The productive opportunities unfolded subjectively and contingently based on events, activities, and actions that coalesced at particular times. To present our findings concisely, we draw on two contrasting productive opportunities, PO 2.1 and PO 2.3 (see Table
2). These two productive opportunities belong to the second technological base (the human-tissue technology platform).
4 PO 2.1 is exemplary because it occurred early in the process of emergence, involved several actors, and introduced the technical/market rationale that shaped ensuing opportunities. PO 2.3 was the productive opportunity that was realized. By focusing on these two productive opportunities, we do not imply that they happened in isolation from the other productive opportunities that BioCure was pursuing.
4.1 The gestation of productive opportunities
PO 2.1, which began in December 2013, focused on developing treatments for inflammatory bowel disease (IBD).
5 It involved several organizations and actors, but it started with interactions between BioCure’s two founders and key scientists at Research Institute A at University 1 in London. It was pivotal as it enabled the founders to reframe the narrative of the company as they envisioned unlimited access to human tissues. John explained, “we could go straight up into a human model. The reason why that is so compelling and exciting … is that every patient is a pairwise analysis.”
BioCure developed significantly its scientific program during the period of PO 2.1. A flurry of activity in the first months defined the scientific program in conjunction with Research Institute A’s key scientists. They envisioned PO 2.1 to encompass a range of services and products. It was described in narrative terms, such as “stem to stern” or “sausage factory” to depict the products and services offered at various stages of gastro-intestinal (GI) disease diagnosis,
6 prevention, and treatment. This included personalized medicine, predictive diagnosis, and stem cell therapies. This full range of products and services based on a human tissue technology platform shaped the pursuit of productive opportunities subsequent to PO 2.1.
To exploit PO 2.1, BioCure sought a partnership with University 1 and its Research Institute A to access critical technological resources, namely human tissues from biopsies and GI clinical expertise. As the scientific negotiations progressed, Research Institute A scientists voiced various concerns and requirements. BioCure conceded to all of their requirements, which John explained as “removing the obstacles” and saw the concessions as acceptable for a long-term, mutually beneficial partnership.
Once the scientific program was determined through iterative discussions with key scientists, representatives from University 1’s technology transfer office (TTO) became involved in the negotiations. As we explain below, the collaboration with University 1 came to a halt in May 2014 because the TTO had concerns about the viability of BioCure, asking for an equity position and/or that BioCure raise external financing before agreeing to collaborate.
Several months later, in February 2015, the opportunity to collaborate with University 1 through another department, the neurogastroenterology group, and a large Japanese pharmaceutical firm appeared. In March 2015, BioCure became operational for 2 weeks, hiring temporary technical staff and conducting initial tests, until the TTO again halted the collaboration. Up to December 2015, John continued to search for other partners (primarily large pharmaceuticals) to pursue PO 2.1, based largely on the same scientific program.
In contrast, PO 2.3 arose in June 2016 somewhat serendipitously. Whereas in PO 2.1 the sequence of resource acquisition started with further development of the technological resources, in PO 2.3 John placed emphasis on securing access to other resources. In the interim period between PO 2.1 and 2.3, BioCure engaged in extensive fundraising activities and secured initial seed investment of £150K. Simultaneously, he secured operational resources, renting lab space at Hospital 1, procuring equipment, and hiring a lab technician. The further development of the technological resources followed.
Once BioCure was established at Hospital 1, John was asked to engage in “Grand Round” presentations at the adjacent Hospital 2. He expressed his surprise at discovering Hospital 2 had important gastro-intestinal (GI) expertise, “don’t know why I didn’t know that … Hospital 2 was a GI hospital.” BioCure was asked to collaborate on a project on perianal fistulas.
7 Initially, the technical rationale to pursue PO 2.3 was weak, but John saw it as a way to establish proof of concept, which, as we will explain below, had proven to be an obstacle for persuading large pharmaceuticals to collaborate on projects. The unmet medical need or “therapeutic opportunity,” and a potential market of $2 billion, were also convincing. The collaboration with Hospital 2 became BioCure’s first collaborative project. Shortly after it commenced, the collaborative team made the discovery that the cells in anal tissue had a different composition than cells from intestinal tissue. Although the discovery would not have much commercial value for BioCure, it had academic value for Hospital 2 scientists and resulted in a scientific publication.
