Pathway to starting a science-based business

Starting a business based on scientific research is very different compared to starting any other business, and this difference is even more accentuated in STEM. This might come to you as a shock at first, but hopefully, by reading this book you will understand better the specificities of a science-based business and what it entails.

First and foremost, starting a science-based business involves higher risks compared to a standard business such as in the food or hospitality sectors, for example, and this happens mostly because of the uncertainty about the demand for the products or services which might be offered to the market. This is a crucial aspect of starting a science-based business and in fact probably the most important one to bear in mind when you start a new business.

As a scientist and/or researcher, you might have achieved success in academia or in the corporate world by having invented or contributed significantly to new discoveries and pushed further the boundaries of the literature and research in your area of expertise. However, what constitutes success in the scientific and academic domains, does not always mean that success will come when the results of said research are transformed into a marketable offer. In fact, technology transfer offices across many universities and research organizations across the world are full of patents which have no commercial use at all. This per se, not a problem as far as the advancement of science is concerned, but is a major challenge when it comes to initiating a business venture.

In my business and academic activity, I frequently come across many business ventures driven by an early career as well as established scientists, who frequently become blind with their scientific success, in the sense that they don’t understand that good research is not necessarily a good product or service if there is no demand for it.

How to achieve that? By reading this book I certainly hope that you will get some tools to start with. But moving forward, thinking business means that you must understand the underlying factor that is common to every single successful business venture, which is demand. Demand drives the growth of businesses, nothing else. The good thing – and hence the higher risks of spinning off scientific research into a new product and/or service, is that demand can be created from scratch. What I mean is that in certain circumstances, when your product or service is disruptive in terms of innovation, you can actually create a totally new market which was not there before you started. This represents huge opportunities for success but also higher risks, as you are not able to benchmark your offer with other competitors already established on the market, making it more difficult to ascertain key elements of your business model. 

On the other hand, even if your research is not disruptive in the sense of creating something totally new on the market, it can still contribute to improving on something already available, will call that an incremental innovation. In either case, the first step on this journey is to focus on what are the problems on the market which your research will solve?

Will your research solve any problems?

Think about any research paper you have worked on and published. In any research there is frequently a gap that has to be addressed, and justifies the research to be conducted, aiming at contributing to narrowing the said gap. Entering the market with a spin-off of research is very similar, in the sense that you must understand whether or not there is a gap that your research can help to solve. You probably have already thought about many problems that toy could solve with your research – if not this will get you started so don’t worry. At this stage is still too early to ascertain which problem or problems you will tackle. The next chapters will help you to focus on the problem or problems that might represent a better potential for commercialization.

When identifying market problems the easier thing to do is to look out to the market and ascertain what are the needs of consumers (which can be either individuals or organizations) that are in demand and might be unfulfilled totally or partially. This is the market pull approach, whereby you might attempt to provide products (or services) to the market, which the market demands. However, it could also be that the result of your research is so innovative (disruptive) that tit may create a totally new need of which the market is unaware of. This is known as a technology push approach whereby you will attempt to interest the market in a new product (or service) based on a new solution.

It is, therefore, important that you now dissociate yourself from your research and become more critical towards it. It is time to look at it as if it is not yours anymore but something that you have to look at with a totally new perspective, as an outsider. This is the only way to raise your level of criticality towards your research, and avoid biases that may distort the way you see whether or no tit fits a market need (existing or upcoming). While this is not an easy task, and there are other techniques which we will be discussing in the next chapters, the first step is yours. 

To start with, think about the different uses that your research may have that address existing (or imminent) problems. I don’t want you to think about who the customers might be (we will come back to that later), but about what uses your research will have. Examples of possible uses could be:

• Is it a new process that can significantly contribute to improving an existing process?
• Is it a new product that can expand the functionality of existing products?
• Is it a new process to detect the presence of certain pathologies in a living organism (such as a human body)?
• Is it something that if ingested and/or integrated into food, can significantly contribute to the well being and health of an individual?
• Is it the cure to a threatening disease?
• Is it data that can be used to understand better aspects of consumer and/or human behaviour?
• And the list can go on and on…

This is by no means an easy task, nor a static one. Understanding the market is something you will endeavour throughout your whole business career. To assist you with the aforementioned tasks you can brainstorm with your closer networks and friends about their perceptions of the use of said technology. Brainstorming is always a good route to start something, and no matter how silly the contributions might be at this stage, it is always useful to note them down, as only the future you will be able to devise those that might work better (commercially speaking) from those that might not.

