Nigeria does showcase sparks of brilliance though, most times, it rarely remembers to replicate the best things. In one entity, National Petroleum Investment Management Services (NAPIMS), Nigeria demonstrated that it is indeed a nation of great people. Nigeria designed a great structure that made it possible for it to unlock value despite apparent lack of technical and financial capacities.
The National Petroleum Investment Management Services (NAPIMS) in the Exploration & Production (E&P) Directorate is the upstream arm of NNPC that oversees the Federation investment in the Joint Venture Companies (JVCs,) Production Sharing Companies (PSCs) and Services Contract Companies (SCs).
NAPIMS is, therefore, set up to earn margin arising from investments in the JVCs, PSCs, SCs, with the multinationals and also protect the nations strategic interests in the JCVs [sic].In addition, NAPIMS engages in frontier exploration services in basins where the multinationals hesitate to venture, like the Chad Basin.
Simply, NAPIMS is the investment arm of the Nigerian people since oil & gas dominates our foreign exchange. As elegantly noted in its mission statement – “to be a world-class oil investment management outfit” – NAPIMS ensures that Nigeria gets value in strategic partnerships with Shell, ConocoPhillips, Eni, Mobil and other major (upstream) oil companies. Through NAPIMS, Nigeria runs many joint ventures with these energy companies, working to maximize Nigerian returns.
Why I like NAPIMS Model
The NAPIMS model is very unique and there is no other structure like that in Nigeria. In short, Nigeria got NAPIMS right, but failed to replicate a really great working system in other areas. I like the structure of NAPIMS because of the following key reasons:
It makes sure Nigeria is de-risked in oil & gas business. Through the JV, NAPIMS makes money only after the energy companies have taken the risks and succeeded. In other words, if they go there and lose money, NAPIMS will not lose. But when they make money, they have to share with the Nigerian people.
Through NAPIMS, Nigeria does not need to have technical capabilities before it can unlock values in its upstream energy business.The global energy giants are responsible for developing and utilizing their technical know-how to unlock the crude oil value in the nation.
With the NAPIMS Model, Nigeria does not need to have the cash before oil mining can happen. The global partners will be responsible for the financial investments.
Sure, I do agree that if Nigeria should develop the necessary technical and financial capacities, the nation would be creating more value from its oil and gas reserves. But expecting Nigeria to do that will miss the point. We did not run electricity well, we failed in telecommunications, and we continue to struggle in clean water supply. So there is nothing that can support the thesis that if there were no Shell, Mobil etc that Nigeria would be an oil producing country. That we have allowed the energy entities to make money seems to be the only pragmatic model, because in other simpler things, we could not deliver. So, NAPIMS formation was a clever way to overcome Nigeria’s stasis in execution.
FIIRO DG updates Nigeria’s former President Obasanjo on the parastatal’s works (source: Fiiro)
Yes, with NAPIMS, we avoided the problems of inefficient Water Boards, NEPA (or its incarnates), and NITEL and delivered a top-class upstream energy business that has funded Nigerian budget for decades. That is the beauty of NAPIMS; very ingenious.
NAPIMS Model for Government Research Institutes
Nigeria funds many research institutes including Electronic Development Institute Awka (ELDI), Federal Institute of Industrial Research, Oshodi (FIIRO) and Raw Materials Research and Development Council (RMRDC).. While we may not have invented computers, some of these government agencies are actually inventing. However, they do not innovate because they have nothing (of value) commercialized. (Innovation = Invention + Commercialization). Without the element of sales/commercialization, they are merely filing up government shelves with ideas. That is the nation’s weak link: inventing without any plan to innovate.
I have a suggestion, Nigerian government should work to liberate these agencies by deploying the same model it has used effectively in NAPIMS. This is what I suggest:
Establish a new unit, not a new agency or commission, within Nigeria Export Processing Zones Authority(NEPZA) to coordinate how inventions from these government agencies can be commercialized through joint ventures with private companies. The unit will represent the Nigerian people as it negotiates with the investors. Call this unit National Research Outcome Investment Management Services (NROIMS).
NROIMS will coordinate with all government labs and research institutes to collect new research outcomes which are ready for commercialization. It will then package them, closing deals with private sector where possible. It will hold small equity, only activated on profit-sharing since it will not invest any money in new ventures. We suggest NROIMS will take 10% profit for ten years. Government has to make the JV terms very palatable for the partners while requiring that they must commercialize under defined terms or they will lose their rights to the inventions.