From the above account of PO 2.1 and PO 2.3, we see that the temporal sequence of resource assembly interacted with the positive or negative outcome of productive opportunity realization. In PO 2.1, the emergent firm developed its technological resources (human tissues and various GI expertise) first. Operational resources (lab space, technicians, and clinicians) were contingent on the development of its technological resources. The limited financial resources created a perceived lack of credibility for University 1, which BioCure could not eliminate satisfactorily. In contrast, the development of PO 2.3 occurred after the assembly of financial and operational resources. BioCure secured financial resources based on the scientific program from PO 2.1 (albeit slightly modified) and, in turn, this allowed it to assemble operational resources. When the opportunity to collaborate with Hospital 2 on perianal fistulas arose, BioCure was able to respond quickly and PO 2.3 was realized.
4.2 Uncertainty surrounding productive opportunities
As we followed the different productive opportunities, we began to see that uncertainty was rooted in knowledge incompleteness and problem-solving competence gaps of the emergent firm and its potential partners. We present our evidence on how this uncertainty manifested and the three mechanisms that emerge from our analysis—envisioning, pooling, and staging—that were used to address it.
Uncertainty was apparent and pervasive and was reflected in the usual request by all of the potential partners for better “proof of concept” or more “baseline data” from the technology platform. Many of these partners refused to commit resources to the new venture until their requests were met. This led to a “catch 22” situation, in which BioCure aimed to enter a collaboration with either a university or pharmaceutical firm to generate data, but the partner requested to see more data first before agreeing to collaborate. The founder expressed frustration regarding these requests for more data, taking them “with a grain of salt.” John explained that large pharmaceutical firms “always ask for more data” and expressed his skepticism about defining criteria for such further studies and suggested instead that it would be more productive to test the pharmaceutical firms’ compounds.
The persistence of this uncertainty hindered the development of the productive opportunities in a recursive pattern. Leads from trade fairs and networking events for both financial resources and business development were plentiful but resulted in similar requests for baseline data, as evidenced by the following excerpts from emails from large pharmaceutical firms:
[our] research would like to see more data before committing to investment … we do need support from [our research unit] to go forward with seed fund investment and it is just not there ...
The build [discovery platform] is really impressive, supported by sustained access to patients, but we need a few case studies [baseline validation] before continuing discussions.
Uncertainty also manifested in the way partner organizations used different assessments to judge BioCure’s capabilities. In PO 2.1, there were various groups from University 1 that were engaged at different stages and they used varying assessments, which contrasts with the simpler assessments in PO 2.3. From our data, we identified three different forms of assessment—scientific, legal, and reputational – that were used (often simultaneously) by the partner organizations. All of these simultaneous and often conflicting forms of assessment reflected the limitations on the problem-solving competences of potential partners to frame and interpret the innovator’s capabilities, compromising their buy in. We show evidence of use of each form of assessment.
In PO 2.1 and 2.3, the assessment of science capabilities and skills and the likelihood of success of the scientific program were scrutinized in meetings and presentations with scientific peers. The process of scientific assessment in the case of PO 2.1 was complex. There were many scientific meetings and brainstorming sessions with different groups of scientists at University 1 to “identify some central themes.” The areas of common scientific interests snowballed, as explained by John:
...[At] University 1 there are four or five disease area groups that we are looking to engage with. There is inflammatory bowel disease, oncology, diabetes, ageing …, hypermobility syndrome, oesophageal reflux [oesophagitis].
John gave several indications of the scientific assessment that took place through the tough questioning and demands. For example, he explained, “the IBD guy … was quite abrasive.” He described another scientist as “the old school [type], telling me … that [he is] one of the top ten people in [his] field.”
In contrast, the scientific assessment of PO 2.3 was quick and simple. John gave a “one hour Grand Round presentation.” The number of scientists involved in the scientific assessment was limited. The response from scientists at Hospital 2 was “very enthusiastic” and in a follow-up meeting, the founder and the dean of the academic institute agreed to develop an open innovation collaboration. Shortly thereafter John received a request for a specific project proposal, which was approved.
We see that in conjunction with the assessment of scientific capabilities, other forms of assessment were introduced, namely legal and reputational. It is difficult to untangle the timing in the use of these forms of assessment, and in PO 2.1, there is evidence of an iterative and recursive pattern. In PO 2.1, a legal form of assessment was introduced into the scientific discussions early on as a two-way confidential disclosure agreement was signed to facilitate the exchange of more detailed scientific knowledge. Three months after scientific discussions started, many questions about legal implications emerged. Action items and documentation from a meeting at the end of March 2014 showed the start of a broader legal evaluation. An action list showed the following item: “what is University 1’s policy on tissue ownership?” indicating concern for potential liability. Another item, “does tissue definition change when processed, in particular establishing crypt organoid cultures?” implied boundary parameters for potentially new intellectual property challenges arising from the collaboration.