At this stage is not good to use people that are out of your close personal and professional network. Invite them for a group meeting, or have a one to one chat with each of them. Explain very well the purpose of the session and empower them by asking them to think off-limits as much as they can. Remember, no idea should be censored or rejected at this stage. Just write them down in a non-judgmental style.

Parallel to this you should also conduct your own research by searching on the internet on whether there have been in the past, are there now or might be in the future applications of similar technologies to the one you have created. Try to get as much information as possible of similar technologies, who created them, if and how they turned into a commercial offer, who has had successes exploiting them, and most importantly, who has failed and why. 

To do this I suggest that you look beyond the academic literature with which you are certainly familiar with, and try to search for keywords related to your technology on a search engine, using a wide range of sources such as newspapers, corporate websites, business sites, forums, etc. 

It is always good to have a look at patents that are there on the market (regardless of whether you have a patent or not). 

Also important is that you expand the search beyond your native language or English, and try to identify and search for your keywords in other languages. This is where it gets a bit complicated as certainly, I don’t expect you to master Russian, Hindu, Chinese, Korean or Japanese, but you should seek some assistance because the last thing that you want is to identify a gap in your local market, just to find out weeks or months later that the same need has been already satisfied by a successful business in other geographies.

Your research can, of course, contribute to addressing one or many problems, and that is why it is good to start with listing down as many problems you think your research may help with – I would day a list of 10-ish would be a good start. Start with these guidelines and write them down on the template suggested.

1. Is there a need for your technology (market pull)? If so, describe what is it that the market is trying to get done. It could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy. 
2. Is the market unaware of the potential benefits of your research (technology push). If so, what are the existing or foreseeable problems that it may help with? 

For each problem which you have identified, ask yourself critically:

1. Describe the benefits of your research. This includes functional utility, social gains, positive emotions, and cost savings.  
2. Now describe negative emotions, undesired costs and situations, and risks that your solution might bring along and impact negatively before, during, and after solving the problem (also referred to as pains). Can you eliminate the pains and if so how?

Narrow the solutions offered to the market

Now that you have a list of potential problem-solving solutions, it is important to start narrowing down the list and eliminate those that could be less practical, difficult, costly or even impossible to implement from a start-up perspective. Before guiding you on how to narrow the list, we will be introducing some additional concepts important to support your decisions on this regard.

You started with a problem-solving centred approach focused on the applications of the technology, and now it is time to progress to a customer-centred approach, which implies that you must identify who are the potential customers who will pay for your offer. In the literature, this is referred to as a customer or market segmentation (explained ahead). A high-level identification of who the customer (or customers) might be will allow us to subsequently make some important decisions on whether we should drop from the list some of the solutions you came up with (Task 1). 

One important aspect to mention at this stage is the key difference between customers and consumers. Customer is the one purchasing and paying for the products or services, whereas consumers are the end-user and who ultimately benefits from them. An example of this can be found when parents buy baby food. The parents are in principle paying for the food, but the little ones are the ones that actually consume it. In this sense, you must appeal to parents so that they might be interested in buying a particular food product that you are selling, but the babies must also enjoy it otherwise mum and dad will probably not buy that product again and will replace it with an alternative. So, while starting to create a picture of who your customers might be, it is also important to ascertain whether or not they will also be the ones consuming the product or not. If so, that makes things a bit easier, otherwise, it adds an additional layer of complexity as you must figure how to appeal to the paying customers while also ensuring the satisfaction and benefits to the end consumer.

