When I am really sick, I see a Doctor. Why? Because they are trained to assess the symptoms/data/evidence I present with. In essence I trust that they know what they are doing.

This trust is based on my understanding that through a unique and powerful combination of training, education and experience they are able to assess the data and from this make an informed diagnosis and recommend a treatment.

What’s my role in all of this? Well it’s not to think I am a better Doctor.

My role is to take this information and decide whether or not I wish to act on this. Do I take the treatment, get a second opinion, ignore it and carry on?

The rational response to this is to ask, what was the diagnosis and the treatment my Doctor is recommending. If it’s a  potentially fatal condition  - like Cancer, Ebola, Bird Flu, etc. and i need to take a radical treatment I need to consider carefully my responses.

Once again the rational decision is to follow a course of action that reduces the risk to  my health and well being. ie. seek a second opinion, gather more data and/or seek a variation as to the treatment options. But certainly I should act on it.

What is certainly not a rational response is to ignore it, or deny the diagnosis because I don’t believe it.

While denial is not a rational response, it is not uncommon. It also is an important part of a grief cycle - as described by Kubler Ross

Given the amazing and bizarre stuff going on in the Australian Parliament this week - one wonders whether or not we are observing this process?

Interestingly, in our work with companies, we often see a similar scenario when it comes to killing a project, or recognising the end of what was once a great strategy or opportunity.

What always helps is re-establishing a  common language built around the data - in our case - data on what customers are demanding. In the case of climate change - data from the latest readings

For those of you who are interested in digging down to the base information - we would recommend an interesting report that was just released looking at the data from an independent - non politicised - perspective.

http://www.copenhagendiagnosis.org/default.html

Referring back to the data allows a new perspective to be formed and a more rational approach to be considered.

In highly emotive situations this can provide you with right input into a decision making process  that may well be the difference between your business, product or technology surviving and prospering or dying an untimely death.

One of the leading academics and authors on Business and Management Dr Henry Minztberg has written a thought provoking piece in the MIT Sloan Management Review on whether the executive bonus schemes should stay or be scrapped.

Mintzberg says, “Executive bonuses—especially in the form of stock and option grants—represent the most prominent form of legal corruption that has been undermining our large corporations and bringing down the global economy. Get rid of them and we will all be better off for it.”

It’s a controversial perspective and one that would no doubt be greeted with a lack of enthusiasm in some quarters, however, it also raises some intriguing questions about the ‘role’ of the CEO and management team in a modern organisation.

In the world of innovation, growth and corporate and cultural change it is often said, “show me the remuneration structure and I’ll show you the culture”. Maybe what have just experienced with the Global Financial Crisis is a classic example of this.

Worth having a read.

For the last 8 months we have been working with Neopec, a new company that is commercialising a revolutionary approach to breast reconstruction using technology developed at Melbourne, Australia’s Bernard O’Brien Institute of Microsurgery and the Australian Tissue Engineering Center.

Neopec will allow women who have been through the trauma of breast cancer and mastectomy to re-grow their breast tissue naturally and permanently, without the need for silicon or saline implants and the long term problems they cause.

Cogentum has been responsible for the development of the Business strategy and innovation/commercialisation pathway for this vital and revolutionary technology and is continuing to play an interim business management role in the consortium. The Project has allowed us to demonstrate once again the value of our market orientated approach to innovation, growth strategy and commercialization. The insights gathered during the research phase of the strategy development (conducted with both women who have had reconstructive surgery and the plastic surgeons who help them) has provided very compelling evidence as to the clear unmet need in this growing medical arena.

We are really pleased this work has also now been recognised by the Victorian State government  via a $2.9m grant from the Science Agenda Fund being awarded to the Neopec consortium to fast track the project over the next 3 years. Cogentum will continue to partner with Neopec through to commercialistion.

http://www.premier.vic.gov.au/component/content/article/8575.html

It’s also pleasing that the Neopec project is now getting some great media coverage as well!

http://www.heraldsun.com.au/news/regrowth-a-godsend-for-women-who-have-lost-their-breasts/story-e6frf7jo-1225796692477

http://www.dailytelegraph.com.au/lifestyle/breast-regrowth-hope-for-cancer-victims/story-e6frf00i-1225796692835

http://www.heraldsun.com.au/news/melbourne-scientists-poised-to-begin-surgery-to-help-cancer-victims-regrow-breasts/story-e6frf7jo-1225796683801

It is truly an amazing piece of technology and the progress being made is indicative of the value Cogentum brings to clients seeking to drive growth, innovation and commercialisation in any industry.

