News - March 31, 2010

DLO finds the limits of the market

DLO institutes are required to make more and more money on the market. That carries certain risks. Research can get bogged down in routine, or companies can advertise results in undesirable ways. AFSG got badly in the red once it lost touch with the latest knowledge. Three guidelines for sellers on the academic market.

In the Plant Research International (PRI) building there is a conveyor belt which sorts, seals, and packs over 1000 rubber stoppers per hour. Aromatic pheromones are pipetted on to the stoppers by a robot the size of a man.
The pipette robot was already there, but the packing machine was purchased earlier this year for an assignment for the government of Tunisia , which wanted 600,000 stoppers with the aroma that could keep off the pest moth Tuta absoluta, which causes disease in tomato plants.
In a normal year the ‘Pherobank' (a limited company at PRI) produces 200,000 stoppers with the pheromones. It is now producing three times that number every three weeks. Business unit manager Piet Boonenkamp has hired technicians through an agency to carry out this enormous job.
‘This was just a matter of producing. It does make money, which is a reward for entrepreneurship, and our main reason for doing it is that we expect it to lead to research assignments. We work a lot with Koppert, a manufacturer of organic pesticides. Koppert is interested in the pheromones, but can't produce them itself. We are showing now that we can do this on a big scale. Eventually Koppert can take over production from us.'
DLO institutes are required to make more and more money on the market, says the executive board. Financing from the Ministry of LNV is diminishing. Cutting back is not an option for the board, so new markets need to be explored. The ‘market' is currently one of the boards 20 key issues, and is even named as one of the four main themes in Wageningen UR's strategy 2011 to 2014.
Three guidelines for sellers on the academic market.
In 2008, DLO received 168 million euros from the Ministry of LNV. A small proportion of this came from individual assignments through tenders, besides which LNV gives three types of subsidy. There are the relatively long-term legal research assignments (WOT), such as food safety tests carried out at Rikilt. Then there are more loosely structured projects on basic knowledge (KB), with which the ministry aims to maintain a scientific basis in key fields such as animal diseases. These programmes go on for one to six years. The third kind of subsidy supports policy (BO), and is channelled through multi-annual contracts on the basis of a concrete question posed by the ministry. The ministry can choose to have this research done elsewhere.

DLO gets 45% out of LNV subsidies (in millions of euros in 2008, Total income 348)
Contract research
EU 20
Governments 33
Product boards 17
Companies 42
LNV - individual assignments 12

