In a separate conversation over this article, I noted that NGOs (and in the case at hand, research labs) often face a problem of inherent indirection.

The ideal competitive for-profit firm exists in what's effectively a two-body world:

Producer <- (goods>) (<payment) -> consumer

That is: a producer manufactures goods, for which they get payment from a consumer.

Many NGOs operate in what's effectively a three-body world:

Sponsor -> producer -> consumer

There's a lack of a closed loop. Or rather, the loop-closure is in feedback or services provided to the donor: positive press, status reports, sponsorship opportunities, etc.

Of course, not all for-profit businesses operate in a closed-loop fashion. Two classic instances are military spending and traditional healthcare insurance:

Taxpayer -> Military vendor -> Military Purchasing Officer

Ratepayer -> Healthcare Provider -> Patient

Note that in the military case, the purchasing officer who makes the "buy" decision isn't actually using the materiel acquired. A more complete view would be:

Taxpayer -> Vendor -> Purchasing Officer -> Grunt

Where the grunt might or might not be receiving hardware suitable to the task at hand.

That is, the obligation for spending money is separated from the decision to spend, and from the recipient of the proceeds. Loans to third-world dictators are another classic example, though I'm not sure this market is necessarily competitive (other than for the bankers):

Oppressed taxpayers -> (taxes)-> Corrupt Government -> (interest)-> Big Bank

More interesting are businesses with an indirect consumer model:

Advertiser -> Publisher -> Subscriber/reader

Advertiser -> Google -> Web User

In both cases, the party paying for the service (at least the bulk of it) isn't the apparent consumer. It's the old "if you're not paying for it, you are the product" quip.

Of course, apparently for-profit businesses can fall into similar traps. Microsoft rather famously doesn't really sell to end-users, its primary customers are OEMs and corporate purchasing agents, generally a CTO:

OEM -> Microsoft -> End user

CTO -> Microsoft -> Worker

In both cases, the person using the software is several stages removed from the decisions which go into preparing it. Microsoft began running into serious quality issues as its focus on end-user experience slipped in the 1990s, from which it's never recovered.

There's model in which the two or three or four body world tends to get reduced to what's effectively a zero-body world: free software development.

Though not all users of free software are developers, a great many developers are users. And often a major perk of the development is the use of the product itself. The result is that you have a relationship where the same person or organization is effectively, sponsor, producer, and consumer. In the case of projects such as Debian or OpenBSD, both of which have a clear and explicit end-user mandate, the result is exceptionally high-quality (defined in terms of the goal) results. ASCII art diagrams start breaking down here, but effectively:

person.sponser <-> person.developer <-> person.user

... where the loop has been closed, because the three roles are filled by the same party (or parties).

It's not ideal of course -- with large projects, each individual developer typically only plays a limited role. Hell, I've head there might even be disagreements at times. But in comparison to alternative incentive alignment structures the result is excellent, especially given the capital requirements of the projects.

Yes, a company such as Apple which puts an explicit focus on end-user experience and positions itself to sell directly to the user can come close, though it too can drift from this. But the requirements are vastly higher in terms of capital, and the results aren't all that much superior.