It is also important to identify well if you are targeting an individual customer (just like you and me) or a business customer. It makes a big difference. In the literature targeting a business is referred to as business-to-business (B2B) which is a situation where one business makes a commercial transaction with another. B2B is often contrasted with business-to-consumer (B2C). In B2B there are business people on both sides, whereas in B2C there is normally one business person and one consumer.

You can now start elaborating a bit more on who your customers might be, and for each of the applications of your technology which you came up with (Task 1), think about the following. 

The goal now is to narrow down the list of the initial solutions to between one and three solutions which may be better aligned in terms of your values, goals, aspirations and expertise. You must now try to visualize who the end customer(s) might be for each solution and if more than one, write them down. It could be that the end customer is a specific industry or vertical (like pharmaceuticals and life sciences, food industry, electronics, etc.), or a group of individuals with similar needs or interests. On the other hand, it is important to reflect how easy it might be to access said potential customers. Do you know anyone that might be already working for/within said industries? Do you have any specific contacts that might help you to step in? Or are you truly isolated and don’t have a clue about whom to contact? This is very important, as you might expect, knowing someone in an industry could be key not only to explore the offer/solution further but also to potentially being able to role on a pilot and engaged with the potential customer towards a commercial relationship. However, not having the contacts yet is not per se a barrier, as long as you understand where they are, who they might be and put up a plan to get to them via your established network participation in a conference, industry forums, start-up competitions, business angel events, or even (why not?) via a cold call.

Understand the principles of market segmentation

Now that you have short-listed your potential customers, it is good to work a bit on its refinement and make necessary changes on Table 2, which you may find important as you move on reading this section.

Market segmentation is a process of dividing a heterogeneous market into relatively more homogenous segments or group with similar attributes. Traditional market segments in the B2C are identified using characteristics such as demographics (gender, age, income, education, etc.), geographic, psychographic and behavioural. On the other hand, traditional market segments in B2B can be geographic, related to the organizations’ attributes (size, turnover, number of employees, products made, markets served, public or private ownership, etc.), behavioural (price and quality sensitivity for example), as well as their needs.

Understanding key differences between the consumer market and the corporate market is also important as it may help you to be more critical about the pros and cons of each. Here are a few which I think are important to share with you at this stage:

• B2B markets have a more complex decision-making process
• In B2B markets, the larger the size of the company the more difficult it may be to step in and to showcase an innovative solution
• B2B buyers are more rational and focus more on the long term benefits, which means that, compared to B2C, tend also to be more loyal to their suppliers
• B2B target audiences are smaller than B2C target audiences
• Personal relationships are more important in B2B markets, compared to B2C where consumers are more volatile and sensitive to brands, media and marketing strategies
• Approaching B2B customers is considerably cheaper than B2C, even though it may require more time, needed for the creation of trust
• B2B markets drive innovation less than consumer markets

Another important element if you plan to enter the B2B arena is identifying where you fit in a supply chain. For every business, there is a supply chain linking different economic agents who supply each other and act as intermediate consumers in a chain of buying and selling that can end in a business consumer or an individual consumer buying a product or a service. Understanding these links and the actors that are present in the chain is crucial for a start-up business who can partner and potentially become a supplier of other businesses in the supply chain, with benefits ranging from quicker market access, understanding the market and consumer preferences better, obtaining funds (pre-negotiating sales volumes and aligning the cash flows) to initiate the production and delivery of the product on a wider scale, and also benefit of the effectiveness and efficiency of the network to access customers while reacting to changing patterns of consumer behaviour.

This is not your final market segmentation. It is a start but not the end. As a matter of fact the process of devising the market segments which you will be serving is quite an iterative one. In the next section I will expand some aspects related to market research which you should follow, to help you to test the market and to obtain insights from potential customers. After doing that you might have to get back to here and re do Task 2 over and over. Looking forward, as markets change very quickly in some industries as well as consumers’ behaviours, the market segments are very likely to be dynamic rather than static.

