Time to outsource your R&D to entrepreneurs!

I was at an interesting panel discussion last week where I first heard a very radical idea: your business needs to outsource its research and development department, and the best place to do so is with your local startup community. The person saying this was the chief operating officer of his company. I will tell you who in just a moment.

The notion makes a lot of sense. Spending on R&D isn’t cheap: Google spends $8 million a year, and Microsoft about $10 billion, both a little bit more than 10% of their revenues. Car and drug companies are also big spenders. These companies, along with IBM and Intel, generate a lot of intellectual property from this R&D, and a lot of innovative products and services. But not everyone can be an IBM or a Microsoft and have the funds to pay for original research. That is where your local startup ecosystem can come in handy.

Almost every city in the world has some sort of startup incubator, a co-working space, a shared lab or some other facility that is a gathering place for entrepreneurs. In St. Louis, we are blessed with many of these outfits, in fact so many that I still haven’t visited all of them yet. That is a Good Thing.

We are also blessed in St. Louis with a lot of laid-off talent, particularly in bioscience and IT. That sounds odd saying it like that, but when you have a big company like a Pfizer or Anheuser Busch that lets go of several hundred folks, it can be the best thing for your startup community. These people don’t necessarily want to leave town and move their families across country. If they have an idea for a startup, they tend to bring together more folks and create more jobs. So it isn’t just the real estate, but having the talent pool too.

Okay, back to my COO that I quoted above. His name is Kevin Demoff and he works for the St. Louis Rams football team. Yes, football. Not the kind of cutting-edge business that comes to mind when we are talking about R&D. One of our startup communities here in St. Louis is called Stadia Ventures, a sports-related accelerator that leverages our city’s sports-crazy universe. Demoff was quite candid about how little the Rams have spent in past years on R&D, and how the NFL is more of a follower than a leader when it comes to implementing new ideas. “It is more likely that the league is going to copy something that we or some other team does than to actually help with innovation,” he said at a Stadia panel session last week. “That is why we have to support the local entrepreneurs and be a part of the startup culture.” It was a very insightful thing to say.

So go visit your local startup offices. Talk to a couple of entrepreneurs, and buy them a few lunches. Better yet, become a corporate sponsor of efforts like Stadia or other startup accelerators. Volunteer as a judge at one of their demo day or pitch competitions. Help mentor one of the young companies. The more you put into these efforts, the more you will be able to outsource your R&D and pick up some new idea that your company can run with and make a few touchdowns. (You just knew a sports metaphor was coming.)

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