For more information about the Neopec project or any other issues concerning innovation, growth and commercialization, please don’t hesitate to contact us.

Great news is continuing to emerge from the Australian biotech sctor.

We are glad to see that one of our clients, Acrux, is leading the charge as it continues to build a cogent story for its investors and the market.

Equally pleasing is the rapid progress of Universal Biosensors (sadly, not a client!). This company is, in our opinion, the pin up of what innovation can mean - in any industry, in any country.

The clear line of sight that UBI’s management have developed between the value they create for the customer and the application of capital is world leading. The way innovation has been built into the business and ensures that all value is captured is not only remarkable but inspiring for all those seeking to drive innovation within their organisations.

This is a big rap, however, when you come across a firm that has actually managed to capture what innovation is ‘meant to be about’ and put it into cogent strategy that delivers strong returns, it really stands out.

What? Web 3.0?

Most people are still getting used to Web 2.0. However a conversation I had today made me realise we are on the cusp of Web 3.0. To quote the clever chaps i had coffee with, It’s no longer about content, it’s all about context.

Nice. When content is ubiquitous, when citizen journalism becomes a commodity, when opinion blends with advertisement and when wikipedia fact melds with fiction we have moved past content. In fact content is no longer a differentiator. Everyone has content. So what?

Context is everything. The right info at the right time at the right place. Web 3.0

Nice. I like that.

Michael Johnson

The 2009 Thredbo summit graphically illustrated why strategy is becoming increasingly more valuable to Australian Biotech’s than the technology upon which these firms were based.

This takeout from the weekend’s stimulating conversations and presentations gives us great heart that the sector has never been stronger or better positioned for a period of sustained growth.

Further, despite the growing weight of clinical evidence that continues to support the technology diligently developed over the last decade, shareholders should take great comfort that the management teams, more than the technology, more than the strength of the IP, more than the depth of the capital backing, can be the major reason for a growing sense of confidence in the Australian Biotech industry.

The Altitude with Attitude

So hold on, you say, strategy more valuable than technology? Did Thredbo’s altitude impair his thinking?

Ultimately, a technology is only really monetised when you place it in the hands of a customer. It’s only then that you work out whether or not it’s worth anything. Sure, you can do some wonderfully clever things by monetising your efforts in developing it to a certain stage. But it all hinges on the notion that someone, somewhere, will generate a massive return when it is placed in the customers hands. And that assumes a couple of things, that, a) you have customers, and b) you can put your technology in their hands.

Companies must actively engage with these potential customers, be they patients, physicians or even the big pharma you intend licensing to. By this we mean you must assess and validate whether or not these same customers want the product, will use it, will continue to use it and will pay for it. Only by doing so and providing cogent evidence to support this can you reasonably claim a value for your technology.

Often the market hears spurious claims about the potential market share a new technology will grab when it enters a market. Just because a market exists, does not mean you can access it. An existing market exists only for existing technology. An existing market is also owned by someone who has invested heavily to create and grow it, and will invest heavily to protect it. Claiming that your technology has a potential market share in someone else’s market without engaging with the end users is like claiming a clinical outcome without undertaking any clinical work.

The Exubera lesson

What became extremely clear in the clean mountain air of Thredbo is that Australia’s leading organisations are increasingly engaging with their end users and value chains to better understand the critical issues that drive acceptance and adoption of their technology. In other words, whether or not their technology has real value.

However just asking patients whether they want a new technology is never enough.

Gary Phillips of Pharmaxis took us through the well publicised Exubera case study. Exubera was Pfizer’s attempt to fill the blockbuster hole in their portfolio with an inhaled insulin product. As was pointed out, Pfizer more than likely undertook extensive research of the market to understand whether or not their technology would be accepted. However, as in any clinical setting, it is the question which is all important not necessarily the answer.

