The role of NGOs in the Valley of Death
Bridging the gap between basic research and commercialization
by
Andrea Slot
S2152339
A thesis submitted to the faculty of
ECONOMICS AND BUSINESS
In partial fulfilment of the requirements for the degree of
MASTER OF SCIENCE BA STRATEGIC INNOVATION MANAGEMENT
Thesis supervisors:
Dr. W.G. Biemans and Dr. K.R.E. Huizingh
25-06-2018
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Abstract
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Table of content
1. Introduction ... 4 2. Literature review... 6 2.1 Valley of Death ... 6 2.2 Non-governmental organizations ... 7 2.3 Goals ... 8 2.4 Enablers ... 8 2.5 Financial instruments ... 9 2.6 Healthcare sector ... 112.7 Impact of NGOs on research and innovation ... 11
2.8 Conclusion ... 12 3. Methods ... 13 3.1 Research design ... 13 3.2 Case selection ... 13 3.3 Data collection ... 14 3.4 Data analysis ... 15 4. Results ... 16
4.1 View on the Valley of Death ... 16
4.2 Goals in bridging the Valley of Death ... 17
4.3 Enablers to achieve their goals ... 17
Strategies ... 17 Capabilities ... 18 4.4 Financial instruments ... 20 Assessment ... 20 Funding... 22 Monitoring ... 24 Evaluation ... 25 4.5 KNCV Tuberculosis Foundation ... 27 5. Discussion ... 28 5.1 Framework ... 28 5.2 Key insights ... 28 5.3 Implications ... 31
5.4 Limitations and future research ... 32
5.5 Conclusion ... 32
6. References ... 33
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1. Introduction
Governments and the industry allocate substantial financial resources to R&D activities (Gouwenberg et al. 2015; Ford et al. 2007; Wessner, 2005). This investment is necessary for the development of innovations, which greatly benefit countries and are a source of competitive advantage for companies (Gouwenberg et al. 2015; Markham et al. 2010; Delisle et al. 2005). However, only a fraction of promising research and technologies developed around the world actually reach the commercial market (Wolfe et al. 2014; Harris, 2013; Roberts et al. 2012), resulting in a gap in which a great amount of knowledge gained from basic research and funding of this research is not used (Ford et al. 2007). This gap between inventions not translating into innovations is called the Valley of Death (Markham, 2002).
The Valley of Death exists because the research cycle and new product development (NPD) process is fragmented and the responsibilities within this are only clear at the start and end of it. Research institutes mainly focus on basic research, the start of the research cycle, while the industry focuses on commercialization, the end of the NPD process (Auerswald and Brainscomb, 2003). The stages between basic research and commercialization, for example applied research and product development, are subordinate to these parties. This lack of incentive can be explained by two reasons, also called the communication and funding gap. The communication gap exists because the experts in the academic world are very different from experts in the industry (Auerswald and Brainscomb, 2003). They for example have different expectations, skills and modes of expression. Resulting in communication barriers and a lack of trust between these parties, creating a disjuncture between the academic world and the industry. The funding gap on the other hand has been suggested to be the main cause of the Valley of Death. There are limited financial resources available for research that is needed to translate basic research into innovations (Wessner, 2005; Auerswald and Brainscomb, 2003; Markham, 2002). Research institutes as well as the industry do not have the incentives to fund this type of research. Researchers are les motivated to continue after the completion of basic research and generally do not have the business expertise to design a pathway required for product development (Auerswald and Brainscomb, 2003; Markham, 2002). The industry demands certainty, through a proven concept or a clear business plan, before they are willing to invest (Auerswald and Brainscomb, 2003). In the stages before commercialization this certainty can usually not be given.
5 the total research cycle and to reach innovations (Delisle et al. 2005). The support of NGOs in research and innovation is especially important in the health care sector. As the improvement of a countries’ health status is an important subject on the agenda in many countries around the world. Accordingly, governments and the industry have increased their R&D spending on health in the last decades. However, only ten percent of all R&D investments lead to actual medical applications (Gouwenberg et al. 2015; Khanna, 2012; GFHR, 2002). NGOs are the largest funders of medical research alongside the industry and research institutes (Gouwenberg et al. 2015). This is important because the healthcare sector faces some specific challenges such as long development times and high costs of turning ideas into medicine (Khanna, 2012; Sternitzke, 2010). Therefore, NGOs could play an important role in bridging the Valley of Death.
Surprisingly, most innovation related studies do not take the role of NGOs into account (Gouwenberg et al. 2015; Hudson and Khazragui, 2013; Ford et al. 2007; Etzkowitz and Leydesdorff, 2000; Delisle et al. 2005). Furthermore, information regarding NGOs in the healthcare sector is very fragmented. Gouwenberg et al. (2015) and Schutz (2013) have tried to bridge the knowledge gap in terms of financial contributions of NGOs and to provide insights in how these organizations operate. However, both studies focus on many elements of research and innovation and do not specifically address how NGOs are able to contribute to bridging the Valley of Death. Since the funding gap has been suggested as main cause of the Valley of Death and NGOs are known for funding research and innovation, this study will focus on how NGOs are able to contribute to bridging the Valley of Death through their funding process.
Based on this, the following research question will be answered:
How do NGOs organize their funding process to contribute to bridging the Valley of Death in the health sector?
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2. Literature review
In this section theory about the Valley of Death and the role that NGOs play in research and innovation is provided. Thereafter, the goals, enablers to achieve these goals and financial instruments NGOs use in their funding process are presented. Additionally, literature about NGOs and their impact in the healthcare sector is discussed. Finally, conclusions and a conceptual model that could be retrieved from the literature is given.