LNV: Knowledge base, WOT en BO 156
Licenses, advice, sale of buildings etc. 68

1. Routine in moderation
Where is the borderline where applied research turns into routine production? An element of routine seems to be okay, if it is a means to obtain new research assignments. Boonenkamp: ‘We want to improve the health of crops, but we are not here to produce pesticides. If Tunisia later asks for 5 million doses, we'll pass.'
Alterra does a routine job itself now and then to keep in touch with what's going on in the field. Alterra's business unit manager Henk Siepel: ‘ now and again we do more implementation; I think 10 to 20% of the turnover. That is to keep in touch with practice. For example, monitoring water quality, testing Natura2000, or drawing up a management plan. And incidentally, there is often an element of innovation in this.'
Another DLO Institute, the Central Veterinary Institute (CVI) in Lelystad, has just got rid of big routine assignments. Until last year, the CVI housed hundreds of glass flasks and 2000-litre stainless steel vats in which testing material was produced for tuberculosis, and vaccines against foot and mouth disease and bluetongue disease. In 2009 the products division was sold to two veterinary pharmacists.
Director of operations Dick Pouwels: ‘It wasn't part of our core activities. The CVI develops things to the so-called ‘proof of principle' stage. In other words, you show on the lab scale that you can do something. The production of a foot and mouth vaccine and of tuberculin was part of our legal assignment. We did it at the request of the ministry of LNV because there were still cases of foot and mouth and tuberculosis among Dutch livestock.' According to Pouwels, the production of these vaccines was the last ‘industrial' assignment within Wageningen UR.
In 2005 a Japanese client ordered 1200 testing sticks from the AFSG for testing for rotten food. It was a variation on the pregnancy test, but instead of showing up the hCG in urine, the stick showed the presence of Escherichia coli in food. This assignment meant two days of routine work for five researchers. Programme leader Charon Zondervan: ‘The client was satisfied, and then wanted 15 thousand of the tests. But we didn't do that. That would have taken us twenty days. There must be companies that can do that more cheaply.'
‘Unfair competition'
Entering the market means competing with other research organizations. And they are keeping a close eye on DLO's continually expanding market stall, which is shored up by subsidies. Unfair competition, think some - for example environmental advisory bureaus. Partly for this reason, Hans Waardenburg has set up the Green Bureaus network, with members such as Arcadis and Haskoning. Waardenburg: ‘Government institutions such as Alterra, Imares, Deltares and NIOO are working the same market as us. We've got nothing against competition, except when it happens with the help of government money. Alterra has equipment and buildings that are paid out of taxpayers' money. So the starting point is not equal. But if the competition gets so strong that our position is weakened and we have to sack people, we take legal steps. We're preparing for a court case.
‘He should do it, he's been saying it for years', is the reaction of Henk Siepel at Alterra. ‘Some bureaus want to attract more research assignments and then they come onto our territory.' He doesn't think that Alterra has a head start. ‘Nonsense, we have to pay for everything out of the projects. My rent is higher than Hans Waardenburg's, and the overheads are much bigger.'
The Ministry of LNV is on the lookout for unfair competition. Janneke Hoestra, director of Knowledge at LNV: ‘I make sure that DLO keeps to the going rates. DLO enters the competition with the knowledge and expertise available in the Institutes. Over the last few years DLO has invested in new buildings on its own initiative; what Hans Waardenburg says is no longer true.'
2. Keep on innovating
At ASFG, they have now discovered that you shouldn't let yourself be governed by the market alone. At the end of the nineteen nineties, this DLO institute was almost bankrupt. Under the leadership of Albert Eenink, the former DLO institute ATO focused entirely on the market. At one point, LNV only financed 2 percent of ATO's research. Charon Zondervan explains what happened: ‘We were very successful for five years. Until we lost touch with the latest knowledge. It turned out that the necessary innovation couldn't be funded by the business world. A normal company would have gone bankrupt. Now the institute has its own funds so it can keep on innovating.' Zondervan warns that you shouldn't work exclusively for third parties. ‘ The LEI needs to watch out for that, for instance. You mustn't lose sight of your own vision'
Tuberculine production in Lelystad
Photo:Fred van Lelyveld

The question is whether researchers should have to go out looking for assignments. ‘If we really want to be a market-oriented organization, we should assign specialists to this', says Toine Timmermans of Food & Biobased Research. Every DLO Institute has these business developers. They know the market, they can talk with clients at the strategic level, and of course they know what Wageningen researchers can do. With a good business developer, two out of three negotiations with clients are successful.
Wageningen UR wants to move towards what it calls WUR-wide account management. A good plan, says Timmermans. ‘We've got to broaden the ‘sales' department with people capable of talking about synergy with big clients at a high level, such as the members of our board. They have good contacts with top companies in the Netherlands and in Europe. This is a long haul job, but I think we do have to make this choice.'
3. Stick to your mission
Another lesson has been learned besides the importance of innovation. And that is: keep your eye on your mission. When Peter van Elzen became director of AFSG, it struck him that the DLO researchers there were extremely service-oriented. If you are too much under the thumb of the R&D department of a company, you can lose sight of your own objectives, he warned.Charon Zondervan and Toine Timmermans have developed a kind of test. The AFSG's mission is to contribute to healthy nutrition and to making the food chain sustainable. Every project has to meet this criterion. Zondervan talked about an entrepreneur in 2003 who wanted to add vitamin C to his candy floss , and wondered whether the food scientists could help him. ‘Of course the man wanted to be able to make health claims. But we didn't do that. You hope that will be the end of it, but perhaps he was lucky somewhere else. But a researcher who is driven by the idea that the group leader wants him to bring in as much money as possible would have taken on the assignment. Now we test assignments against our mission. And group leaders should support researchers who turn down an assignment like that.'
Pipetting robot and conveyor belt at PRI in Wageningen
Photo: Guy Ackermans