NAPIMS model will unlock value in the country by providing a vehicle for private companies to explore research outcomes which can be commercialized. NROIMS will work to market and promote the inventors locally and internationally to ensure Nigeria does not end its research policy at discovery, without any element of commercialization.
Case Study: Unlocking FIIRO
FIIRO is a federal government parastatal with the mission “to conduct and promote market-driven research and development (R&D) for the industrialization and socio-economic development of the country”. Over the years, it has created many technologies with most of them not commercialized. Though it has a technology transfer office, a nationwide consolidated system will help bring efficiency in cases where complementary technologies can be integrated from other national institutes.For example, ELDI Awka could have developed an embedded electronics technology which could be used with FIIRO Fruit Washer, to improve its efficiency.
FIIRO Fruit Washer
Rounding Up
Nigeria should not just focus on discovery, neglecting commercialization as it works to redesign its economy through diversification. Our science and technology policy rarely gets up to the level of taking ideas to markets. Our nation has to correct that issue for us to make progress. Yes, we are good in sending satellites in the space before we even plan what to do with the downlink signals. We budget money for research with no apparent strategy on what to do with the outcomes. If we can borrow a model that actually worked, the NAPIMS model, we can redesign our science and technology research for market impact. Now is the time for Nigeria to think seriously about commercializing the little efforts we are making. The Nigerian people are looking for the products in our markets.
Many people are pushing for modular refineries in Nigeria. It is indeed a very exciting business, on the face of it: Nigeria needs fuel to run our generators and drive our cars. And with our refineries not producing the capacity the nation needs, we have been importing for years. Indeed, government will like to substitute the imports with locally refined products especially in this age of foreign exchange scarcity. It makes economic sense because Nigeria has the crude oil and we have no business importing refined products.
That is the optimistic exuberance why most people are getting into this. According to the Vanguard, Nigerian National Petroleum Corporation (NNPC) expects about 20 investors to pump in $20 billion in the business.
THE Nigerian National Petroleum Corporation, NNPC, has commenced move to attract 20 companies to make substantial investment worth $20 billion in order to meet the Federal Government’s target of increasing refining capacity in the country.
Investigations showed that the apex oil corporation has, in the past few weeks, been engaging with the investors in order to inform, educate as well as assist them to prepare various packages required in the process of applying for licence. On completion of the engagement, the promoters of the modular refineries would be equipped with vital knowledge to submit their applications to the Department of Petroleum Resources, DPR, that is vested with the responsibility to issue such licenses.
It is indeed an exciting sector. This article provides a good rosy picture for Dangote Refinery, which is certainly the one that matters at the moment, as it is already building, to begin operations in 2019.
THE 650,000 barrels per day Dangote Refinery has been projected to hit 50 per cent capacity utilisation by 2020. The capacity utilisation of the Lagos-based plant, scheduled to come on stream in 2019, would rise to 90 per cent by 2030.
PriceWaterCoopers, in its latest report, Modular refineries: Merits and challenges, made available to Vanguard, stated that the feat would make West Africa to become a great refining hub in Africa.
The report, which puts existing refineries at 20 percent utilization, stated that Nigeria and West Africa have a deficit of 113,000 barrels per day, bpd. “Nigeria’s refineries continue to operate at abysmally low utilisation rates. 8.5 percent combined utilisation as at 2016 and 37 percent as at 2017. Refineries have been forced to halt operations multiple times as crude supply lines have been routinely targeted by militant groups.
That is a very interesting projection. And that makes sense because Nigeria presently imports most fuels. So, with local demand, Dangote Refinery will not have any problem in getting to near-capacity utilization; our national refineries are largely non-functioning.
Then read this from Quartz newsletter:
This week the UK became the fifth country—after the Netherlands, Norway, India, and France—to commit to selling only electric cars in the near future. It will do so starting in 2040, while Norway and India are more ambitious, aiming for 2025 and 2030 respectively.
As battery prices fall, it’s clear that electric cars are the future. How soon we get there will depend on how serious we are about reaching emissions goals set under the Paris accord….
If any country seems to be on track in this regard, it’s China. In 2016, the country registered 350,000 electric vehicles (the US was a distant second with 160,000). It has tax exemptions in place worth $6,000 to $10,000 per car. It boasts 150,000 charging stations, with 100,000 more coming in 2017 (the US has just 16,000). And it has plenty of spare capacity to power all these vehicles, with its thermal power plants running only half the time.