2.1 Valley of Death
The Valley of Death refers to the gap between basic research and inventions not translating into innovations (Hudson and Khazragui, 2013; Barr et al., 2009; Ford et al. 2007; Markham, 2002). As a consequence promising inventions do not emerge and do not reach their full potential (Wolfe et al. 2013). The NPD process can roughly be distinguished into five phases, namely research, inventions, early stage technology development, product development and commercialization (Auerswald and Brainscomb, 2003). Research can even be further separated into three stages, also called basic research, translational research and applied research. Each phase is getting closer to implementation (Gouwenberg et al. 2015; Sternitzke, 2010). Research, mainly basic research, is conducted by researchers and technologists, while the industry on the other hand is responsible for the commercialization of products (Auerswald and Brainscomb, 2003). Thus this fragmentation of the research cycle and NPD process, in which the responsibilities of the research institutes and industry are clearly divided, is mainly responsible for the Valley of Death.
There are two main reasons causing the lack of incentive of research institutes and the industry to take responsibility for the stages between basic research and commercialization. As mentioned these reasons are also called the communication gap and funding gap. Auwerswald and Brainscomb (2003) state that the communication gap addresses the disjuncture between research institutes and firms. Researchers and technologists are very different from investors and managers. They have different expectations, modes of expression and skills. Researchers know wat is feasible, novel and scientifically interesting, while managers know more about how to bring a product to the market and how to make it profitable. Thereby researchers are more focused on their vision of what something could be, while the managers are more focused on processes and making profits. A lack of effective communication and trust between researchers and managers is causing a disjuncture between these two parties, making it hard to bridge the Valley of Death.
7 Brainscomb, 2003). Furthermore, funding is an important factor that determines the success of innovation (Wessner, 2005; Markham, 2002). The funding gap addresses the lack of available financial resources in the stages between basic research and the commercialization, while funding of these stages is needed to transform basic research into innovations (Auwerswald and Brainscomb, 2003; Markham, 2002). For example, translational research is needed to validate basic research (Schutz, 2013) and in the (early) product development stages production processes have to be described and the economic feasibility needs to be assessed (Auwerswald and Brainscomb, 2003). This R&D is costly and requires a lot of time and effort. However, research institutes as well as the industry do not have the incentive to allocate their financial resources to these intermediate stages. Research institutes mainly invest in basic research and focus less on research in later stages of the research cycle (Auwerswald and Brainscomb, 2003). Moreover, researchers do not have the business experience to design a pathway required for product development and to commercialize a product. The industry is mainly investing in the commercialization of products and are less willing to adopt technologies in the early stages of the NPD process (Auerswald and Brainscomb, 2003). They are not willing to further develop these technologies, since these are mainly based on speculations and there is yet no proven concept or clear business plan. The industry looks for opportunities to invest in inventions that are feasible to justify risky investments and thus they are unwilling to fund risky and un-validated projects. This clarity however, can usually not be given in the stages before commercialization (Ford et al. 2007; Auwerswald & Brainscomb, 2003). Therefore, without this clarity the industry is in most cases not willing to invest, even though these technologies might be very promising (Wessner, 2005; Auwerswald and Brainscomb, 2003).
2.2 Non-governmental organizations
8 cycle from the generation of knowledge to effective use (Gouwenberg et al. 2015; Schutz, 2013; Delisle et al. 2005).
2.3 Goals
Many NGOs are goal oriented and are committed to achieve these goals (Medinger and Logan, 2015; Schutz, 2013). Their goals are clear and are focused on a specific issue. Thereby, stimulating and supporting research is one of the main purposes of NGOs (Gouwenberg et al. 2015). There are however differences between NGOs regarding their investment in R&D. Some NGOs have a clear focus on innovation and research, while others are less or not even involved in research at all (Gouwenberg et al. 2015; Delisle et al. 2005). Medinger and Logan (2015) stress that it is important for NGOs to have clearly defined goals to formulate a desired impact on the specific issue they are aiming to address (Medinger and Logan, 2015). Chatterjee and Rai (2016) investigated philanthropic foundations in India. They found that some organizations have clear quantifiable goals while others fund programs that are driven by the interests of donors or specific budget portfolios. Another prominent goal of NGOs is to be patient centred in their activities, since they are funded and driven by patient communities (Schutz, 2013). NGOs represent the interests of these specific patient communities.
2.4 Enablers in reaching their goals
Strategies and capabilities of NGOs enable them to reach their goals. The strategies and capabilities that contribute to bridging the Valley of Death are described in this section.
Strategies
Having a strategy is fundamental for NGOs when aiming to achieve their desired goals and to maximize the outcomes (Katz, 2005; Moore, 2000). The literature indicates that NGOs have different strategies they take on (Schutz, 2013; Akingbola, 2006; Brown and Iverson, 2004). For example, some NGOs have a traditional approach, meaning they mainly focus on basic research. This because originally many NGOs were founded to fund basic research. More recently NGOs took another approach on funding research, the venture philanthropy approach, in which they focus on funding the entire research cycle from basic research to translational research and clinical trials (Schutz, 2013). This last approach is more directed at bridging the Valley of Death and is accompanied with reliance on internal staff with both science and industry expertise.
9 the US NGOs were frustrated with the limited amount of new treatments resulting from funded basic research and changed their strategies to be able to support the transition from invention to innovation (Schutz, 2013). This involved the partial adoption of private sector management principles and the focus on social return on investment (Schutz, 2013). Thereby they also shifted from a more traditional approach to a more venture philanthropy approach.
Capabilities
Having certain capabilities are important in implementing the strategies of NGOs (Medinger and Logan, 2015). In general the capabilities of NGOs that contribute to bridging the Valley of Death can be divided into their expertise and their ability to focus on the end-goal (Delisle et al. 2005). NGOs have a lot of expertise since they are focused on a specific field of interest. This specific knowledge from a certain field might be harder to access for other types of organizations (Delisle et al. 2005). With this specific knowledge NGOs are able to set priorities, help researchers clear regulatory hurdles and identify future research needs. Another capability NGOs have is that they are able to focus on the end-goal which makes them more compelled to complete the research cycle and apply the findings in a timely manner (Delisle et al. 2005; Toepler, 1999). Understanding and engaging with the community on specific issues is very natural for NGOs (Delisle et al. 2005). Due to their close connection with the community they are able to see how research could be translated to practise. This suggests NGOs are able to asses if projects are feasible or not.
