Why You Should Tap Innovation at Deep-Tech Startups

In today’s business environment, firms must navigate labor shortages, market shifts, geopolitical tensions that strain supply chains and manufacturing, and mandates to adopt sustainable practices. Meeting these demands will require innovation rooted in breakthrough science and engineering. Even companies in less R&D-intensive sectors will need to look to science-based innovators — so-called deep-tech startups — as they seek solutions to their key challenges.

Deep tech describes a category of solutions rooted in atoms rather than bits — such as new materials, synthetic biology, fusion energy, and quantum computing — and grounded in cutting-edge research. Deep-tech ventures are startups dedicated to taking ideas from the lab bench to scaled global impact. And although these companies have great promise, adopting their breakthrough developments requires patience, a tolerance for risk, and capital.

Deep tech can benefit businesses across a range of sectors, including industries such as financial services, infrastructure, and retail, where R&D spending has traditionally been low, roughly 4% or less of sales revenue. Quantum computing, for example, presents significant opportunities for the financial services sector, particularly in terms of data analysis and security enhancement. The emergence of new eco-friendly cement and steel holds promise for transforming the sustainable footprint within the historically carbon-intensive construction industry. And the introduction of innovative materials in the fashion sector offers substantial potential to enhance customer experiences while reducing waste.

While research-driven, R&D-intensive companies like Novo Nordisk and IBM have engaged with deep tech for years, other sectors have held back. Our engagement with executives from low R&D intensity sectors suggests that deep-tech ventures come with risk profiles and growth trajectories that are very different from these leaders’ usual venture activities. Corporations in finance, retail, government services, and health care have plenty of experience with startup ventures, but most involve digital innovations. Others, such as those in construction and infrastructure, have had, until recently, only limited engagement with external startups.

If these organizations wish to harness deep tech, they must explore new strategies and practices. Our work with companies in sectors as diverse as fashion, transportation, and banking has yielded insights that can help guide managers in low-R&D organizations into the uncharted territory of deep tech.

“The MIT Sloan Management Review is a research-based magazine and digital platform for business executives published at the MIT Sloan School of Management.”

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