This week I am talking to Rob Lowe, CEO of WellSpring a company focused on identifying technology and intellectual property and successfully rolling out that technology. Rob was a college professor who taught classes and strategy and innovation management and turned that into a company that provides software platforms to help bring early-stage ideas into products in the marketplace.
We talk about the history of innovation and the network effect – the interactions between the producer of the technology and complementary technologies and distribution channels and the difficulty of aligning all these disparate groups. As we have seen in the past – great technology does not always emerge as a commercial success. But recent accelerated successes like the COVID19 vaccine that was developed over at least a 10-year period with funding coming from NIH and various universities to create a mix of technologies that came together in a great success story of multiple COVID19 vaccines. The importance of partnerships has increased over time along with the complexity of matching and finding the right groups so they can identify potential partners and manage complex intellectual property requirements. We discuss the innovation consortium and the special case that came together to produce the Compact Disc (CD). As we discuss there is much that goes into innovation – something captured very aptly in these images
We dive into the complexity of bringing all these groups together, using the COVID19 vaccine and Moderna as an example, and dive into the changing nature of innovation. Rob shares the breakdown of different types of innovation from the incremental or “H1” horizon through to adjacent possible (H2) and the moonshots (H3).
Their survey of innovation report (accessible here) from last year shows a significant shift away from the 70% focus that used to be on incremental improvements to a more even split of 1/3 of investments across the 3 areas. While there is more focus and investment on the moon shot and the adjacent possible that is not at the expense of Incremental Steps:
all sorts of moonshot innovations require a lot of incremental work and incremental innovations to get there
Listen in to hear about the massive transformation taking place in healthcare and the tremendous opportunities for organizations that meet the minimum scale required to be able to stand up innovation hubs and organizations to accelerate change in healthcare. In fact, while many are larger organizations, as Rob points out we are finding the steady decreasing cost of infrastructure to innovate which ones the door for even more opportunities to enable more entrepreneurs to create solutions that benefit all of us and can come quickly to market.
Listen live at 4:00 AM, 12:00 Noon, or 8:00 PM ET, Monday through Friday for the next week at HealthcareNOW Radio. After that, you can listen on demand (See podcast information below.) Join the conversation on Twitter at #TheIncrementalist.
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Raw Transcript
Nick van Terheyden
And today I’m delighted to be joined by Rob Lowe. He’s the CEO of wellspring. Rob, thanks for joining me today.
Rob Lowe
Thanks very much and enjoy being here.
Nick van Terheyden
So if you would tell us a little bit about your background and how you arrived at this role.
Rob Lowe
Sure, I’m, I’m CEO of wellspring. I’m one of the co founders. Prior to this. I was a actually University, a professor who taught classes and strategy and innovation management.
Nick van Terheyden
Um, so what is wellspring? And what do they do?
Rob Lowe
We’re a software company, we service government agencies, companies and universities, and we provide software platforms to help them bring early stage ideas into products in the marketplace.
Nick van Terheyden
Yeah, so that strikes me as something that’s relatively challenging. I mean, we see lots of innovations. Let’s pick on a classic. If you’re old enough, you remember the Betamax VHS? And, you know, we can debate technical prowess. I certainly didn’t have the chops to understand it sufficiently. But I think the general consensus was Betamax was the better technology yet it didn’t develop, it didn’t become the standard. Why was that? Yeah,
Rob Lowe
well, that typically has to do with network effects in that you can have great technology. But if there’s a network effect, meaning that the interaction between the producer of the technology and other complementary technologies and distribution channels aren’t perfectly aligned, then that technology is not going to take hold. And that’s that’s a story that’s played out in innovation quite often that you’re raising, which is great technology early stage doesn’t mean that it’s been commercialized successfully.
Nick van Terheyden
So Wellspring sits in this nexus. And, you know, your your focus is on finding the innovation, and then trying to shepherd it through to that point of actual success.
Rob Lowe
Yeah, it’s it. What we do now is different than what we did 10 years ago, which is 10 years ago, most companies universities, and, you know, even GM government agencies did a lot more innovation in house, but particularly companies were much more in house. Today, it’s a complete partnership. So technologies that have been rolling out for the last 10 years have been largely co developed. So you know, the obvious example is the COVID vaccine. This is a technology platform that started a decade ago, funded by the NIH to various universities involved in the process. And all the technologies work their way through the process of entry, we’re licensed out to some different companies that eventually produce products. And COVID is a great success story in that way. But But universities government and companies do this every day, lots of technologies, the first internet, search engine, lots of pharmaceutical drugs, robotics tools, it’s usually a partnership. So our our path is that we provide the software to support each of those organizations, finding each other, identify potential partners, and then managing the complex intellectual property that comes out of that partnership.