2.5 Financial instruments
In this section the financial and related instruments NGOs use in their funding process to bridge the Valley of Death are described. NGOs also use social instruments in bridging the Valley of Death like connecting different parties and stimulating collaborations (Anheier et al. 2016; Hudson and Khazragui, 2013; Keiper, 2010). However, this study focuses on the funding gap and funding process of NGOs and consequently on the financial and related instruments. The instruments that could be identified in the literature are allocation of funding, funding niche markets, combining sources of funding, monitoring and evaluating.
Allocation of funding
10 Funding niche markets
NGOs have a great impact through funding niche markets, markets in which other parties are less likely to invest (Gouwenberg et al. 2015; Delisle et al. 2015). Delisle et al. (2005) stresses the importance for NGOs to allocate their funding to the areas of research that have the greatest social benefit. NGOs are independent from government and industry (Toepler 1999). Therefore they are free to innovate, experiment, take risks and find and occupy their own distinctive niche (Gouwenberg et al. 2015; Schutz, 2013; Wisely, 2002). Gates (2016) supports the importance of NGOs in niche markets since they are able to fund seed projects that eventually could become breakthrough projects.
Combining sources of funding
Many NGOs collaborate to combine sources of funding. They are also often part of consortia in which multiple parties collaborate (Schutz, 2013). Besides their participation in collaborations for funding, NGOs are able to contribute to identify other potential sources of funding, like from the local private sector (Delisle et al. 2005). By identifying and connecting these firms with other parties they increase the available financial resources for projects.
Monitoring and evaluating
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2.6 The healthcare sector
In the health sector innovations are referred to as medical applications (Butler, 2008). Besides the given challenges regarding the Valley of Death, the health care faces some specific challenges.The commercialization of a drug takes a lot of time, approximately 11 to 12 years, and only a small fraction finally enters the market (Sternitzke, 2010). Moreover, the costs of taking a drug concept to the market are very high (Khanna, 2012). Even if the drug is made available to the market, side effects can still emerge several years later which has led to very stringent regulatory approval guidelines that slows the process even further (Tralau-Stewart et al. 2009). To overcome these challenges NGOs have increased their focus on translational research and clinical development to promote the translation from research into new drugs, diagnostics, devices and medical treatments (Schutz, 2013; Khanna, 2012).
2.7
Impact of NGOs on research and innovation
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2.8 Conclusion
A conceptual model could be retrieved from the literature (Figure 1). In this triple helix model not only the roles of the government, research institutes and industry are taken into account, but also the role NGOs could play. The literature indicates NGOs are important parties in research and innovation, however it is not clear how NGOs actually contribute to bridging the Valley of Death. Which specific goals they have regarding bridging the Valley of Death is unknown. Moreover, there is a lack of understanding regarding which strategies, capabilities and instruments they use and how they could use these in bridging the Valley of Death. This study increases understanding on how NGOs organize their funding process to contribute to bridging the Valley of Death.
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3. Methodology
In this section the methodology of this study is described. Subsequently, the research design, case selection, data collection and data analysis are presented.
3.1 Research design
In the literature the non-governmental organization (NGO) is also referred to as a philanthropic organization, non-profit organization (NPO), charity organization or third sector organization which are used interchangeably in this study with NGO (Salamon and Anheier, 1992). NGOs are value partners alongside the research institutes, governments and the industry in research and innovation. The goal of this paper is to give more insight on how NGOs organize their funding process to contribute to bridging the Valley of Death. The funding gap was given as a main challenge in bridging the Valley of Death. Therefore, this study focuses on the funding process of NGOs. Since it is yet unclear how NGOs organize their funding process to bridge the Valley of Death, a qualitative approach was chosen to increase understanding. Qualitative data will help in answering the research question and will give insights on how NGOs organize their funding process and how they use this in bridging the Valley of Death. A qualitative approach has proven to be helpful in comparable studies in revealing the role of NGOs in research and innovation (Gouwenberg et al. 2015).
3.2 Case selection
14 Table 1: The Interviewed health NGOs with names and those that preferred to remain anonymous. The anonymous NGOs are named from A to E. The English translations of the names and functions of interviewees are given. Thereby the size of the NGOs is displayed in three size groups, namely big (>20 million total income), middle (5-20 million total income) and small (<5 million total income) based on data from Philanthropy Netherlands (GDN, 2016).
3.3 Data collection
The data is collected in three ways. Firstly, the main source of qualitative data was gathered through semi-structured interviews. Of each health NGO an employee responsible for innovation and/or research was interviewed. In one case two employees from the same NGO were interviewed because both functions were useful. Semi-structured interviews were conducted because this field is still very unknown. This offered flexibility and the opportunity to ask un-documented and probing questions when new insights were gained. To gain some first important insights the first interview was in a focus group setting. Two employees of two different NGOs were able to join this focus group setting. Because the interview offered already most insights from both NGOs only a follow up questionnaire was sent for additional information. This was also the case for other NGOs when additional information could increase
# NGO’s official name
Translation of the NGO’s name
Function interviewee(s) Size group 1 KWF Kankerbestrijding KWF Cancer Foundation
Programme coordinator in agents and programme coordinator in
valorisation
Big
2 Nierstichting Kidney Foundation
Manager Innovation & Valorisation Big
3 KNCV
Tuberculosefonds
KNCV Tuberculosis Foundation
Senior Epidemiologist Big
4 Aidsfonds Aids Foundation Policy officer scientific research Team Knowledge and Innovation
Big 5 Diabetes Fonds Diabetes
Foundation
Member of Team Knowledge and Innovation
Middle
6 NGO-A NGO-A Manager Research & Innovation Big
7 NGO-B NGO-B Policy officer Middle
8 NGO-C NGO-C Manager Research and Innovation Middle
9 NGO-D NGO-D Consultant Knowledge and Innovation Middle
15 understanding. To four NGOs, including those from the focus group, additional information was sent. Only one of the NGOs from the focus group offered additional information, one other responded the inability to answer the questions due to al long stay abroad and the remaining two NGOs did not respond. The interview data was complemented with archival data regarding the NGOs policies and with annual reports. The use of different sources of data, also called triangulation, will provide a stronger validation of the constructs and hypotheses (Eisenhardt, 1998). In the end transcripts were sent to the interviewees to validate the transcripts and give consent regarding the use of the organizations’ name. Half of the NGOs remained anonymous and the other half gave consent to use their organization’s name.