To address these rising legal considerations, John prepared a memo that prioritized the issues, including intellectual property, tissue ownership, and lab space. He established his credibility by explaining his previous experience in intellectual property and licensing arrangements. At this point, John consulted a law firm, which later wrote the “heads of terms.” John elaborated on the boundaries of intellectual property inventorship and business terms:
The process starts by each party defining ‘background knowledge’ which includes core competences and invention disclosures at the outset of the collaboration. Invention disclosures are submitted to the collaboration’s patent counsel throughout the collaboration. When filing patent applications, the collaboration’s patent counsel will assess each person’s contribution to the invention – regardless of their affiliations – to make a determination on inventorship.
Inventorship rules would determine the business terms, and he elaborated:
They might have interest in the patent but whatever deal they have with the university is their deal … If … they get [10%], I don't care. It deals with the university. If they have a problem with getting paid, we say, talk to your university.
The memo outlined BioCure’s position on the issue of tissue ownership. He anticipated “generating a large bank of intestinal organoids and other tissue stem cells” which would be used in the collaboration but also used separately by each party freely. Tests would be done on the university premises. But concerning tissue ownership, John was rather indifferent:
I don’t really care if we own them, just as long as we have restricted use. …We use it for our internal programs, R&D only, with them, and with pharma. We would not sell the tissues … once we get these hundreds of samples and get this bigger picture, we will probably never look at those samples anyway.
Furthermore, the cost of tissue ownership was a concern. This was not specifically mentioned in the memo but John elaborated:
if they own the tissues… then they can pay for storage. … we don’t want to be responsible for that. … it’s not an area to ‘go to the mat’ and be ugly over, especially if you realize that once you got the tissues and have that original discovery, you don’t really need them any more.
The issue of tissue ownership was not a trivial matter, and agreeing to have lab space at University 1 was a way to abate some of the concerns. This became a requirement for proceeding with the collaboration. The demands placed on BioCure during the scientific assessment included renting lab space, hiring a clinical nurse, and funding PhDs. This phase of legal assessment closed with BioCure requesting a “material transfer agreement” so that they could determine whether they could “get stuff done.” Nevertheless, another form of assessment was simultaneously at work and impeded progress, namely, reputational assessment.
This form of assessment was most apparent in the collaboration with University 1 in PO 2.1. The nature of the collaboration with University 1 seemed to be surrounded by more uncertainty for all the partners. Once legal assessment began, more actors within University 1 became involved in the negotiations, namely business development managers from the TTO. John’s reaction to the first encounter with one of these managers was cautiously positive and emphasized the mutual benefits of the partnership:
If it is presented as a win-win situation … I think that will fly. If you start hyping that and saying these human tissue samples could lead to a cure for this disease, then people will start to say, I want to be compensated for that. … [It needs to be] very clear that we’re in this game together and that there is a mutual benefit.
Nevertheless, the tone of the negotiations changed abruptly when another business development manager entered the negotiations:
… what she did in that meeting was mark her place in the discussion … It went from an IP [intellectual property] discussion to a general business discussion. ... we were here to talk about IP, the process of doing this and the licensing terms. All she wanted to talk about was the business model … she said, ‘you guys are the middlemen, you are going to pharma ... We’re the clinicians, you’re the middleman.
John noted the reservations of University 1’s business development manager and was concerned that BioCure was being undervalued:
… we are the ones that make the discoveries that translate this to the other people. You guys aren’t going to do this. You’re not stem cell experts, you’re not biotech people.
Still, University 1’s business development manager was not fully satisfied and continued to make more requests, stating that they required “[making] an investment in the company” and then a request for an equity position instead of an investment because the manager believed BioCure “would be raising money on the back of University 1.” The abrupt turn towards a reputational assessment surprised John and Sarah:
We are a young company with no assets. So I said what is the exposure?... I suppose the reputation. [They] are putting no money in. [It’s a] marginal increase of time to take out a couple of extra biopsies. We are processing them with a couple of FTEs [full time equivalents] and we are consulting with [them]. So where is the risk? It is primarily reputation. They do not want to be involved in anything that is deemed risky. We could have an agreement and then we [might not get] the funding and then what would happen? ... it would simply be public knowledge that they had a failed engagement.