Nick van Terheyden
So I help people understand a little bit about the the complexity of that, because I think, you know, we look at COVID vaccine as a good example. Great, we produced it, you know, it happened in a year. But that’s not really the case that what happened. And, you know, there’s a lot of steps, can you sort of detail in in high level form, what those steps are and how that all comes together?
Rob Lowe
Yep. A vaccine itself is is not just one technology. It’s a series of technologies that are in a product platform. So over 10 years ago, the NIH started funding research on messenger RNA technologies and similar technologies going into the platform at a variety of universities. So University, Wisconsin was the one of the bigger ones in that area. Those faculty continued to refine those technologies over time, and eventually led to a couple of upstart companies. One of them the end to end up being called Maderna, which is a name we all know now. And other technologies were co developed over time, for example, between Oxford AstraZeneca. But those are the initial, as you say, the initial technology platforms were funded by the government agencies and their respective countries, as the universities developed of the license those technologies out to companies, and those companies then take it the second half of the way, which is the actual product development testing clinical trials.
Nick van Terheyden
So let’s talk about innovation, as it takes place today, and I think my sense of it is that we’re accelerating. Is that true? And if so, is that just a function of the speed of acquisition of knowledge or is there something else that’s going on?
Rob Lowe
It’s a great question, we are certainly creating more knowledge assets. And that’s growing exponentially. Meaning that we can run research projects much faster in many fields than we used to run than we used to operate in. For example, drug testing 25 years ago was literally people putting things in test tubes 1000s of times in a lab, today, we can run computer simulations to target exactly what we need to do in a matter of days. And we’ve already cut out 90% of the possibilities that won’t work. So we are clearly creating a lot more artifacts. Simultaneously, thanks to you know, a burgeoning capital market, we have had the ability for lots of startups, who can be disruptive in a number of different technology classes come forward and experiment with new technologies. So while large companies are becoming much more efficient, we also have an influx of a lot of tech startups who can try experimentally different things, when the result of that is almost in a chaotic way, we have a lot more knowledge assets being created over time. And so innovation appears to be accelerating, but it actually is then becoming more challenging on a different side, which is if you’re a if you’re the government, or if you’re a large company, and you’re trying to keep track of where what technology assets, do I need my portfolio, what’s emerging, what can be disruptive to this market, it’s, it’s much, much harder now. Because you’d have to keep track of much more technology, and develop what’s called absorptive capacity, which is to take in a new technology, you already have to understand how it fits in your product and technology, technological portfolio. So it’s actually much harder for companies now to understand what their landscape looks like, then the days when they were controlling most of the actual r&d themselves.
Nick van Terheyden
So if I can, I want to try and link this to something that I’m certainly aware of maybe others are, as you know, the computer disk, the, you know, the silver discs that we’re all familiar with AOL sent out five millions on to us all. And the technology behind that was a big conglomeration of different IP intellectual property that came together that had to be licensed in a single block, essentially. And then that allowed for that particular piece of technology to be produced. And is it correct to say that it didn’t matter who produced the disagreed or, and so forth, everybody within that consortium was getting payment for it is what’s going on behind the scenes there?
Rob Lowe
That’s exactly right. That’s, in fact, that’s an extra example, what our company does is manage how the intellectual property comes together into a product and the payment stream, which is, which is vast and complex. And you’re right, so no one company can monopolize all the technology assets needed for a complex product, that back to your point innovations moving too quickly, there’s too much knowledge being created. So it’s not just the compact disc, it’s canola seeds, it’s sort of pharmaceutical drugs, it’s kind of everything. The result of that is the final producer, well has to have manufacturing excellence also has to have excellent Intellectual Property Management licensing, because the top components of that technology are going to come from their competitors, start with companies, universities, like everybody in the value chain. And if they don’t go down that path, you know, the compact disc is a great example of network effects. Because if we had many competing standards of compact discs, no one would ever have any cup tech dish, because we wouldn’t be able to keep up with producing them. All. Right, that’s a story that’s played out in innovation for a long time.