The goal now is to narrow down the list of the initial solutions to between one and three solutions which may be better aligned in terms of your values, goals, aspirations and expertise. You must now try to visualize who the end customer(s) might be for each solution and if more than one, write them down. It could be that the end customer is a specific industry or vertical (like pharmaceuticals and life sciences, food industry, electronics, etc.), or a group of individuals with similar needs or interests. On the other hand, it is important to reflect how easy it might be to access said potential customers. Do you know anyone that might be already working for/within said industries? Do you have any specific contacts that might help you to step in? Or are you truly isolated and don’t have a clue about whom to contact? This is very important, as you might expect, knowing someone in an industry could be key not only to explore the offer/solution further but also to potentially being able to role on a pilot and engaged with the potential customer towards a commercial relationship. However, not having the contacts yet is not per se a barrier, as long as you understand where they are, who they might be and put up a plan to get to them via your established network participation in a conference, industry forums, start-up competitions, business angel events, or even (why not?) via a cold call.

You must also understand whether or not you will be capable of delivering the full solution to the market if you set up a firm and gather a team around you, and the extent to which you will need to rely on third parties to deploy it. It is not a problem to rely on third parties to outsource partially something that you need, but bear in mind that you should not outsource elements that might be too critical or dangerous in the sense that you may have to uncover key aspects or secrets of your research. You should therefore be careful when it comes to deciding what can be done by yourself (and your future team) and what can be outsourced without posing risk to the firm and to the delivery of the service to the customers.

Last but not least you should now expand your knowledge about the competition by deepening the initial search you conducted before Task 1. At this stage, you must look at aspects that may indicate whether or not a firm that is on the market with a similar offer to yours (but not necessarily the same), might be able to step onto your territory. 

A good way to start is t differentiate direct competitors from indirect competitors. Direct competitors offer the same thing as you while indirect competitors offer products or services which are different from yours but potentially could satisfy the same customers’ needs. On the other hand, it could be that you don’t find any direct competitors and a few indirect competitors that don’t seem to represent a threat. Don’t ignore them, as they might be able to, in the future, deploy resources to research and develop on a similar offer if they see that there is market potential – and as I said patents and intellectual property do not always grant timely and efficient protection. But could be also that in the future they might be interested in acquiring your business, which is always a good thing to think of!

When it comes to identify your competitors and end consumers, I expect that you get contributions from other individuals but also conduct your research of secondary data (there is a whole section about secondary data collection ahead, which I advise you to read before starting Task 2).

Another key aspect to understand the potential of the markets you are thinking of entering into, is to understand the concept of industry life cycle. The industry life cycle refers to the evolution of an industry or business through four stages based on the business characteristics commonly displayed in each phase. In this sense, similarly to living creatures, industries are introduced, expand and growth, reach maturity and may enter decline (these are the four phases of an industry life cycle). It is not always obvious the stage of your targeted industry or industries, but it is important that you try to find out by contacting within your network people with industry expertise, and also doing your own desk based research. 

If you enter an industry which is just starting (as the Internet industry was at around the late 90s, and if it growths, you will be in a good position to profit from its expansion. On the other hand, this may also represent additional risks as not all the industries go through all the stages, in fact some collapse immediately after being born. Approaching a customer which industry is growing can imply that the customer will not likely pay too much attention to you, as it is enjoying the profits of an expanding business. However it could be that your product might help the customer to grow faster than its competitors or to achieve greater economies of scale in its operations, for example, in which case your product could have a better fit. If the industry is mature it means that the market might be saturated with too many players already – hence limit opportunities for growth – as well ss suffering the impact of a stabilizing demand – either because there is simply no more customers to exploit, or because the industry as entered decay as a result of external circumstances (think for example of what happened to the machine cameras industry when the mobile industry with digital cameras started to boom). However this is not necessarily bad, as the players on the market may have more appetite for new technologies and innovative solutions that might help them to enter a new stage of growth instead of facing decline – this is very visible for example on the game consoles and mobile phones, which typically at Christmas revamp their lines with new devices with better and more innovative features to capture new customers and make their existing customers repeat buying. At last, entering an industry that is in decline is probably not a good idea, unless your technology is so good that can actually invert that trend. 

Define the value proposition and product specification

It is now time to refocus our analysis on your offer, the product(s) or service(s) you plan to bring to the market. Most likely you have not developed a fully featured product nor have a structured idea about how you may end up delivering a service to the market, but you are in position of elaborating some high-level specifications about some elements of your offer.