Tour of Dangote Refinery by Nigerian leaders [Source: LN News}
Comments
From these two bits of news, one can deduce as follows:
The future of refineries cannot be assured because batteries and electronics will get cheaper, as always. The implication is that fossil-powered cars will be the alternative cars in most parts of the rich world by 2040. If that happens, the fossil-powered cars may not even be produced. Understand that the market for Nigeria, unless we can get more people into upper middle class, may not be too huge for GM, Toyota, Ford etc to be making cars they cannot sell in U.S., Japan, Western Europe, and other rich countries. (I make this statement believing that making electric cars will be cheaper than fossil-powered cars within 15 years, for comparative cars.)
So, if the rich world pivots to electric, the end of fossil-cars can happen. That will affect the refinery businesses in Africa. It is important to note that this will not happen overnight; we have about two decades on this, in Africa.
Most refineries in leading economies will struggle because of many factors: electric vehicles, car-sharing (lesser on the road), vehicle energy usage efficiency, solar etc. So, the implication is that any projection in long-term, based on today’s refined-product demand will be careless; one has to consider the technology trajectory and how it will affect demand. This is where I see challenges for small refineries in Nigeria because demand will drop and price must crash for a product that is largely undifferentiated.
Sure, refineries are not just there to produce petrol for cars. However, in Nigeria, that is the main demand driver. The generators are there but I expect solar to have a good take on that within a decade. In other words, solar will become a good source of energy for most homes or government will figure out the electricity problem.
Investing in Modular Refineries
Refining is a commoditized business where scale matters more than anything. If Dangote Refinery takes off, as expected, it will be the industry leader. If that happens, it will have a huge advantage on building the necessary distribution facilities first. Should you need to come, say five years, after Dangote Refinery begins operations, you need to carefully analyse how soon you can recoup your investment before an expected fundamental industry-level redesign begins to affect demand. The five year projection is based on my model that NNPC may finalize all permits by next year and it will take each company 3-4 years to build.
Besides, if electric cars become far cheaper than fossil-powered cars, petrol demand will struggle. And since electric car penetration is always correlated with solar electricity home usage, we can also see more homes and offices getting electricity from solar at the same time they are driving electric cars. This means that if that happens in Nigeria, we may not even need generators.
So from the electric cars and generators, we will see multi-pronged challenges for refiners, depressing earnings for a commoditized product. We may end up having only the expected industry leader, Dangote Refinery, winning and every other participant largely struggling.
Rounding Up
Refinery business is not trading, it takes years to recoup the investments and as you work on the break-even analysis, consider the technology impact and the fact that we already have a category leader. In the short-term, modular refinery makes business sense in Nigeria. But after the next two decades, it may be worthless.That understanding should help to ascertain if the business is worth the risk.
Interswitch pioneered a digital payment processing sector in Nigeria. It remains the category-king today. But its business is challenged by amalgam of startups, banking institutions and innovators looking to create value in what is becoming an exciting growth industry in the country and the whole of Africa. As noted when Helios, a private equity firm, invested in the firm, it was at the forefront of the digital payment sector.
In December 2010, an investor group led by Helios agreed the acquisition of a majority equity interest in Interswitch Limited (“Interswitch”), the largest payment processing service provider in Nigeria. Interswitch has been at the forefront of the development and growth of the e-payment sector. The firm offers integrated message broker solutions for financial transactions, e-Commerce and e-billing solutions, telecoms value-added services and payment collections solutions. It also administers Verve, Nigeria’s leading debit card scheme. In March 2017, TA Associates acquired a minority interest in Interswitch; Helios remains the majority shareholder.
A brilliant company, founded by a Nigerian entrepreneur, Mitchell Elegbe, who saw an evolving opportunity and took action. The firm has become synonymous with digital Nigeria. It has had its moments over the years, and continues to drive Nigeria’s quest to digital payment future. But it is not alone. Competition is mushrooming daily across the African continent and beyond.
The Huge Fees
I first came into business contact with Interswitch, when my team in Owerri noted that we needed to send N150,000 (about $1,000, using then exchange rate) bank draft to GTBank, in favour of Interswitch, for us to link StartCrunch.com (since failed crowdfunding website) for payment integration. It was a very huge amount just to have the opportunity to receive payment online. I explained to the team that it was too much. But they noted that, there was no other way, to link the site to a local payment ecosystem without Interswitch. We made the payment.