In hindsight Pfizer realised that the reason for the lack of acceptance had more to do with the way the product would be used and how this impacted the Physicians’ business rather than the technology itself. An issue highlight by Pfizer Vice President Ian Read in 2007 “The resistance from physicians and patients to going on to insulin any earlier than they might have done previously was seen as a particular hindrance to the uptake of Exubera, coupled with the burden the Exubera technology represented to the practice, in terms of lung function testing, training with the device as well as the size of the inhaler itself.”

This understanding of how your technology impacts the other ‘jobs’ both the physician and the patients are trying to get done is what Pharmaxis with their cystic fibrosis product Bronchitol™ and Acrux with their testosterone replacement device Axiron™ have sought to understand.

More importantly, it is how these two companies have responded to this that should provide investors with great confidence in the respective management teams and the strategies they are employing.

By ensuring a strong market orientation, both organisations have been able to add a powerful strategic element to their clinical development, product and device design and create compelling ‘Go-to-market’ strategies. In other words, market orientation has allowed both businesses to create powerful propositions to their markets and mitigate their market risk. By doing so they have gone some way to avoiding the problems Pfizer encountered.

The value is in the problem, not the solution.

Josh Hofheimer from Hexima and Jackie Fairley from Starpharma illustrated that market orientation does not only mean a focus on the end user, but includes strong appreciation of the needs of the marketing partner. This direction has the potential to be a huge boon for the Biotech sector.

StarPharma identified that SSL – one of the world’s largest manufacturers of condoms - would be able to create a long term competitive advantage by coating their condoms in the VivaGel® product. The job – of active product/brand portfolio management - is a critical issue facing all large consumer facing companies. Starpharma were able to provide a patented point of difference. In the world of Fast Moving Consumer Goods, that is as rare as hens teeth, and the subsequent value created has the potential to be significant for both partners.

Hexima , too, has focused on developing a deeper understanding of the challenges, or important jobs, their marketing partner, Dupont, faces. This focus on developing technologies that address some of Dupont’s high value important ‘jobs’ – dealing with margin control and yield - has not only resulted in some exciting revenue opportunities but also created a licensing outcome that many Biotech’s can only dream of. Not only have Hexima dropped the traditional ‘transactional’ licensing model of here’s my product, where’s my cheque, they have created a scenario where they are now an integral partner in Dupont’s Agribusiness offering.

Innovation in a time of crisis

Mark Morrison from Universal Biosensors, in a confronting and challenging session, raised the topic of the rising cost by the US health system, and indeed, health systems across the globe. The implications for the entire sector are immense. What happens when societies and economies can no longer afford to continue to subsidise the pharmaceutical sector? What then?

While this crisis will threaten the viability of many biotechs and pharmas globally, it is also opening the door for organisations with disruptive strategies. These are companies who not only develop breakthrough technology, but whose technology allow them to rip cost and time out of existing processes within the health system – from patients, right back through to the lab.

Labtech’s Lusia Guthrie illustrated just how compelling this opportunity can be. Labtech’s strategy of identifying processes with the pathology lab environment that are time consuming, costly and cumbersome and responding to this with an automated solution illustrated the power of market orientation. Not only is Labtech providing a compelling solution to a problem the lab technician experiences, more importantly, they provide a compelling solution to the Lab’s Chief Financial Officer (the buyer) who is seeking ways to improve productivity and protect margins in a sector under increasing price pressure.

As a result of this focus Labtech has now built a unique capability in solving problems within a defined market - a market that will continue to look to it for solutions to its key problems.

Welcome to the Renaissance

Thredbo 2009 illustrated that this sector has reached a fascinating inflection point. By building a capability in understanding the needs of their markets and bringing to bear the right technical and scientific expertise, Australian biotech’s are building a truly sustainable and compelling story; for investors, for customers, and for those who continue to sink their hearts and souls into this industry.

One of the more cogent comments we heard over the course of the weekend occurred right at the very end. A well respected and experienced delegate commented, “You know I used to think we were a bunch of very bright people who were so obsessed by how brilliant we were that we were all doomed to fail; but over this weekend I’ve heard some of the most amazing stories, not about how smart we are, but about how good we are at listening to what the problems are.”

If nothing else, market orientation ensures you listen. More importantly, it has the potential to then describe that problem with a common language; one that the customer defines, the investor understands and which can guide the strategies and activities of all those seeking to solve it.