3.4 Data analysis
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4. Results
The findings of this study are presented in five different sections. Firstly, the view of NGOs on the Valley of Death is presented. Subsequently, their goals, enablers including strategies and capabilities and financial instruments used in bridging the Valley of Death are described. Lastly, a separate description of the KNCV Tuberculosis Foundation is given since their strategies and financial instruments used, do not match with other NGOs in bridging the Valley of Death. Relevant quotes are described per subject in Appendix A.
4.1 View on the Valley of Death
All NGOs recognize the Valley of Death. Some interviewees actually know the term, others just recognize the gap. Many NGOs got in touch with this phenomenon, the Valley of Death, during meetings in the Programme Translational Research of ZonMW. This is an organisation that executes the division of research subsidies given by the Dutch government. The NGOs indicate several challenges in bridging the Valley of Death. They indicate the field is segmented, the lack of knowledge researchers have about translating their research into practise and they also address the lack of funding between basic research and commercialization. Most of the NGOs indicate they feel at least partly responsible for bridging the Valley of Death since this hinders them from reaching their goals. Accordingly they have certain goals, strategies, capabilities and financial instruments they use that contribute to bridging the Valley of Death.
4.2 Goals in bridging the Valley of Death
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4.3 Enablers to achieve their goals
In this section the strategies and capabilities of NGOs, which enable them to achieve their goals in bridging the Valley of Death are described.
Strategies
The strategies of NGOs in how they organize their funding process to bridge the Valley of Death can be divided into four different dimensions, namely top down versus bottom up and internal focus versus external focus. NGOs are able to have different strategies simultaneously. Firstly, the bottom up strategies are related to the funding process NGOs in which researchers apply, with their research proposals, to get funding from the NGO. The top down strategies are related to activities of the NGO besides their standard funding process. Secondly, an internal focused strategy is related to activities the NGO conduct within the organization and an external focused strategy contains the activities of NGOs together with external parties. In figure 3 a framework with the combination of these two types of strategies into the four different dimensions is given. Below the four different strategies NGOs use in bridging the Valley of Death are further explained.
Top down and internal focus
A few NGOs have top down internal focused strategies like for example the KWF Cancer Foundation and Kidney Foundation. This strategy contains initiating own projects from inside the organization that contribute to bridging the Valley of Death. For example the KWF Cancer Foundation started a project “The KWF Studio” in which they, among other things, organized a competition among start-ups to help them in realizing the NGO’s goals. Also the Kidney Foundation started a project related to start-ups. They established, together with other parties, an investing foundation in which they give start-ups a financial push to realize health innovations.
Top down and external focus
18 Figure 2: A framework of the strategies NGOs use in bridging the Valley of Death divided into four dimensions. With on the vertical axes top down versus bottom up and on the horizontal axes internal focus versus external focus.
Bottom up and internal focus
Almost all NGOs have bottom-up and internal focused strategies. This includes activities within the organization that focus on organizing the funding process to contribute to bridging the Valley of Death. In this strategy they mainly focus on allocating money to, and thus focussing on, specific themes and programmes. Many NGOs indicate there has been a shift in this allocation of money from focussing on funding basic research to also more focus on translational and applied research. Other aspects of bottom-up and internal focused strategies are having stringent criteria and protocols in the funding process to have some control over the funding process. Bottom up and external focus
Also almost all NGOs have bottom up and external focused strategies. This involves the motivating activities of NGOs when working together with other parties. For example they stimulate researchers to collaborate in the funding process and motivate them to focus on the end-goal.
Capabilities
The most important capabilities of NGOs in bridging the Valley of Death are their flexibility, ability to motivate (stimulate, mobilize, activate), connect, to be goal focused and their expertise. More recently some NGOs added the capability of business expertise.
Flexibility
With their flexibility they are able to adapt to the trends and needs in the community. They care about the needs of patients and are able to respond to these to make sure their needs are met.
19 Thereby they are also have the freedom to support research concerning rare diseases in which the industry for instance is not willing to invest.
Motivate, connect and being goal-focused
Through motivating and connecting other parties and their focus on the end goal during the entire process they are able to speed up the research cycle. Many NGOs use their ability to connect and motivate simultaneously. They for instance motivate researchers to connect with other funders or other researchers. Moreover, they stimulate researchers to focus on the end-goal in the beginning, during and at the end of the project.
Subject and process expertise
Their expertise is a capability that is addressed, besides in the annual reports, by almost all interviewees. This capability can be divided into their knowledge regarding the subject, a disease, and knowledge regarding the funding process itself. NGOs have a lot of “subject” knowledge regarding specific diseases because they are focused on a specific disease and usually many employees are from the field itself. With this “subject” knowledge they are able to advice and support the scientists from the start to the end of the project. With their “process” knowledge, which they mainly gained through experience, they are able to keep the project going and give advice regarding how to take the next step or who to involve.