The reputational scrutiny from University 1 resulted in greater uncertainty for BioCure. In order for University 1 to discuss internally the possibility of pursuing the collaboration, the business terms needed to be defined. Yet, there was no agreement on business terms. Moreover, due to these protracted negotiations, John and Sarah began to question the competence of University 1 as a potential partner. Prior to these negotiations, they spoke positively of the professionalism at University 1, “really textbook type of communication … I’m very impressed.” When the discussions moved to negotiating business terms, their opinion changed:
… when we moved on the heads of terms ... they were dismissive, like we … low-balled and were really unreasonable.. I don’t think [University 1] has much experience.
Also, the founders experienced uncertainty and lost confidence in the ability of the head of the Research Institute A to champion the collaboration internally:
Our contact had a meeting with the business manager and it’s completely gone off the rails ... Literally everything we talked about was shot down … [we] understand that he is not a business person. But for him to be so inflexible is a little puzzling … I don’t know how much of the actual conversation that happened behind closed doors is accurately reflected to us.
Having met successfully the scientific assessment, the urgency to remove the concerns associated with reputational assessment was high. Although the founders were keen to “figure out a pathway forward with University 1 the business development manager was not swayed:
[our contact] couldn’t imagine a way to go forward … [he] tried everything and tried to explain it, but … it sounds like they won’t do anything without [BioCure] getting the funding first.
Negotiations came to halt. BioCure would have to raise funding before the collaboration could take place, but also the new demand from University 1 of owning 50% of the company would outstrip any benefit of collaborating with University 1 for BioCure.
4.3 Mechanisms to address uncertainty
Our data showed that the founder employed three mechanisms to address uncertainty in the different productive opportunities: envisioning, pooling, and staging. John employed these mechanisms strategically at different times or simultaneously.
From the start of the venture, he was continuously
envisioning the different future states or scenarios of the emergent firm. In the interviews, there were verbal cues of these scenarios, such as “it’s a different story,…,” “you really have to think that through, if …,” or “this is the way it will work,…” During the pursuit of PO 2.1, the founder used elaborate scenarios, which provided the basis for the narrative that persisted through subsequent productive opportunities. The following illustrates the initial vision of the collaboration with University 1:
Here is what happens. They give us tissues, whether they are biopsies or resection tissues, and we take the tissues and we grow up the stem cells in our cultures. We can tell them whether the stem cells are normal or abnormal. Right, if they are abnormal then we can do whole genome sequencing. We could do a number of tests, we can look at dose response of drugs, and we could find out what kills specifically that diseased stem cells and not the healthy stem cells. Or if we take the tissue, we put it in, and their stem cells are fine, then they don’t have a stem cell disease. [If] they are all bad, then the only alternative is stem cell therapy, which is still very far away. So in the meantime, they get to learn, is it a stem cell disease, yes or no? If it is a stem cell disease, what is the gene defect? We write them a report, we develop what that report is, a lot of functional studies, we will be doing immune studies and characterizing them. Then ... what do we get as BioCure? We get, first, a highly motivated team, technicians, who are going to be giving information that is going to be informing clinical decisions. That is pretty rare. The second thing is that as we build our bank we take that asset and we go to pharma and we are looking for drugs that kill those specific human conditions. We have a panel of ten or twelve, however many we have over time, and we can screen their compounds and optimize these compounds on these tissues. They’ll have case reports and … we identify drug candidates...
This early envisioning helped the founder develop the narrative he used to get the potential partners motivated about the collaboration and to identify the services of knowledge exchange (e.g., clinical diagnosis, reports) that BioCure could offer University 1 while at the same time advancing BioCure’s research and development of therapeutic treatments. The founder’s envisioning was also very detailed in working out the terms of intellectual property. He envisioned the mechanics of inventorship as follows:
… you start off with the collaboration, you record all the background information, what you knew at the time you started, including the potential inventions, and that sets the base. And then you go forward and you collaborate. As you make inventions, we report them to the attorneys and invention disclosures and when it becomes time to write the patent applications and to identify the inventors, the attorneys are the ones who do that. It’s not authorship, there is no pressure; they look and see who contributed to it. Clearly there is scope for adding people on because you want to be nice. Once that gets set, the inventors will be all BioCure or all University 1 or both. You try to give them assurances; it’s going to be mostly both on a lot of this stuff. You’re in a meeting and somebody picks up on an idea. We know nothing about the gastrointestinal track; [we] are experts in stem cells, so we have advantages there. The most important thing is to get the invention. … the next step is the business issues. There are standard business issues for sole or joint IP. The terms of all that [are decided] in advance and … you never have to talk about them again. Done. I think that gave them a lot of reassurance.