Nick van Terheyden
And, you know, I just want to thank you for correcting me. It’s you’re exactly right. It was compact this, but it’s been so long since I read. I said computed this because I’m looking at it. To me, it was always the cup holder on my machine ejected out. So I think what I’m hearing is that we’re accelerating. And now I don’t recall, maybe you know, the number for the compact disc, I believe it was like 130 140, we’re accelerating and for anything, any kind of innovation, is it always going to be more gathering of more intellectual property to produce utility? Well, the
Rob Lowe
fact is that it was a special case, because there were so many parties involved. But I think the consensus what you’re getting is correct, which is in any kind of industry, there is going to be an increasing amount of intellectual property that has to be licensed in to make a product compared to how it’s been in the past. Now, electronics tends to have as you point out dozens if not hundreds of patents. Actually, a lot of agriculture is now in the dozens of patents now when you make a new seed or a new, graphed of tomato or something. And so it’s going to differ by class of technology, but definitely all of them have more patents and licensing needs and they did 1010 and 20 years ago.
Nick van Terheyden
So increasing increasing complexity, obviously, you know, not only are we seeing more knowledge and more acquisition of that, but you know, we want to accelerate the use of that, you know, and back to the COVID vaccine, everybody’s sort of, you know, general perception, it was a year, obviously, it was a lot longer than that. Do you see a shortening of this timescale?
Rob Lowe
Yeah, the timescale is shortening. I mean, 10 years seems like a long time to come up with a vaccine, but but it’s not in the history of the world, you know, much, much longer, as you know, and so that that is an enormous acceleration. But I think you’re hitting a really deep insight is that, because things are happening so quickly, we’re only going to see the final mile on a lot of the new technologies and think that, wow, there’s a new disruptive technology. There’s not it’s been under works for 510 15 years, it’s just we haven’t seen it occurring until now.
Nick van Terheyden
So when you think about innovation, what are the sort of categories? And where are we going to see that innovation before we start talking about healthcare and where you’re seeing that going?
Rob Lowe
Yeah, that’s a that’s a great point. So there’s really three categories when we think about innovation, and sometimes the term is h1, h2, and h3 are horizon one horizon to horizon three. So horizon one is typically seen as like incremental innovation, these are innovations that we are probably going to have in the next 18 months are going to be going directly into our product line. Horizon two is looking out kind of two to five years, which are things that typically are not exactly in what we do today, either, it’s a new technology space for us, or it’s a new market space for us. But it’s adjacent to what we do. Horizon three is, you know, sometimes more of the moonshot that’s kind of five years out. These are radical changes to what we’re doing in the market. It’s not for most companies, that requires not just new technology, but it also requires new distribution channels, new complementary partners. So a whole new way of thinking about the business structure. And that’s, for large organizations pretty scary, because now that’s highly disruptive on what we’ve been doing well, for a long time. So the big shift we’ve seen is historically, we’ve always said, most companies innovate in their r&d department, based on a 7020 10 split, which is incremental is 70%. That’s the majority of what you need to be doing. You need to be innovating. But you need to be innovating in ways that are make profitable sense for your platform. 20% is adjacent that you know, you can feel comfortable getting outside of what you’re doing. And 10% is sort of the moonshot like five years from day to day, how would we disrupt our market? What’s interesting is we run an annual survey of innovation executives around the world. And this year 2020, this past year 2021, we found that the fastest growing companies, so the top half of green companies relative to their peers, innovate about 1/3 1/3 1/3. So they have allocated their investment resources, about a third really about 30%, to h3 innovation, and about 35% to h2 and 35% to h1. So what that tells us that there has to at least two ramifications. One is, companies are recognizing that to keep going to run faster, they have to actually get outside their comfort zone, they have to get outside their standard distribution channels, and they have to move beyond 70% of incremental innovation. But the second part of that is they can’t do that themselves. So if by definition, if almost tooth, if if two thirds of what they’re doing is not related to existing technology platforms they have, they do not have the knowledge assets in house to develop them. They must partner with universities, other companies, startups, incubators, etc, to actually develop those technologies. And we’re seeing that play out everywhere that the amount of collaborative development or CO dev to create new products has been exploding, you know, across every industry.