Business expertise
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4.4 Financial instruments
This segment will focus on the financial instruments and instruments related to these, used in the funding process of NGOs, which contribute to bridging the Valley of Death. For almost all NGOs funding research projects is their core business. The funding process of NGOs can be divided into four different phases, namely the assessment, funding, monitoring and evaluation phase (Figure 2). The instruments used are assigned to these different phases.
Figure 3: The funding process of NGOs starts with the application for funding of the researchers and is followed by four distinctive steps. After the evaluation researchers could hand in new applications or are able to extend funding of their project when needed depending on the evaluation.
Assessment
Researchers apply with their research proposals for funding from the NGOs. However, due to a limited budget not all applications can be granted. The assessment of the proposals is a way to make sure the projects match the goals of the NGO. The instruments used in the assessment that contribute to bridging the Valley of Death are conditions, involvement of users and involvement of business experts.
Conditions
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“Next step” conditions “Speed up” conditions
Involvement of a user committee Having a development plan
Prolongation of funding when the next step is taken
Collaborations with firms Setting deadlines
Publishing open access
Table 2: The conditions NGOs use in the assessment of applications from researchers for funding that contribute to bridging the Valley of Death.
“Next step” conditions are conditions that motivate the researcher to think about the next step. Almost all NGOs require the composition of a user committee, half of the NGOs require a development plan and a few allow prolongation of funding when the next step is taken. In a user committee, patients, caregivers and other experts help the researcher in making the transition from the academic world to practise. Through a development plan they motivate the researcher to think about the steps after the completion of the project and how their results should be translated to practise. Lastly, with prolongation of funding they motivate usually consortia to actually take the next step.
“Speed up” conditions contribute in speeding up the research cycle. Almost all NGOs require collaborations between public and private parties in consortia and in specific programmes guided by the government. Mostly the researchers themselves have to initiate these collaborations. NGOs make sure through conditions, since firms have other objectives, that their goals are met. Also many NGOs set deadlines to make sure results or medical applications are reached in a timely manner. Lastly, some NGOs require researchers to publish open access to stimulate the reuse of data and efficiency in conducting research.
Involvement of users
Almost all NGOs involve users in the assessment of proposals. Through this they are able, together with the Scientific Advisory Board, to not only assess the quality and relevance, but also the feasibility of the studies. Thereby, with including users, they try to reach their goals more effectively. How users are involved differs from having Social or Patient Advisory Board, to patient panels from a third party to the involvement of users by the researcher itself. Through requiring or stimulating the involvement of users the NGOs put focus on the feasibility of projects, the match with the needs of the patients and on the end-goal. Involving patients from the beginning enables them to eliminate projects that are not feasible or do not meet the patients’ needs. Thereby the patients especially look at the end-goal, a medical application for themselves, and therefore the researchers are motivated to focus on this in their application. Involvement of business experts
22 the potential to patent a certain idea or invention and if this idea could be commercialized. The Kidney Foundation does indicate there is some resistance in for example their field in including these types of experts. This is because researchers focus on confidentiality of their projects to make sure firms are not taking knowledge gained in the assessment to their advantage. Other fields might also be also more resistant to this while others are less resistant.
Funding
When applications are approved by the advisory boards and the NGO itself, the funding is given to the researchers. This section displays the instruments NGOs use in the funding phase to bridge the Valley of Death. This section is divided into the allocation of funding, funding niche markets, co-funding, funding consortia and financing start-ups.
Allocation of funding
NGOs allocate their funding budget to specific programmes or research tracks. Most programmes are based on certain themes and some on the type of research. Almost all NGOs fund the entire research cycle from basic research to applied research. Half of the NGOs directly fund translational research in their programmes. The others indirectly fund translational research through the Programme Translational Research from ZonMW. However, their ability to fund research beyond basic research depends on the type of disease. For example in some cases the cause of a disease was not yet known meaning a lot of basic research is still needed to discover the cause. Due to the risks, not knowing if it the results from research in the end will work, NGOs focus in these cases mainly on basic research. Also many NGOs mention they do not have enough financial resources to solely fund the big clinical studies.
Funding niche markets
Half of the NGOs mention their ability to fund niche markets. They experience their freedom as private foundations and therefore are able to fund the projects they find important and are not funded by other parties. The industry might not be interested in funding niche markets since it is not profitable. NGOs especially focus on these markets, which are less profitable. The Kidney Foundation even started with NGO-C and other parties a separate foundation that focuses on a niche market. Through this the Kidney Foundation is able to contribute to the development of a portable artificial kidney. Although NGOs have the freedom to allocate their money these niche markets, they often need additional financial resources from other parties to actually realize medical applications.
Co-funding
23 The NGOs mainly co-fund with governments, the industry and other NGOs either nationally or internationally. Firstly, through co-funding with the government in certain programmes they are able to double their money. Secondly, NGOs also co-fund with firms to increase financial resources. In most cases this is through a government subsidy in which a collaboration between researchers and firms is required. The researchers often initiate these collaborations. Lastly, NGOs also co-fund with other NGOs mainly in projects that matter to several NGOs. They for example co-fund projects related to complications that are similar for many diseases. Moreover, they are all part of an umbrella organization called the SGF (Samenwerkende Gezonheidheidsfondsen). Together they have a combined budget around 200 million euro’s for research. Trough co-funding they are able to unite their financial resources.
Furthermore, NGOs are able not to just engage in co-funding, but are also able to motivate parties to co-fund with them. This is because other funders are more inclined to invest when an NGO is funding a specific project due to their reputation. The NGOs are related, as mentioned in the capabilities section, to quality and expertise. Together with their integrity this view of NGOs influences other parties and consequently these parties are more willing to invest in projects the NGOs fund.
