If cost recovery in government labs is worth doing, it is worth doing right

Analysis

By Denzil Doyle

For the past decade or so, pressure has been mounting on the managers of government laboratories to generate more revenue through the sale of services and technology to the private sector. The word on the Hill is that the federal government is increasing that pressure in concert with various programs aimed at cost reduction. In fact, the pressure is being exerted on every government department that has anything to sell. As one insider put it, it is not an exaggeration to say that the federal government is being turned into one big bazaar.

So far as the labs are concerned, there is a wide body of opinion that says that government has gone far enough in cost recovery and that increased emphasis will turn them into consulting shops that will end up competing with the private sector and that the quality of their research will deteriorate.

Despite their frustration, the laboratory managers would be well advised to assume a leadership role and start putting systems in place that encourage individual scientists and technologists to generate such revenue and measurement systems that convince their political masters that they are making progress against such goals. It will take some nose holding on the part of the managers because many of them have seen the damage that can be done if the pendulum swings too far in the cost recovery direction. And with money being tight, that is almost inevitable.

However, there are many positive things they can do. They should recognize that they are now in the sales and marketing business in a big way — or they should be. They must take a look at the job descriptions of the people who currently carry titles like technology transfer officers, business development officers, and industry liaison officers so as to determine which of them should be doing sales jobs and which of them should be doing marketing jobs. Obviously, there is a widely held view that the two activities are one and the same and that neither title belongs in publicly funded labs. They will have to dispel those notions.

To clarify the difference, selling encompasses those activities associated with getting orders and keeping the customer happy, while marketing encompasses such activities as market research and marketing communications. The former is a tactical function, while the latter is a strategic function that is funded out of corporate funds in much the same way as R&D is funded. In a well managed company, the distinction will be made at a very early stage in its development and the two functions will report into a VP of sales and marketing.

The introduction of terms like sales and marketing into the language of publicly funded research will seem strange, particularly in those laboratories doing pure research. Some laboratories might even decide to contract out the activities to the private sector. This would have the benefit of clearly identifying the costs involved in both activities and the tactics and strategies employed. It would also improve the dialogue between the public and private sectors and increase the rate at which new companies are formed.

There was a time when the use of such terms was resisted in the private sector, particularly by companies that were highly R&D intensive. Sales people preferred to be called applications engineers and the market research activities, if done at all, were done in the R&D department. The stigma has gone away in most successful Canadian companies. The time may have come for some fresh approaches in the public sector.

Denzil Doyle is chairman of Doyletech Corp, an Ottawa-based consulting firm providing services to entrepreneurs, investors, policy makers and economic development authorities.