Immediately, I knew that there was the power of monopoly in town. With PayPal, you can sign-up for free, and within minutes be getting revenue online. But yet, I do understand that Interswitch has its own cost model, running its generators and providing its security since government is largely not part of building companies in Nigeria. But was that fee appropriate just to be connected online, in Nigeria? Not really, and I felt they were making a real mistake. A big mistake because such fat profits and margins would cloud their strategies to mine all the juices with the power of monopoly and suffering later the risk of not innovating. They did not make significant efforts to expand beyond Nigeria, at scale, because they could simply charge $1,000 for integrating websites. (Sure, they did expand to Uganda, etc but generally, the pace was slow. When they started in Nigeria, they could have taken over Africa, if they had not become very comfortable in Nigeria alone.)
Besides the fees, the integrating solution was terrible:
Demanded expensive development time instead of copying and pasting as is done with PayPal and leading payment processing companies.
Required Interswitch staff to have access to Admin of the site to check that everything was fine. That was the product weakest link as when they asked for the password, my team laughed. Possibly, this company was not getting many sign-ups. Otherwise, they would not be doing that, at scale.
The second reason above extended the time to market as Interswitch was not even available to check whatever it wanted to check in the site. It took days to finally get the staff to check. GTBank was patiently coordinating this as the integration was going through GTBank. Everyone was frustrated including one of the finest banks in West Africa. The international facing payment integration with PayPal took 4 minutes: we just generated the code and added to the site. Interswitch took more than 6 weeks as the bank draft was issued in GTBank Owerri and they had to send it to Interswitch in Lagos. We asked: why not just ask us to pay into Interswitch bank account? No, the company wanted bank draft. MONOPOLY POWER is bad for humanity.
Simply, with easy profit margins, Interswitch became lazy and was unable to innovate.
Interswitch Verve offered a new dawn on Nigeria’s possibility in the digital age
The Monopoly And Post-Monopoly
Every product offered then by Interswitch was anchored on the premise that it was the only vehicle to connect companies online for payment, in Nigeria. You either take whatever you get or you stay offline. When we connected to GTPay, the company also needed to be supported by Interswitch. So, from banks to startups, Interswitch ruled the market. A one-product company, at its best, with many other things (electronic health records, etc) all linked to it, it had its moments.
But today, the power of monopoly is ending because with Stripe, PayPal, Flutterwave and Paystack, there are many options now, to a degree, locally. Unfortunately, in some cases, Interswitch has to pursue what some of these companies are doing, but now from behind.
For Interswitch, there are major scenarios here which are evident in this largely post-monopoly era of its existence:
Structure: Do what competitors offer, using the scale it has to compete. Its most innovative element is its size. While it can do this, as a big company, it may not necessarily do so at the quality level of the smaller local rivals. The structure of the new world, pursuing free sign-ups when it enjoyed in the past a payment of nearly $1,000 cannot happen overnight
Strategy: Working to be at the edges of the smiling curves, making it possible that it can have the best value created. It is a big company and it can support any person. However, the strategy has not really been supporting small companies which cannot generate decent revenue. Unlike the free cash it could get from these companies in the past, it needs to find a way to serve them, without the free cash. This makes it challenging because its cost model is not wired for such. So Paystack is already growing and most banks are eating deep into the market share. It has to adapt fast.
The Product: Interswitch product is simply to help companies participate in digital payments. From outside, it looks simple, as it provides services to banks and companies. However, as some of the banking institutions look for alternatives, even as Visa and Mastercard arrive, Interswitch will lose its firm grips in the nation. It will have to develop a new product – partnership – relying heavily on its best feature which is its size. Today, Interswitch has figured that out and is working with Visa, FuelVoucher and other companies. It is now evolving as a partner-company and that is a good thing.
Visa, the credit card company, and Interswitch, Africa’s integrated payments and transaction solutions company, announced news on Friday (June 30) that they will partner to accelerate mobile payments adoption across the region. In a press release, the companies said the partnership will see Visa and Interswitch upgrade the digital banking applications of leading banks to include mVisa, as well as enable more merchants to accept mVisa payments.
Interswitch will work very closely with Visa in selected African markets across West and East Africa to develop a Merchant Management Platform to receive Original Credit Transactions (OCT) from Visa, as well as app-based merchant enrollment solutions, which enable minimum Static QR code functionality.
Simply, Interswitch cannot be the Visa for Africa anymore, which is good, for it. It simply shows the intense power of choices. So it has to find ways to partner for new sources of growth. It can see its brand permeate Africa because that humility that comes post-monopoly will make it to compete.
