Government in the innovation economy:

Finding untapped value by transforming

federal technology transfer
The problem

As countries ramp up their research and development (R&D) R&D investment of only 0.15%iv is shocking and underscores the
spending to challenge the United States as the global innovation need to improve the way in which technologies are transferred to
leader, it is increasingly important that the US take measures to industry. Data suggests that every active license between the federal
improve the efficacy of its innovation process. One area prime for government and commercial entities contributes to roughly 18 jobs
improvements is federal technology transfer—the phase when and $5 million in national economic activity per year on averagev,
innovations are transitioned from federal government labs to the so not getting IP to market is also a huge missed economic growth
commercial marketi. The federal government tech transfer process opportunity.
struggles to ensure that these lab developed technologies find
The deficiencies of federal technology transfer become more evident
a use in the commercial marketplace due to inefficiencies and
when compared to the exponential change occurring in the private
inconsistencies.
sector. The pace of progress is now being measured on a different
While the value of federally funded research is undeniable (consider time scale and government must match industry’s intensity during
the Internet, global positioning systems, etc.), quantifying the return the “hand-off” process or forfeit its commercialization window. For a
on investment (ROI) is often challenging. In simple terms, billions of technology to advance to the point of commercial use, and generate
dollars are invested in government R&D programs to develop robust positive economic returns, it must overcome the proverbial “valley
intellectual property (IP), but too often this IP languishes on the shelf of death,” the region of technology maturity where development
with limited commercialization activity. For example, as described funding and private investment are scarce. Difficulties at this medium
with traditional metrics, in 2014 total federal R&D investment was maturity stage are often ascribed to misaligned incentives for
$130.8 billionii while the total annual income generated from licensing government and too poor of a risk-reward profile to justify business
was only $194 millioniii. While licensing revenue isn’t the sole method investment.
for measuring commercialization success, a monetary return on
Government in the innovation economy: Finding untapped value by transforming federal technology transfer

To bridge this divide, the entire strategy for federal technology federal technology transfer process requires abandoning the “if we
transfer must be realigned to more effectively facilitate the build it they will come” mentality. This traditional “push” mindset
placement of technologies in the hands of private companies with to technology transfer must be balanced with “pull” strategies that
the means and incentives to drive it to market. The creation of require commercialization conversations and industry input early in
patents and the subsequent licensing thereof is no longer a sufficient the R&D process. In doing so, federal agencies will improve efficiency
measure of innovation success. Universities have moved away from and transparency as they encounter greater budgetary scrutiny and
touting licensing revenue and scientific breakthroughs to listing the must demonstrate positive returns on public investments.
companies founded by alumni or created on campus (e.g. Facebook
and Harvard, Intel and MIT, Google and Stanford). Improving the

The opportunity

As US government leaders seek the greatest value for each tax dollar To implement these and other best practices, systemic challenges
spent, federal technology transfer can realize massive efficiency that span the federal landscape must first be dealt with. Culture,
gains through the adoption of improved processes and technologies talent, information systems, and processes are all critical to
that are successfully deployed in the private sector. Implementing executing an organizational strategy, but vary widely among federal
these advancements will enable government to better address the technology transfer agencies. The underlying causes of this problem
“valley of death” by proactively developing data supported strategies are generally attributed to a combination of a lack of employee
to survive the proverbial expanse. incentives, poor transparency, little outside collaboration, fear of
failure, difficulty attracting and retaining high quality talent, lack of
From a technology standpoint, recent advances in fields including
training at agencies, and missing interagency synergies. Too often
data management, information processing, and automation opens
federal labs push patented technologies to the commercial sector
the door for dramatically more efficient and effective technology
without the necessary sweat equity or the know how to effectively
transfer. Artificial intelligence (AI) and machine learning can be
have them adopted by commercial entities. If the government
leveraged to help improve the efficiency of technology transfer by
acted to update its policies and implement them across the federal
identifying potential targets through matchmaking algorithms. Novel
landscape, the federal R&D units, including the innovation engines
techniques such as crowdsourcing and gamification are being used in
that are the federally funded research and development centers
various forms to accelerate innovation by tapping into the collective
(FFRDCs), would be better positioned to make material contributions
intelligence of the masses. Socializing technologies with a community
to the 21st century innovation economy.
of potential adopters also improves the chances for a successful
transfer event.