Funding consortia
NGOs also co-fund consortia, however this is not only to increase resources but also to stimulate continuation of projects. NGO-A even mainly focuses on funding consortia. In consortia they fund projects that serve the goals of several parties, including firms, universities, experts from several disciplines and sometimes multiple NGOs. Continuation through funding them is stimulated because consortia not just focus on one project in the research cycle, but on a specific end-goal. Moreover, they are also very flexible, for the reason that projects are able to adapt and researchers come and go when needed. The main task of NGOs in these consortia is to make sure the consortium stays focused on the end-goal. With this they make sure that projects always work towards an application that benefits the user. NGO-E mainly focuses on funding specialized research groups with the same intention to stimulate the continuation of projects. In these specialized groups the laboratories and clinics are in close proximity of each other. Thereby these research groups work in an environment, a specialized centre, that enables them to do their scientific research.
Financing start-ups
24 The Kidney Foundation together with NGO-C desire to give these start-ups a financial push to take their idea to the next level. They founded an investment foundation, with some other parties, which still has to be approved by the government. Through co-financing with other NGOs, the government and other financers they are able to invest in the ideas of start-ups that match the goals of multiple NGOs. They choose to finance these start-ups instead of funding to have more control and also use return on investment to re-invest. The KWF Cancer Foundation also examines the idea of financing start-ups, however they also see the risks regarding role clarity, accountability to donors and risks related to the succeeding of these the start-ups.
Monitoring
All NGOs monitor their funded projects to make sure the projects actually contribute in the end to their goals and to account for their investments in these projects to their donors. Most NGOs do the monitoring themselves, however some also use external parties or computer systems. In this phase the instruments that contribute to bridging the Valley of death are monitor visits and reports, support and stimulating focus on the end-goal.
Visits and reports
Through monitor visits and requiring evaluation reports from the researcher they stimulate the progress of the project. For example the KWF Cancer Foundation has kick-off talks with each researcher to discuss the steps in the project, milestones and the planning regarding the monitor visits. Through this they keep themselves close to the projects and increase transparency between the researcher and them.
Support
The NGOs do not themselves participate in the research, however they are able to support the researcher when needed. Sometimes projects are not on track and in these cases they want to know what caused this and how they are able to help the researcher. This support of the NGOs is usually directed at helping them in the process or connecting them to others to take them to the next step. The KWF Cancer Foundation for example has an internal consultation structure in which they discuss complex issues. When advice is needed on the content of the study itself the NGOs usually refer the researcher to their Advisory Boards. However, support is not only offered when the projects are not on track, but also when new chances or ideas during a project arise. Sometimes early publication of results is possible or projects receive more funding to realize these opportunities.
Stimulating focus on the end-goal
25 researcher regarding the feasibility of projects, especially when modifications are made, and make sure they keep the end-goal in mind. Also through the user committee, which is appointed in the beginning of the project, they stimulate goal focus during the project.
Evaluation
At the end of a project all NGOs have an end-evaluation, which enables them to assess if projects were successful or not. The instruments used during evaluation that contribute to bridging the Valley of Death are the pillars of success, interviews and reports, follow-up evaluation and measuring impact.
Pillars of success
Most of the NGOs do not have clearly defined pillars to measure the success of the funded projects. However those that use these success pillars emphasize that it is not just about having a scientific significant result. For example one of the pillars of the Diabetes Foundation is that they require there is a moment of knowledge transfer from the scientific world to practise. Examples are the composition of guidelines or applications of patents. NGO-A adds to this they do not only look at if there is a product in the end, but also if it is incorporated into guidelines and actually used by caregivers. So through having these pillars these NGOs determine when a project, in their eyes, is successful or not.
Visits and reports
Every NGO uses the instrument of evaluation through interviews and or reports. Through the end-evaluation they are able to assess if the project delivers what the researchers had promised and if they met the goals determined in the beginning. In the evaluation they are also able to decide whether a project receives additional funding and they are also able to assess barriers that hinder bridging of the Valley of Death. Through this they for instance noted that researchers are not focused on the end-goal or do not have a patient focus.
Follow-up evaluation
26 Measuring impact
27
4.5 KNCV Tuberculosis Foundation
The KNCV Tuberculosis Foundation has a different approach to bridge the Valley of Death compared to other NGOs. The biggest difference is that they mainly focus on being operative themselves compared to funding other parties. Although they are involved in funding, their main contribution in bridging the Valley of Death is related to their own operative activities in the entire research cycle. They are, in this sample, the only NGO that actually conduct scientific research themselves and publish the results in scientific journals. They are able to identify and analyse problems and chances in fighting against Tuberculosis. Through this new interventions arise. At the moment of writing they are developing a test, which enables detection of Tuberculosis in fecal matter. Thereby they are also asked to test as an independent party the effectivity of medicine and tests in real-life settings. When there is a proven concept they also contribute in the application of these products or services in several countries.
28
5. Discussion
The purpose of this paper is to increase understanding on how NGOs organize their funding process to contribute to bridging the Valley of Death. This study suggests that NGOs should be taken into account in stimulating the transition from inventions into innovations, since NGOs set specific goals, implement strategies and use financial instruments directed at bridging the Valley of Death. In this section the framework, which answers the research question is explained. Thereafter the key insights, implications, limitations and conclusions are given.
5.1 The framework
How NGOs organize their funding process to contribute to bridging the Valley of Death is displayed and visualized in figure 4. Most importantly, NGOs have goals that directly or indirectly focus on bridging the Valley of Death. To be able to achieve bridging this Valley of Death they have a certain enablers, namely their strategies and capabilities. The four identified strategies are linked to the financial and related instruments they use in their funding process to implement these strategies. There is some overlap, meaning that some instruments are used in two or three different strategies. For example, co-funding can be initiated by the NGOs themselves, top-down, but they can also be part of a co-funding agreement initiated by the researcher, bottom-up. Moreover, they are able to give support through discussing complex issues internally, internal focus, or through connecting the researcher with their Advisory Boards, external focus. All the instruments they use are assigned to different stages in the funding process, namely the assessment, funding, monitoring and evaluation phase. These are given different collars in the framework. Lastly, the instruments have an expected impact like increasing resources or speeding up the research cycle. This is an expectation since NGOs in general are not able to actually measure their impact.