Interswitch partners Fuelvoucher as it expands retail business
Growth and Africa Miss: Problem of Pricing
For all its success in Nigeria, Interswitch missed the African opportunity. It also missed enormous opportunity to lock many small companies in Nigeria and seeded its long-term growth and survival. I will explain with these two products:
Interswitch Quickteller is a secure payment gateway, which allows your customers pay for goods or services from different channels such as your website, ATMs, QuickTeller website, and the QuickTeller mobile App. For payment, the cards accepted include Verve Cards, MasterCard and MasterCard Verve.
Webpay is InterSwitch’s secure online gateway with which you can accept payments only on your website, using Verve Cards, MasterCard, MasterCard Verve and VISA. WebPay also processes International MasterCard acceptance, however, your bank has to be able to process International payment before international payment can be accepted on the site.
Looking at these two products. one can see that Interswitch has all the pieces of value that any entrepreneur, startup or digital company will need in Africa. PayPal and others were not then available in the continent. Then, Africa was Interswitch continent. But it did not scale. (Sure, some of the products were not exactly in these forms few years ago, but they had the pieces.)
Also, looking home in Nigeria, it missed another opportunity. As I explained, if the company had not adopted the N150,000 initial fee, many people could have signed up to its system. Not many people had the money and for those that had, the cost was high when there was no empirical data on if the business would work, digitally. Imagine if it had followed the PayPal model, nearly every site in Nigeria will be Interswitch-first. But with initial fee, as not many could afford nearly $1000, few cared.
The founder of Interswitch
The Future Partnership Model
In coming years, I expect more choices in the region, meaning that Interswitch will see further erosion of its grips on e-payment. Some banks like GTBank will begin building their own infrastructure since the future of banking will be digital and they can decide to own the assets. As this happens, Interswitch will begin to win by becoming a preferred partner with global corporations who are interested in the Nigerian and African markets. The deal with Visa is a sign because it simply means that Interswitch will prefer to help accelerate mVisa great product, over developing and pushing its own product to the banks. With its pedigree as a local digital payment pioneer and working with Visa, the firm can break more grounds in Africa. This means, its size, being BIG, begins to work for it.
That is one advantage of a former monopoly: SIZE. And on post-monopoly, a very smart management will find how to use that size as it redesigns the business. That is what the leadership is doing. It can get great deals from Visa, Mastercard and other global firms because they know it has the scale and experience to execute, in Africa. The startups may be innovative but most do not have presence needed to support banks with all the compliance issues.
Locally, Interswitch will transmute into a partner-company that works with partners to deliver its solutions to more customers. Doing this will mean not collecting the old fees that stymied its growth.
The Interswitch Opportunity
The future is about digital and electronic payment. Interswitch has the opportunity. It is still the category-king. It needs to do the following:
Improve its products. Integrating with Interswitch technology is unfortunately difficult. Sure, it has built the SDKs but its product usage is light years behind the industry best like Stripe. It needs to improve them to make it easier for developers to integrate.
Redesign the Marketing Model: The firm has to find ways to serve startups and SMEs, besides any existing partnership model. This is the way it can build a company that will worth $1 billion as it has been rumored, to be valued, in the past
Deepen the African strategy: As it works with Visa, the opportunity must not just be banks but also SMEs and startups.
Build Better Primitives: It can get ahead in many ways if it invests in making primitives which can help developers find its ecosystems to be more useful in Africa. It has the resources to do this than competitors.
Balance growth and profit: The initial model of charging huge initial fee made sense, but under intense competition, the real winner will be any player with network effect. So, the firm must balance profitability and growth: Verve has to be popular to have any value.
Can Interswitch Evolve?
Everything will depend on the attitude of the firm. It can dance even as an e-payment elephant, relatively, at local level. It cannot be obsessed with profitability as a digital company at this level of infancy. It has to focus on growth; profits will come. If it can cure itself of the love of fees and huge margins at the expense of growth, which is very critical for a digital company, it will return back to its glorious innovative past which won Central Bank of Nigeria and all the banks to adopt it as platform of choice. It is a great company and one that has moved Nigeria forward in many ways. Interswitch can do it as it is peerless in what it does, in the region.
As nations try to emerge from the most devastating global recession since the Second World War, policymakers, business communities, academia, and governments will be looking at ways to accelerate growth and competitiveness. Many at the right will continue their propositions that governments should be left out of business, while those at the left will emphasize that governments must play central roles in shaping commerce and industry.
The reality is that governments do matter and a single legislation could have impacts that can redesign a nation’s economic destiny. Globalization makes it so important that nations must compete not just on technologies, but on policies upon which those technologies are developed and commercialized.