Depending on your plans, your offer can be 100% product or 100% service, but could also be that it is a combination of both. Let’s first clarify some key differences between products and services before we move on. A product is a tangible item while a service is an intangible. Products are produced before they are consumed, while in case of services production and consumption happen at the same time. Products can be stored in inventory while services cannot be stored for later use. Because service products are so closely related to the people providing the service, ensuring the same level of satisfaction every time is very difficult. Therefore, whereas in products the quality assurance in products is objective and is measurable, in the case of services it is very subjective. 

Illustrative examples of a product are when you buy an electronic component or gadget. When you attend a medical appointment that is most likely a service. On the other hand, when you eat out in a restaurant there is product which is tangible – the meal – and a service provided by who is serving you. If you plan to deploy a product to a particular industry, you will still need to provide some services around that offer such as after sales support to the customer for example. In the high technology arena, and particularly when entering the B2B space, a product always come attached to a service of some sort. In fact, it is difficult to engage with other organisations if you sell a product and do not provide additional services which might be helpful (and vital) to help your customer conducting their own R&D with your product and/or technology for example. 

For the sake of simplicity, from this point onward I will refer to product which in a broader sense encompasses a product and a service.

You must now devise the value proposition for the product at the top of your rank (Task 2). A value proposition is a promise of value to be delivered, communicated, and acknowledged. It is also a belief from the customer about how value will be delivered, experienced and acquired. It’s also the first thing that determines whether people will bother reading more about your product or hit the back button/delete your Email. If you have a service-based idea you might want to describe the key attributes of the service, its benefits, and specify in as much detail as possible how do you plan to deliver the service to the customer. The same goes if you are planning to sell a product. You might have at some point developed a prototype of the product which is what your research is all about in a lab environment, and even thought that prototype is not the finalized version of your product ready to be commercialized, you should already be able to define its potential use and application, even though you might have tested it in a lab environment. 

Your value proposition should me more than a mere summary of the attributes of your product, as it will be vital for you to present it to potential customers and/or partners who might help you to get to access end customers. It might be difficult for a scientist to be unbiased when it comes to create a detached version of the product rather than the one he or she has developed after so many years of research. However, the market does not necessary perceive value the same way as you do, and therefore, you must be flexible in this process. Drafting a value proposition from the standpoint of a customer is important as this will help you to gradually be more critical about your research in the sense that you will look at it as a customer/buyer and not as the parent of the idea. However, at this stage you most likely have not presented and/or obtained feedback from your customers, which means that you should rely on the previous feedback obtained in Tasks 1 and 2 to devise what a value proposition might be. You will see that you will return to the value proposition and redefine it once you conduct your market research (next chapter). It is also not unlikely that during the life cycle of your product you will have to adapt to the changing market circumstances and revisit your value proposition (the same way you will be revisiting your customer segments).

A convenient starting point is to elaborate a visual representation of the product or a diagram explaining the service, and a name that can inclusively describe its functions and features. Functions relate to the description of what the product does, and the goal that can be accomplished by using it – for example, by using your personal safety technology the customers may reduce drastically the number of injuries the staff suffer when working at the shop floor, or to  put it more simply, a plane that can fly. On the other hand, features are the tools that accomplish that function – for example glasses with augmented reality can help staff to identify potential hazards, or in the case of a plane, the wheels that support the aircraft taking off and landing.

You should also provide a key description of the functions and features of the product clearly aligned with the key benefits which you expect your customer t derive from using it. The whole point of the value proposition is to provide information of the value of your offer as seen by the customer, and not necessarily by you. As noted, you must focus on the key benefits of the product to the customer. However, do not include too much detail at this stage and keep your approach as high-level as you will be using the value proposition to step in some customers’ territory, and you will be subsequently refining it and adding more depth. For the time being it is better to have something that appeals to the customers’ attention – therefore focusing on the key perceived benefits the customer will see if it is bought – rather than convincing them to buy 0 that will come at a later stage in the process.