5.2 Key insights
The four strategies to bridge the Valley of Death
29 Figure 4: A framework describing how NGOs organize their funding process to contribute to bridging the Valley of Death. Strategies and capabilities enable them to achieve their goals and bridge the Valley of Death. They use various financial (and related) instruments to realize their strategies. The financial instruments used in their funding process are assigned to different stages: stage 1 (assessment) = red; stage 2 (funding) = blue; stage 3 (monitoring) = orange; stage 4 (evaluation) = green. In the end the expected impact of each instrument is given.
Financial instruments
Impact
Bridging the Valley of Death to be able to achieve their long-term vision (Business) expertise
Capabilities
Strategies
Motivator Goal focused Flexibility Connector Organizing the funding process (bottom up and internal focus) Motivating other parties (bottom up and external focus) Initiating collaborations(top down and external focus) Initiating projects
(top down and internal focus) Evaluation visits/reports Monitor visits/reports Funding consortia Co-funding Involvement of users Involvement of business experts Allocation of funding Financing start-ups
Filling the funding gap
Increasing applicability
Increasing resources
Goals of NGOs
Enablers
Stimulate end-goal focus Pillars of success Follow-up evaluation
Funding niche markets
30 Thereby they initiate collaborations in areas they find important to increase the sources of funding and realize their goals. Through combining the bottom up and top down strategies NGOs are able to fund phases throughout the research cycle. This corresponds with the study of Schutz (2013) who states that NGOs have shifted their focus from only funding basic research to funding the entire research cycle. Moreover, the distinction between an internal or external focused strategy of NGOs has not been made in previous literature regarding bridging the Valley of Death. This distinction shows that NGOs themselves are able to contribute to bridging the Valley of Death, but also in many cases collaborate with other parties.
Co-funding as main financial instrument
NGOs use several instruments in their funding process to bridge the Valley of Death. This study suggests that co-funding is the most important instruments NGOs use in bridging the Valley of Death. This contradicts with previous literature in which funding niche markets was emphasized as main instrument (Gates, 2016; Delisle et al. 2005). Although funding niche markets is also an instrument NGOs use in bridging the Valley of Death, co-funding is viewed as main instrument in this study because it results in a greater impact. A lot of financial resources are needed to translate ideas into innovations and no party is able to do this by itself. Moreover, NGOs are able to increase the sources of funding for projects they are funding. This is line with Delisle et al. (2005) who indicates that NGOs are able to identify additional sources of funding and connect the different sources with each other (Delisle et al. 2005). Additionally, this study offers a reason why NGOs are able to motivate others to fund, namely due to their reputation. When they fund a certain project, other parties relate NGOs to quality and expertise and are therefore more inclined to also fund these projects .
Impact of NGOs in bridging the Valley of Death
31 started in the last few years. Due to this short time period it is difficult to measure the impact already. In the future it would be easier to measure impact of NGOs in bridging the Valley of Death since the results of projects are available.
Funding gap versus communication gap
This study focuses on bridging the funding gap and how NGOs contribute to this. Surprisingly, although this study conducted research regarding the funding process, this does not automatically mean the funding process of NGOs only contributes to bridging the funding gap. The instruments used in the funding process also contribute to bridging the communication gap. Examples are, the support during projects in which business experts helping researcher to take the next step and bringing research institutes and the industry together through requiring collaboration in order to get funding from the NGOs. Moreover, besides that NGOs use financial instruments, they also use social instruments in their funding process. Examples are motivating and connecting other parties. This indicates that no clear distinction could be made and the different instruments in relation to the two different gaps are entangled.
5.3 Implications
This study indicates that NGOs are able to contribute to bridging the Valley of Death. Therefore other parties, like governments, the industry and research institutes, should take NGOs into account when translating inventions into innovations. Together they are able to combine financial resources and increase impact. In these collaborations NGOs should be made responsible for keeping the other parties goal-focused and for stimulating researchers to connect with the industry.
All of the involved parties should not solely focus on financial instruments when aiming to bridge the funding gap or solely focus on social instruments when aiming to bridge the communication gap. They should keep a broad perspective and take into account both type of instruments in bridging the Valley of Death as a whole. For the organizations it is important in the beginning to assess how their instruments impact the Valley of Death. With this overview they are able, together with other parties, to improve the effectiveness of certain instruments or initiate the design of new instruments when this is needed to enable the translation from inventions into innovations.
32 which others are not willing to invest. Thus their able to bring ideas to the market which otherwise would not reach the market.
5.4 Limitations and future research
Although it is clear NGOs play an important role in bridging the Valley of Death, their actual impact in bridging the Valley of Death could not be retrieved from this study. This is mainly due to the fact that it is difficult to measure this impact. Future research should therefore focus on defining when and how impact should be measured. This could be different for the various sectors. For example, in the health sector it is very important that medicines reach all patients who need it and are not just available for those with money. In other sectors this might less important. When clear measures are on hand, future research should test whether these are applicable in practise and in the end measure the actual impact of NGOs related to the other parties in bridging the Valley of Death.
Another limitation of this study is that only NGOs from the health sector are examined. As mentioned in the literature there are specific challenges in the health sector, which could make the results of this study less applicable to other sectors. Gouwenberg (2015) also states there are differences in NGOs between countries. Moreover, this study itself also shows that NGOs who are mainly operative are different from those who are mainly involved in grantmaking activities. For future research it would be interesting to see how NGOs in other sectors or countries bridge the Valley of Death and to compare the strategies and instruments used.