This makes it possible that two universities in two separate nations can develop similar technologies with one creating Fortune 500 companies within a decade and another having the idea locked up in a cabinet. In other words, the policies or legislations made by congress or parliament on what happens to inventions supported by government funds matter.
In 1980, a United States legislation dealing with intellectual property emanating from federal government-funded research was implemented. The legislature called Bayh-Dole Act (after two Senators Birch Bayh of Indiana and Bob Dole of Kansas that sponsored it) or University and Small Business Patent Procedures Act gave US universities, small businesses and non-profits intellectual property rights and control of their inventions, even though they were funded by government.
Through this Act, universities, small businesses or non-profit organizations could pursue ownership of inventions in preference to the government.
What this means is that instead of sending the patents or inventions to the government agencies like National Science Foundation (NSF) or National Institute of Health for them to file away in their office cabinets, this Act empowers the inventing entity to pursue commercialization of the idea. Simply, the U.S government elects to fund an idea and allows the fund recipient to profit from any invention that comes from that idea.
This Act provides clarity on many issues that could derail the process of taking ideas to market, especially when those ideas were funded by US federal government. For professors, it provides incentives to pursue research both for discovery and for profit since they also could profit from their inventions. Just as their students could discover and commercialize, the university dons can also do the same.
It has been a new era as the number of Technology Transfer offices in the US universities has increased many folds. As schools file more patents, they continually look for opportunities for venture funds to commercialize or simply license their patents to other institutions. These days, schools quote the number of start-ups they have incubated as a metric to their competitiveness. They will tell you the stories of their students who graduated and founded firms and use that as selling points in their brochures. This is business right in the four walls of the universities.
Interesting, schools do not just teach business regulation and competitiveness anymore, they experience them because they are getting products to the market, though indirectly. There are many start-ups which have become pipelines for the big MNCS to buyout. Before the Act, some of the ideas that enabled the start-ups might have been overlooked by MNCs. But as the former show promise and profitability, they could be bought over and that mission of making society better is given a bigger scale.
For me, Bayh-Dole Act is the most important business legislature of the last century in the United States. And this is American Congress at its very best moment. It delivered through legislature and transformed the pace of innovation by providing a fluidic system that enhances U.S competitiveness.
The outcome of the Act has spread around the world because of the number of technologies which have been commercialized and subsequently penetrated across the globe. The discovery of the search engine that powers Google was done in Stanford University. When Mr. Page and Mr. Brin decided to pursue commercialization of this algorithm and created Google, they must have been grateful for the federal funds that partly funded their discovery.
In a recent trip to Africa, I noticed that many universities now have Technology Transfer offices or what they call Consults. Good idea, but I must say that the structure where those offices operate is entirely different from what Bayh-Dole Act gave the American schools. The Act is helping American taxpayers to reap the benefits of funding the academic institutions through innovative products in the market. In Africa, you rarely see government in the mix of research and the whole constructs of technology transfer office seems superfluous since no research takes place.
It is one of those things that happen when African professors visit American universities for two weeks and afterwards go home trying to recreate the American educational system. Unfortunately, the root cause analysis is not thought through to appreciate the fundamental evolution of what goes in the US system. Yes, you have technology transfer offices, but the school has no electricity to run a lab.
Back to the Act, notice that many US universities are very competitive. While some could argue over the benefit of that since universities should traditionally share freely, the pursuit of commercialization and the rewards that come with it help to make research relevant to the needs of the society. And this new focus has created a platform where collaboration with industry has reached an all-time level.
Possibly, without this legislature, the idea that powers Google might still be filed out someone in the NSF cabinet. And the world will miss the dynamism, positive disruption, jobs, success-domino and information access that arrival of Google gave the world. When they introduced 1GB gmail, Yahoo was forced to upgrade its users from 4MB to 1GB and later, limitless storage.
It is not just Google, there are many small companies in pharmaceutical, semiconductor, and IT industries which exist today because the Act made it so easy that individuals and entities can hold rights in preference to government and in the process increase the chance of getting innovative products to the market.
The lesson here is that congress and parliament can change the future of any nation when good policies are made.
I understand that this Act might have reduced the free flow of information and ideas across the academia because everyone wants to guard its ideas for profit; but we have to live with the reality that there is nothing that does not have a potential drawback. Yes, some of our professors are now visiting venture capitalists more often. But at the end, it provides a perspective that makes education relevant and useful. And I think American students are better off when their professors are not decoupled from the industry.
