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03/22/2011 07:00:00

How an Idea Becomes a Business

"Why do so many good companies fail?" muses Ken Pickar, visiting professor of mechanical engineering at Caltech. "Why have so many great-seeming products flopped?"

These questions form the core of the course Entrepreneurial Development (E 102), in which students work in small teams to identify an existing technology and develop a business plan for it. Pickar teaches the 10-week course as a follow-up to his Product Design for the Developing World (E/ME 105). "In that course," he says, "the students created products specifically for use in developing nations. But in this one, rather than designing the proverbial better mousetrap, we ask them to take someone else's science—something currently under study at Caltech—and recast it as a viable business. For most traditional engineers, that represents a dramatic shift in world view."

Course lectures cover many topics rarely seen at Caltech outside the business economics and management curriculum, including licensing, partnerships, outsourcing, corporate financials, intellectual-property protection, and the folly of a careless business model.

The class's final exam consists of a 15-minute marketing presentation by each team before an audience of real-world investors and venture capitalists. At this year's final, held on March 14, the variety of technologies and markets was remarkable. One team presented a solid-state memory technology developed at Caltech by Jehoshua "Shuki" Bruck—Gordon and Betty Moore Professor of Computation and Neural Systems and Electrical Engineering—and for the first go-round proposed targeting Netflix and other high-volume streaming content providers. Another team investigated bioethanol production using agave plants rather than corn. Still another pinpointed a new market for the vertical wind turbines of John Dabiri, professor of aeronautics and bioengineering. Their proposal for a wind-driven expeditionary power supply for the U.S. military was carefully crafted to attract available federal funding.

Some teams found that they had envisioned markets that didn't exist. For example, one team's project centered around a microfluidics device for quickly and inexpensively detecting various disease markers present in the blood. They originally targeted the consumer market, in hopes of allowing patients to track the effectiveness of their medications. But experts and focus groups greeted that plan with frank skepticism: no physician appreciates having an extra cook in the kitchen, and patients rarely make reliable data gatherers. At the eleventh hour, the team scrapped their original marketing plan and went after an entirely different population: workers in certain professions carrying a high risk of disease. Pickar sees this forced about-face as a good thing. "It gave a great demonstration of the importance of changing rapidly, guided by marketing data," he says.

Sometimes combining technologies can open up whole new markets. "Many research ideas have numerous possible applications," says Pickar. "The trick is to tweak them until there is real value to real people with real money to spend." For instance, passive RFID (radio frequency identification) bracelets for prisoners, similar to the technology used to thwart retail shoplifting, isn't a new idea. But when one of the teams proposed melding that technology with state-of-the-art software for analyzing flocking behavior, the result was an automated system that promised to predict gang-style altercations based on the movements of individual prisoners. This sort of technology mash-up "is itself a form of innovation," notes Pickar, "which makes it extra appealing to the minds of engineers."

The students enjoyed a wide range of support from the community, including access to Caltech's Office of Technology Transfer, the Caltech Entrepreneurship Club (for which Pickar serves as advisor), and the Caltech/MIT Enterprise Forum. Each team was mentored by an experienced high-tech investor who coached them on structured meeting methods, negotiating techniques, and other fine points of business development. Many of the mentors attended the final presentations. Also in attendance was Professor of Aeronautics and Applied Physics Charia Daraio, whose concentrated-acoustic-pulse technology was pitched by one team as a noninvasive method for breaking up arterial plaques.

Pickar hopes the course gives students a new respect for what it takes to bring a research idea to market. An effective CEO spends much more time in potential investors' offices than in her own, he notes, and an effective marketing plan requires more than a fistful of hyperoptimistic numbers and some pretty pie-in-the-sky charts. "The students are learning to take exciting research ideas, assess their commercial viability, and communicate that value to the folks who can help bring them to life."