Case study—Amazon.com, Inc.

Jeff Bezos, founder and CEO of Amazon.com, Inc., often credits Amazon’s success to the sheer volume of experiments the
company performs daily, monthly, and yearly. Private companies like Amazon embrace experimentation, failure, and
iteration. For a public research initiative to enjoy similar efficiencies with transferring marketable technologies, it must
apply and prove its technologies early and often, with the objective of constantly improving successful commercialization.

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Government in the innovation economy: Finding untapped value by transforming federal technology transfer

The bold play

Selective centralization of key elements of the federal technology

transfer universe would help improve the efficiency and efficacy of
commercialization activities and enhance the economic impact of Case study—Manufacturing USA
federally funded technologies. While some functions and systems
must exist at the point of innovation, others are not only conducive
for centralization, but doing so would provide strategic insight into National labs and manufacturing institutes play a
national interests and enable the government to better implement strong role in developing American technology
tech transfer strategies. A bold play to centralize key technology capabilities while also strengthening the local economy.
transfer elements will enable a shift in focus towards national A recent study showed that efforts to coordinate the
economic impact rather than the antiquated proxy metric of IP manufacturing institutes through Manufacturing USA
licenses. In doing so, the government can achieve: resulted in significant network effects in terms of
added value to members and progress towards the
01. Greater accountability
institutes’ missions vi. Much of this happened even after
02. Better aligned incentives
the initial injection of federal funding, as commercial
03. More attractive risk profile for federally developed technology
groups saw the returns in IP worth their investment.
04. Increased commercialization success

While the idea of centralization tends to generate concerns

of government bureaucracy, a central office may minimize A central authority for the entirety of the federal government
administrative burdens by reducing the number of agencies can better engage the technology ecosystem and incentivize
and actors involved in technology transfer decisions. For some consortiums of industry and academia to collaborate. By
large organizations with a broad array of activities, such as the consolidating and potentially automating processes and systems,
Department of Defense (DoD), centralization of technology transfer a centralized office would free up local field offices to strategically
efforts may be a two-step process. Organizations like these might be engage their region or mission space. The field offices could
well served by first consolidating tech transfer activities within their become more integrated in the overall research process to ensure
own agency before ultimately merging efforts with the rest of the commercialization is considered throughout the development
federal government. process. Engaging researchers to gain an understanding of the
evolving commercialization potential of their technologies is an
important element in increasing technology transfer success. By
Case study—DataTribe centralizing the associated information, industry would gain a line of
sight into the pipeline of innovations that are likely to be available in
the mid- to distant-future.
Some private organizations have already demonstrated
Many government leaders recognize the need to posture federal
the value of having business champions, or
agencies to more effectively contribute to our nation’s innovation
organizations with expertise in managing the tech
economy. This is no small task as it requires that the entire system
transfer business considerations, participate in the tech
become more attentive to the interface with industry. The proposed
transfer process. DataTribe, one such organization, has
centralized office would be equipped with personnel with expertise
also taken on the role of investor to support the
spanning the private and public sectors and it would aim to:
successful transfer of federal government technology
to commercial entities that develop the technology •• Promote innovation networks through the creation of cross
further and bring it to market vii. functional consortiums.
–– Foster collaborations between federal organizations and
private companies to drive government technologies to
commercialization, with guidance and support from business
champions.
–– Pursue collaborative business models earlier in the research
cycle that de-risk technology development by diffusing costs and
broadening pools of available talent and resources.
–– Identify commercialization opportunities by looking beyond
individual agency’s mission domains.
–– Provide agencies with a greater perspective into the state of
innovation across the federal government to inform collaborative
research opportunities.