Also, early patenting of ideas or processes without pursuing immediate commercialization could decelerate the pace of their improvements from other partners. In other words, when schools patent their ideas, they could possibly be closing the channel of progressive advancement on those ideas. From professors to graduate students, few will be interested to work on ideas which have been patented.
But the reality is that over the last five hundred years, intellectual property rights (IPR) have proven to be the difference between the old world and the new one and this Act cannot be an exception. A world of IPR is a world of innovation and though Bayh-Dole can have some drawbacks, it is to me the greatest business legislation in the last hundred years.
Article Source: http://EzineArticles.com/4290212
Nigerian government is looking for how to diversify its economy. That is expected as the future of the world economy and specifically the automobile sector will not likely be powered by hydrocarbons but by electrons.That transitioning process is already happening with Nigeria’s junior minister of Petroleum Resources looking for petroleum demand within Africa.
Nigeria is a nation with talented people. With the right policy, our moment of glory will arrive. We have seen many countries fully recovered from the most devastating global recession since the Second World War, and their policymakers, business communities, academia, and governments pursuing ways to accelerate growth and competitiveness. Nigeria, unfortunately, is yet to recover. Our stock market is still embarrassingly under-performing.
I do believe that government has a major role in shaping commerce and industry. Yes, governments do matter and a single legislation could have impacts that can redesign a nation’s economic destiny. Globalization makes it so important that nations must compete not just on technologies, but on policies upon which those technologies are developed and commercialized.
This makes it possible that two universities or research institutions in two separate nations can develop similar technologies with one creating Fortune 500 companies within a decade and another having the idea locked up in a cabinet. In other words, the policies or legislation made by congress or parliament on what happens to inventions supported by government funds matter.
The Bayh Dole Act – America’s Most Important Economic Legislation
In 1980, a United States legislation dealing with intellectual property emanating from federal government-funded research was enacted. The legislation called Bayh-Dole Act (after two Senators Birch Bayh of Indiana and Bob Dole of Kansas that sponsored it) or University and Small Business Patent Procedures Act gave US universities, small businesses and non-profits intellectual property rights and control of their inventions, even though they were funded by government.
Through this Act, universities, small businesses or non-profit organizations could pursue ownership of inventions in preference to the government.
Without the Act, we may not have Google today
What this means is that instead of sending the patents or inventions to the government agencies like National Science Foundation (NSF) or National Institute of Health for them to file away in their office cabinets, this Act empowers the inventing entity to pursue commercialization of the idea. Simply, the U.S government elects to fund an idea and allows the fund recipient to profit from any invention that comes from that idea.
This Act provides clarity on many issues that could derail the process of taking ideas to market, especially when those ideas were funded by US federal government. For professors, it provides incentives to pursue research both for discovery and for profit since they also could profit from their inventions. Just as their students could discover and commercialize, the university dons can also do the same.
It has been a new era as the number of Technology Transfer offices in the US universities has increased many folds. As schools file more patents, they continually look for opportunities for venture funds to commercialize or simply license their patents to other institutions. These days, schools quote the number of start-ups they have incubated as a metric to their competitiveness. They will tell you the stories of their students who graduated and founded firms and use that as selling points in their brochures. This is business right in the four walls of the universities.
Interesting, schools do not just teach business regulation and competitiveness anymore, they experience them because they are getting products to the market, though indirectly. There are many start-ups which have become pipelines for the big MNCS (multinational companies) to acquire. Before the Act, some of the ideas that enabled the start-ups might have been overlooked by MNCs. But as the former show promise and profitability, they could be bought over and that mission of making society better is given a bigger scale.
The Act’s Impact – Google Effect
For me, Bayh-Dole Act is the most important business legislation of the last century in the United States. And this is American Congress at its very best moment. It delivered through legislation and transformed the pace of innovation by providing a fluidic system that enhances U.S competitiveness.
The outcome of the Act has spread around the world because of the number of technologies which have been commercialized and subsequently penetrated across the globe. The discovery of the search engine that powers Google was done in Stanford University. When Mr. Page and Mr. Brin decided to pursue commercialization of this algorithm and created Google, they must have been grateful for the federal funds that partly funded their discovery. It is possible if not for this Act, we may not have Google today.
The African Case
It is evident that many African universities now have Technology Transfer offices or what they call Consults. Good idea, but I must say that the structure where those offices operate is entirely different from what Bayh-Dole Act gave the American schools. The Act is helping American taxpayers to reap the benefits of funding the academic institutions through innovative products in the market. In Africa, you rarely see government in the mix of research and the whole constructs of technology transfer office seems superfluous since no research takes place.