The above quotation shows the founder’s envisioning as a deliberate mechanism to address uncertainty through helping partners to frame and interpret the information and make a decision to collaborate. For example, when we questioned the founder about the conflicts regarding academics’ incentive to publish papers, he envisioned a solution:
We just have a normal disclosure period. You don’t actually have to file [patents] until the paper has been accepted, I think, because technically it is supposed to be confidential when it is being reviewed, but we may do it earlier. Depends on what the invention is.
He developed clear scenarios of the division of labor and stated “ you [the university academics] write the papers, we write the patents. We are going to be focused on filing patents, managing IP, managing the business. ”
Envisioning was also used with potential investors to address uncertainty and establish greater confidence in the likelihood of the venture’s success. Nevertheless, investors were also concerned about uncertainty arising from lack of “proof of concept” and cited the early stage of the technology as the most common obstacle for not investing. As BioCure developed, envisioning manifested in the pitches presented to potential partners and investors, which culminated in a concise and powerful 7-page presentation: “my thinking evolved … probably the best presentation I’ve ever given.” Thus, envisioning helped address uncertainty for some partners but not for others, like investors, for which this did not provide sufficient “weight of evidence” by itself to increase confidence.
In addition to envisioning, the founder engaged in what we term pooling, seeking to bundle support for productive opportunities. The pooling mechanism manifested in different ways. First, John pooled advice from various experts whose opinion he trusted. In the early period of the firm, he met regularly with a trusted advisor, a board chairman of the parent firm (“we have known each other for a long time, have gone through hell and high water together”). He described him as “holding his cards close to his chest but [also] the most honest and fair business man” he knew. Initially, meetings with the board chairman allowed John to verify the feasibility of the productive opportunities. In the development of PO 2.1, the chairman introduced the founders to a consultant for pooling more advice and supporting a potential diagnostic component of PO 2.1, as well as to diagnostic companies that could become potential partners.
Pooling was used to create confidence and maintain investors or other potential partners interested in the productive opportunities. Networking with these potential partners was a key aspect to the success of pooling, in particular during the fundraising phase. The board chairman of the parent firm provided introductions to other venture capitalists but was not transparent about his own financing intention, as John explained:
It might mean that he has no interest other than being a consultant or it might mean that he has extreme high level of interest and he doesn’t want to show his hand.
During the search for seed financing (approximately a 2-year period between 2014 and 2016), John presented BioCure’s business proposition at numerous industry trade shows and venture capitalist events. He continuously pooled information and support from various actors, gaining further network connections, scientific and market verification, and legitimacy. When John secured a round of seed funding in June 2016, his extensive pooling for support brought the potential investors together and included the board chairman as a seed investor. The pooling mechanism among the investors increased the positive assessment of the emergent firm’s capabilities.
The pooling mechanism was also used to garner scientific support and is apparent in PO 2.1. Here, pooling was insufficient by itself as a mechanism to address uncertainty. The founders were unable to pool enough support to establish confidence from the business development manager, despite having the positive assessment and support of the academics.
Lastly, John engaged in
staging, which was a deliberate phasing of small step progression to address uncertainty. The use of staging was less apparent during PO 2.1 than in the subsequent POs. However, during the negotiations of PO 2.1, the founder did employ some staging or was aware that staging was necessary. The following quotation exemplifies this:
the relationship is built with lots of communication, a little bit of humor, just to keep things moving. We’ll be down there once a month or less, keep talking, not be in their face, just stop by and have short meetings.
Yet, the data from PO 2.1 provided indications that perhaps the collaboration was not broken down into small enough parts to “stage” acceptance. The founders claimed that “University 1 were confused about the business structure.”
PO 2.3 is a good example of how John used staging. Proposals or pitches became more focused on particular projects with clear boundaries and less focused on creating a complex business undertaking together. He consciously chose to call the model of collaboration with PO 2.3 “open innovation,” picking up on the “latest trend.” The open innovation model suggested that Hospital 2 and BioCure would collaborate on a number of research projects. This was a first step in establishing legitimacy. The proposal to Hospital 2 differed substantially from the complex collaboration that evolved through the discussions with University 1. In the initial proposal, John included a detailed project outline on one A4 page, with clear boundaries around the research project. The staging mechanism allowed the founder to reduce uncertainty and start a project. He described how he made this transition:
Until recently I have resisted pursuing low value “starter” projects to engage pharmaceutical partnerships. Instead I have focused on the “all in” discovery partnership model previously … [but it has] a higher threshold for eventual engagement.