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Government in the innovation economy: Finding untapped value by transforming federal technology transfer

•• Streamline and standardize processes across the federal Centralization of technology transfer functions has the potential
government. to not only enhance the impact of federally funded technology,
but also improve transparency, provide negotiation leverage, and
–– Create streamlined processes and boilerplate agreements that
inform strategic decisions with national implications. In turn this
are suitable for a wide-range of potential partners and can be
will enable the federal government to move beyond simplistic IP
enacted on a time scale consistent with industry’s needs.
licensing strategies and instead take measures to realize its full
–– Identify best practices within the federal government and
potential within the broader innovation ecosystem. Doing so will
industry and standardize those practices across the tech transfer
increase licensing royalties to the government, but moreover, the
ecosystem.
impact will extend to those elements that are core to the spirit of
–– Continuously experiment and innovate with tech transfer
federal technology transfer (i.e. job creation, US competitiveness,
processes at a small scale to identify more effective methods,
GDP growth, etc.). Through centralization, the federal government
and then quickly scale up across federal agencies once the
can simultaneously reduce waste and improve outcomes for private
methods are proven.
industry, government agencies, and the American taxpayer. By
•• Implement new performance metrics and better incentives. tuning the federal innovation engine with advanced technologies
–– Adopt tech transfer metrics that better reflect the impact of and techniques, the government can keep pace with the 21st
federally funded innovation on the national economy. century economy and maintain its leadership position on the global
–– Standardize metrics to enable performance comparisons across innovation stage. Let’s re-ignite the passion America witnessed
technology transfer entities and hold organizations accountable. during the Apollo program and get Americans excited to work with or
–– Implement performance incentives for government technology to work for the federal research system.
transfer personnel that reward successful commercialization of
technologies and are attractive to top tier talent.
–– Publish and socialize post mortems for unsuccessful endeavors
Contact
so that future efforts can benefit from lessons learned.
Matt Widmer John Lisciandro
•• Harness big data to provide better visibility into the federal
Principal Managing Director
innovation ecosystem to aid in opening federal R&D assets.
Deloitte Risk & Financial Advisory Deloitte Risk & Financial Advisory
–– Centralize data assets pertaining to patents, licenses, etc., from [email protected] [email protected]
all federal government technology transfer offices. +1 571 882 5140 +1 571 882 5318
–– Leverage data assets and advanced information processing
technologies like machine learning and AI to perform analyses
that seek to increase the likelihood of placement and impact.
–– Increase access to data by external parties through easy to
use interfaces to promote visibility into available government i. National Expert Panel, White House Lab-to-Market Inter-Agency Summit:
technologies and provide transparency of tech transfer Recommendations from the National Expert Panel, White House Conference Center, May
20, 2013, p. 2, http://innovationassoc.com/files/WH.L2MSummit.Recommendations.FINAL.
performance. Aug.09.2013.-2.pdf, January 1, 2018
–– Capture and publish additional tech transfer data as generated to ii. National Institute of Standards and Technology, Federal Laboratory Technology Transfer,
enable smarter decision making by all players in ecosystem. Fiscal Year 2014: Summary Report to the President and the Congress, October 2016, pp.
8-9 https://www.nist.gov/sites/default/files/documents/2016/10/26/fy2014_federal_tech_
•• Raise the stature and reputation of federally funded research. transfer_report.pdf, January 4, 2018
iii. Ibid.
–– Increase involvement of federal funded research facilities in iv. Data for calculation from: Ibid.
national innovation efforts. v. Data for calculation from: TechLink and University of Colorado Business Research Division,
–– Attract stronger talent through employee incentives, enjoyable National Economic Impacts from DoD License Agreements With US Industry: 2000-2014,
TechLink E-publication, April 27, 2016, pp. 25-26 https://techlinkcenter.org/wp-content/
work culture, and commercial exit opportunities for employees.
uploads/2017/01/2016-DoD-Licensing-Study-E-Publication.pdf, January 4, 2018
–– Proactively advertise for and pursue the nation’s most skilled
vi. Deloitte Consulting LLP, Manufacturing USA: A third-party assessment of program design
scientists and engineers. and impact, January 2017, pp. 4-7 https://www2.deloitte.com/content/dam/Deloitte/
–– Provide a diversity of career paths, allowing agencies to us/Documents/manufacturing/us-mfg-manufacturing-USA-program-and-process.pdf,
January 4, 2018
capture value from employees with long-term and short-term
vii. DataTribe, https://www.datatribe.com/, January 4, 2018
commitments to their organization.

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