Lastly, this study did not focus on the social instruments NGOs they use stimulating the translation from inventions into innovations. It would give a more comprehensive view if both would be taken into account in future research. Especially since the results indicate no clear distinction can be made between social and financial instrument and how they affect bridging the Valley of Death. Future research should focus on further examining the relationship between social and financial instruments in bridging the Valley of Death .
5.5 Conclusion
33
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37
7. Appendix
Appendix A: Illustration of coded data
Deductive and inductive (
cursive
) codes are distinguished. Per code two quotes are given.
Code Sub-code Quotes
Valley of
Death Meaning KWF Cancer Foundation: “In this Valley of Death a beautiful product, invention or idea could get stuck or stranded, well give it a name, and doesn’t reach the bed of the patient. This is of course a great pity” Diabetes Foundation: “For me the Valley of Death is about ideas or research that have potential to work in practise, however are not further developed and no more research is conducted”
Challenges KWF Cancer Foundation: “Actually you would want co-investors from the industry, pharmaceutical companies or perhaps governments to position themselves in this gap and to put money in it, however this does not happen”
Diabetes Foundation: “The problem with Valley of Death is not that the project itself is going wrong, but it is not one project”
Goals NGO-A: ”Speeding up the translation from research to applications on the market is an important goal”
Kidney Foundation (long-term strategy report 2017-2020: “Through connection more impact”): “Initiating and improving the international collaborations in research”
Strategies top down & internal focus
Kidney Foundation: “In which we search for start-ups who try to implement and realize health innovations”
KWF Cancer Foundation (annual report 2017): “Through this, KWF Studio initiates, directs and organizes change within and outside KWF”
top down and external focus
NGO-C: “You just have to get to know them. At the moment I’m very busy with building a financial network. Who are investors in the Netherlands and who do these things? And not just in the Netherlands but also in Europe, the US and Canada”
KWF Cancer Foundation: “I think we are as KWF more and more directed at becoming a societal organization. Searching for collaborations with several stakeholders is something that fits with this”
bottom up and internal focus
NGO-D: “But through making sure the front side of the funding process is correctly designed, you hope that it leads to projects that fit the foundation”
38 translational and applied research. We recently changed our strategy in which we are refining this”
bottom up and external focus
NGO-E: “This is how we stimulate to make researchers to be more aware, to think about the end-goal they have to work towards”
Kidney Foundation: “We require co-funding with a firm and through this we stimulate the collaboration in projects, if this was not already the case”
Capabilities Flexibility Diabetes Foundation: “We are a private foundation, not a government foundation, so we are free in how to spend our money”
NGO-D: “At the professional association, who are represented by people from various disciplines, the important trends and developments are checked. From that we gain a lot of information. We are able to translate this to our research tracks or to conditions for funding”
Motivate NGO-B: “We also ask researchers to compose an implementation plan to stimulate them to think about the next step. A patient cannot be treated with scientific publications. We want them to think about what needs the happen after the completion of the project to get the application to the patient”
NGO-D: “We stimulate researchers to think about what this will deliver tot the patient. But also stimulate them to collaborate with for example the patient organizations”
Connect NGO-A: “At consortia we also want to stimulate researchers to not only focus on our, but also other sources of funding. The researchers usually end up in the EU. In the EU they have to collaborate with international parties, that is also something we want to stimulate”. Diabetes Foundation: “Also during the project we stimulate collaborations”
Goal-focused NGO-D: “Something that is for us very important, is to explore what does this mean for and will deliver to the patient” KWF Cancer Foundation: “Eventually we have within KWF the ambition, somewhat simplistic formulated, to work towards the day that nobody has to die because of cancer. This is the ultimate goal” Expertise Diabetes Foundation: “That is the beauty of a specific foundation, we
know a lot about the Diabetes science and most of us have a background in this science. So we are able to think with the scientists” KWF Cancer Foundation: “The people at KWF must be viewed as process experts. So what we are able to do is streamlining the processes and connection between different stakeholders”
Business expertise
39 through funding research, is something that has gained attention the last few years within KWF”
Kidney Foundation: “How are we able to speed up the translation of research to applications, how we are able to stimulate researchers in this”
Financial instruments -Assessment
Conditions NGO-B: “With scientific publications a patient cannot be treated. We
stimulate them to think about what needs to happen after the completion to achieve a medical application for the patient”
NGO-D: “Through conditions you are able to say that a project has to deliver something within X years, a medical applications or a concrete problem has to be solved. Through having these conditions you direct researchers to this type of studies”
Involvement users
NGO-B: “The art is to involve patients in the beginning, when the applications of researchers are assessed, to view if the project is actually feasible”
Kidney Foundation: “I think the involvement of users is a very important component. Firstly, this keeps the researchers focused on why they conduct research. Secondly, it offers new input which others have not thought about”
Involvement business experts
KWF Cancer Foundation: “The definition valorisation, talking about increasing value, doesn’t have to be financially. It could also be increased value for society and value adding of research we conduct. Valorisation is something that emerged at KWF the last few years” Kidney Foundation: “There is resistance in involving them. This because of the importance of researchers regarding the confidentiality of projects. Researchers conduct good research and you don’t want to share this with firms just like that, so they might take advantage”
Financial instruments - Funding
Allocation Diabetes Foundation: “We try to finance all the steps from fundamental to translational, to really applied research”
NGO-B: “We fund research in the preclinical phase with the aim of achieving medical applications. This is mainly the case with genetic problems because a cause is known. With other diseases the actual cause is not always known yet and financing this type of research brings some risks”
Niche
markets NGO-C: “Something you often see is that especially for the rare diseases nothing is being developed. This is because the industry isn’t going to bring something on the market just for a few people. That is not profitable”