Nick van Terheyden
So for those of you just joining, I’m Dr. Nick the incrementalist today I’m talking to Rob Lowe. He’s the CEO of wellspring. We were just talking about incremental innovation and the classification h1, h2, h3 the change that you’ve seen in terms of the survey. And, you know, obviously, I come at this with the perspective of incremental improvements to get you to where you need to go, I think what I heard you say was, we’re seeing a bigger push towards that adjacent possible, and indeed, the moonshot, both of which let me, you know, put my position down, I think still remain incremental improvements. And I’ll take the moonshot. Let’s talk about Apollo and you know, the incredible steps that we got there. But to get to that was all of these small increment you just do it faster? Is that a reasonable assertion?
Rob Lowe
Um, I think that’s, it’s partially true, but I would debate that, I think in part it does require whole new technologies and whole new actual business practices to be introduced to this process, but you’re getting on the HDInsight, which is when we talk about moonshot are adjacent innovations, they aren’t completely out of the realm of what a given company already does. So it’s not as if a car company is going to start making pharmaceutical drugs. So they have to tether them to an area that they’re in. That’s absolutely true, which. And the other insight in your comment is, often when we talk about this sort of in r&d terms, it’s as if there’s like three classifications, but secondly, continuum. And there’s a lot of increment, what we would call incremental innovation, which is pretty close to adjacent, if not a little bit adjacent already. And there’s a lot of adjacent research projects that are you know, they’re they’re close to being what we might consider incremental, it’s just a little bit bigger change in technology than we’re used to. So yeah, we should bear that in mind at all times. But I do agree with you that all sorts of moonshot innovations require a lot of incremental work to get there and incremental innovations to get there.
Nick van Terheyden
Well, I’ve got to say, I’m relieved, because, you know, that’s, that’s my brand, where I sit, so good to hear. So let’s, let’s talk a little bit about healthcare, because we certainly, you know, with a huge bias, as a clinician, I come at this, it seems like we’re just on this precipice of a a huge expansion of technology, and the coming together of, you know, innovation, as you know, as the example of COVID. And the vaccine and the speed with which we got there is that what you’re seeing, you’re doing a survey
Rob Lowe
salutely, and also just amongst our clients, so we work with a lot of healthcare systems and hospitals. And we are seeing a massive transformation in how the healthcare system is working. And it’s sort of boils down to a really fundamental change, which is, it used to be innovation in most Hospital and Healthcare Systems was more of a basic research and technology transfer exercise, meaning they have an adjacent research institution, clinicians will do research in that institution on what things that could eventually become messenger RNA technology, and eventually become a vaccine. And, and the the hospital or healthcare systems job was to license out those technologies to interested parties, pharmaceutical firms and medical device firms, etc. Well, it turns out that healthcare system and hospitals are unique organization in that there are both buyers and producers of technology, because the clinicians have the best understanding of applications of this technology, and a deeper understanding of what the demand has to be because they’re practicing it every day. So in increasing the last three, four years, we’ve seen healthcare systems, adding capabilities to do what is more like corporate innovation, which is the hospital says, what are the problems that we face every day, in this institution? What could be better, let’s now spin up a research program that solves that problem, which is much more how, you know, an automobile company or chemical company would would actually operate as opposed to this technology push platform that they had been hadn’t been closer to for a long time, it’s now kind of a circular motion where clinicians can work with the research staff and determine what the right project is they do the actual project. And they’re now consuming the benefits of all of that research. And so the process of that, that we’ve also seen, is, of course, the hospital itself does not have production facilities does not have all the technical needs they they have, so they can partner with medical device firms and pharmaceutical firms and startups to actually bring these technologies to market as well. But it’s like a perfect, you know, customers customer survey process where they can build work on the technology at the same time that they’re they’re reviewing technologies a buyer.
Nick van Terheyden
So is this an unlimited market for that group? And I’m thinking of hospitals. So as I listened to you, it sounds to me that even the small, you know, remote facility should have some level of innovation, or is that just too big of a stretch and you have to be of a certain size?
Rob Lowe
Well, there it is fair to say that there is a minimum scale effect to set up a research institution. I mean, in part because there’s regulatory requirements, there’s there’s infrastructure requirements, equipment. So a very small community community hospital would be difficult to do on their own. However, as as you’re very well aware that there’s been a lot of consolidation in the last decade in the healthcare system, particularly the US but elsewhere as well, where a small community hospitals are actually part of a broader system. And the upside of that you’ll one upside of that consolidation is that having a larger system tethered together enables them to have the scale effects at Central Headquarters for all the infrastructure that they need to run a research program.