Thredbo 2009 could signify a new chapter in the Aus Biotech sector. One where the emerging stars of this sector cogently demonstrate that the most effective way of commercialising a technology is to keep the problem it seeks to solve front of mind.

Michael Johnson.

Our recent blog on the move towards a Green Bank has been explored further by our colleagues at Mckinsey in a recent article in the Mckinsey Quarterly.

The underlying hypothesis that we put forward was that climate change will be a massive wealth creation event, not a wealth destruction event. This argument is now starting to take shape and gather weight.

Mckinsey articulate the nature of the massive opportunity now facing the global financial services industry as the new green economy takes shape. As this sector grows there will not only be an exponential demand for funding for infrastructure and technology, but also a whole new segment requiring a vast array of financial products and services - from reporting, measurement, analysis through to the creation of new instruments and markets.

We believe that the response to climate change, like any crisis that requires a large scale innovative response, will generate wealth not only in the industries directly effected, but more broadly right across the entire economy. It will be interesting to observe, as more data comes to light and economists start to model this in greater detail, what the net ‘costs’ and outputs actually are. Could it be that the climate change could create a net benefit for society?

We suspect that just as the emergence of the fossil fuel industry created untold wealth, new industries and masses of new jobs right throughout society, so too will the emergence of the green economy and clean energy technologies. While the transition between the old economy and the emergent one will be rough, as transitions of this nature usually are; the advantage of globalisation - both social and economic, and the pervasive nature of the internet means that everything happens at a much faster rate.

So just as the worst recession to occur in 75 years looks like lasting little more than 12 months, (compared to the horror 2-3 years of the pre-internet 1990’s and the 5-8 years of the 1930’s), one hypothesis worthy of consideration is that the transition from the fossil fuel economy to a renewable one can and will occur much quicker than was previously expected.

Given the emerging data on the pace of climate change, this is one optimistic scenario in an otherwise bleak outlook.

One of the fundamental challenges facing any new energing technology is funding. It is the Rubicon for any startup business.

With any emergent technology, acceptance by investors follows your classic product lifecycle. Early adoptors, mainstream and laggards. The Cleantech industry finds itself in the early adopter (acceptor) stage just when th world needs it to be running at the mainstream stage. The sad result is that many new cleantech companies are dying at birth - unable to source the critical capital they need due to the GFC.

The American response has been to develop a Green Bank. This article provides a wonderful overview of what the bank could do, how it would work and the payback for America. So while there is a mass of ink being spent in many countries on the relative merits of Government support for climate change initiatives, the American response is to assist private enterprise to sovle the issue.

We love this. For some time we have been espousing the concept that climate change is one of the biggest money making opportunities that has ever existed!

In short, you can make money from saving the world.

Our firm belief is that you can make huge amounts of money from saving the world. Using our persecptive of market needs and opportunity identification, you could argue that saving the world is currently the greatest ‘unmet need’ in any market. Additionally, the length of time before this unmet need is actually satisfied to the point where no more value can be created is potentially unlimited. So theoretically, a planet saving offering may well provide you with an extremely sustainable business model.

So back to the issue of funding. Investment in any new technology requires a keen appreciation of both risk and the likelihood of success. The market is also, despite recent events, pretty good at picking winners, so maybe the best bet for any national government is to place the decision back into the hands of the market, but assist it with a brief and support that will drive this development process. A la the Green Bank.

Ultimately, like any technology life cycle, existing technologies will be superseded by ones that offer to do more for less. Just as Netscape lost to Google, new clean technologies will be superseded by those that do the ‘job’ better. A Green Bank that allows this process to occur faster would provide the structure for the next Google, You Tube and Facebook to germninate and also provide us with the critical solutions that are required right now.

Malcolm Gladwell is one of our favourite authors. His book the Tipping Point became a phenomenon. We recently noted his latest article (Cocksure) in the New Yorker. It is a wonderful description of the dangers of over confidence and how this contributed to the spectacular fall of Bear Stearns. A great read.

A recent report on Cleantech VC investment has highlighted what we probably have all suspected - that at an  international level Cleantech is certainly the flavour of the month in terms of where VC funds are going.

The interesting issue will be whether this will be replicated locally?