Some products from ELDI Awka Nigeria
It is one of those things that happen when African professors visit American universities for two weeks and afterwards go home trying to recreate the American educational system. Unfortunately, the root cause analysis is not thought through to appreciate the fundamental evolution of what goes in the US system. Yes, you have technology transfer offices, but the school has no electricity to run a lab.
Case Study: South Africa
In 2010, the Intellectual Property Rights from Publicly Financed Research and Development Act enacted by the government of South Africa, went into effect. The Act regulates how private institutions access university research when public funding is also involved. It strives to eliminate perceived exploitation of public funded university research by making sure that taxpayers are adequately compensated. The implication is that companies must not just fund research, but also ensure that no public funding is used, if they intend to become sole beneficiaries.
The proponents of this legislation have argued that they are helping the citizens by safeguarding the public funds. And across the continent, other countries followed South Africa and enact similar legislation to forestall profit-seeking institutions from ‘exploiting’ taxpayers. The Act is a welcome development in a continent where IPR remains weak and developing the structure will surely help in the long-term competitiveness of Africa. The nation has the right to seek for companies to properly license or pay for research.
Yet, the challenge in Africa is not necessarily university licensing of technology, but actually developing an environment that can sustain quality research. In this case, following South Africa that has the best university research network in Africa to enact a similar Act will be a misplaced priority for the other nations. Any sign that involvement of public funds in universities that are predominantly owned by the public will limit access to research outcomes could alienate the few companies that support the schools. The relationship between the university network and the industry is weak and increasingly schools still destroy research outcomes, simply to make space to store new ones. Products nurtured in the university labs are not common. So any more legislation that can scare companies could dampen any prospect to enliven the academic-industry partnership in the continent.
Why Nigeria Needs Our Bayh Dole Act
US universities are very competitive, and they respond better to the needs of the society. They also work hard on managing their IPs. While some could argue over the benefit of that since universities should traditionally share freely, the pursuit of commercialization and the rewards that come with it help to make research relevant to the needs of the society. And this new focus has created a platform where collaboration with industry has reached an all-time level.
Possibly, without this legislation, the idea that powers Google might still be filed out somewhere in the NSF cabinet. And the world will miss the dynamism, positive disruption, jobs, success-domino and information access that arrival of Google gave the world. When they introduced 1GB gmail, Yahoo was forced to upgrade its users from 4MB to 1GB and later, limitless storage.
It is not just Google, there are many small companies in pharmaceutical, semiconductor, and IT industries which exist today because the Act made it so easy that individuals and entities can hold rights in preference to government and in the process increase the chance of getting innovative products to the market.
The lesson here is that congress and parliament can change the future of any nation when good policies are made. This is where I want Nigeria to pay attention. Our FIIRO and Electronics Design Institute (ELDI) Awka along with our universities can open up with a very smart legislation.
I understand that this Act might have reduced the free flow of information and ideas across the academia because everyone wants to guard its ideas for profit; but we have to live with the reality that there is nothing that does not have a potential drawback. But at the end, it provides a perspective that makes education relevant and useful.
Also, early patenting of ideas or processes without pursuing immediate commercialization could decelerate the pace of their improvements from other partners. In other words, when schools patent their ideas, they could possibly be closing the channel of progressive advancement on those ideas. From professors to graduate students, few will be interested to work on ideas which have been patented.
But the reality is that over the last five hundred years, intellectual property rights (IPR) have proven to be the difference between the old world and the new one and this Act cannot be an exception. A world of IPR is a world of innovation and though Bayh-Dole can have some drawbacks, it is to me the greatest business legislation in the last hundred years.
I challenge the Nigerian National Assembly to begin work to liberate our research institutions so that along with our schools creators and inventors can profit from any federal funded research. We want them to be greedy as that will help stimulate innovation in Nigeria. Nigeria needs our Bayh-Dole Act.
In this piece, I use the success we have found in user growth which ended up crippling our hosting capacity on tekedia to explain the importance of continuity management and building resilience in startups. The fact is this: we did not anticipate to support thousands of readers in this blog, for few hours. But that happened and the site crashed. The hosting company noted that we had a “Facebook Problem”. Someone had shared one of our contents online and that drove traffic and the website failed.
We had success, momentarily, but it took the service away. Thank goodness, this is just a blog, not one of our core product like Zenvus, Facyber, and Milonics. There is something to learn here. I explain what we have learnt and what you can do to ensure your success does not trigger failure.
Interswitch Verve offered a new dawn on Nigeria’s possibility in the digital age