Nick van Terheyden
So I and the reason I sort of push on this a little bit is you know, I go to DEF CON, and they have a whole hacking section on you know, personal health and you know, One of the presentations I saw was a bio reactor per individual who created a bio reactor, you could 3d print it, you know, it was in the guise of the classical Hewlett Packard and Apple truly in the Garriage. Where you you could develop anything you think I am economy thinks that with wellspring. If I partner with an organization that like yourself, I can navigate through the IP and create something, is that true? Or am I just?
Rob Lowe
Yeah, that’s sorry. Yep, that’s our software provides a couple of things which are, are and you’re getting a really fundamental point, which is the infrastructure to innovate has become cheaper. And it includes 3d printing technology, which we’ve been working on for, like, it seems like 30 years. And we’re finally there, where you can put it in your garage and work on it. But yeah, and there’s a couple fundamental points is, if you invent it in your garage, well, now you need to get intellectual property protection, you need to find potential partners who can produce this, you need to figure out what what’s the technology landscape look like. And so that’s what our products, you know, help people do, which is identify who their partners should be, navigate the intellectual property process and go through the licensing process with a, you know, in this case, probably a much larger company who has distribution channels.
Nick van Terheyden
So I already acceleration knowledge opportunity for folks and indeed, supporting infrastructure that’s accessible to pretty much almost anybody that has technology, you know, access to the cloud, the Internet. In tell us where you see innovation in healthcare, what have you seen? And what are you excited about?
Rob Lowe
Well, I am, I’m very excited about that the hospital system I’d referenced earlier that it’s really fundamentally shifting. And I think another aspect of this is the fact that you we kind of have left the government out of this a little bit, but the government is still the major funder of health care of healthcare research in the US, the UK elsewhere. And, you know, the one advantage of coming out of this pandemic now is the recognition and revitalization of the importance of funding science. And so that means that the biggest funder of science is the National Institutes of Health in the US. So that is really exciting to me, because we’re going to have a lot more innovation coming out as we start to double down on the importance of really doing fundamental health research and recognizing the value of the products that the government can help support out of that process.
Nick van Terheyden
And if you would just tell us the contribution or the importance of the contribution of the scientific process, and the government supported that, because what I hear repeatedly is, without that, we don’t get an awful lot of this, but you can’t just do this on private investment. I mean, it is possible, but I think less of it happens. Is that true?
Rob Lowe
That’s right. Yeah, I mean, we’ve long known that fundamental science, like basic research, which is, you know, sort of research into the new physics of how very serious work is a company is not going to engage in that because that’s a 10 to 20 year investment cycle, their shareholders aren’t going to allow it. And that’s exactly the COVID vaccine we talked about earlier. You know, Pfizer wasn’t going to start 15 years ago, doing a lot of fundamental research on mRNA technology, we need the government has to be their support, because the government can support long term research programs, which is has been the history of government support in this country and elsewhere for a long time. So that that will continue to play out as we are looking for fundamental changes and fundamental additions to what the moonshots and adjacent technology spaces, the government is a is a vital partner in that process to be a funding agency.
Nick van Terheyden
So as you think about the future, do you see more moonshots given the survey instrument that you talked about? Are we going to see more of this happen?
Rob Lowe
I think so. Absolutely. So it’s a confluence of several ideas. I have ideas here, which is one is just more spanned by government companies. So we see that happening now. The second is the shift towards more moonshots and adjacent technologies. So just mathematically, we should be seeing more outcomes, even if they’re even slightly less successful for per dollar spent, we’d be getting more. And third, I think, as we talked about earlier, that the rate and pace of Knowledge Advancement, whether it’s government, university, company, startup, whatever is is accelerating on any measure we look at. So those three items coming together means that we must be getting much broader bigger moonshots than we’ve had in decades past.
Nick van Terheyden
What an exciting time to be around and especially in healthcare where, you know, couldn’t be more important and more relevant to each of us. There’s a It’s not entirely altruistic, we want to see all of this innovation for our own benefit. Unfortunately, as usual, we’ve run out of time just reminds me to thank you for joining me on the show. Rob. It’s been a great pleasure.
Rob Lowe
Thanks very much. I really enjoyed the conversation and I look forward to talking again
