Conference_20130305_Jari Romanainen

DM Copyright © Tekes

Challenge driven innovationWhat will the Nordic business environment look like in the future?

5-6 March 2013, Stockholm

Jari Romanainen

5 March 2013

01-2013

Copyright © Tekes DM

Innovation Policy Approaches Science / Research driven

Provide knowledge and skills, ensure level playing field Scientific discoveries / research result enable new applications Focus on scientific research and industry academia collaboration Ensure market competition, empower consumers

Market / Opportunity driven Facilitate innovation, ensure competition Providing products and services to fulfil existing customer needs Identify and address latent needs of users, creating new markets Focus on industrial innovation, collaborative applied research,

competitiveness and competition

Demand / Challenge / Mission driven CDI emerges on policy agenda typically during crises Address systems, provide platforms and solutions Identify and address demand / challenge / mission Focus on societal needs, societies/communities of users, systems

and institutional/structural change 01-2013


Implications of Challenge Driven Innovation 1

Solutions need to be systemic Based on a shared (physical, virtual) platform, which enables a large

number of different business models, products and services Require large consortia and multidisciplinary/cross-sector approaches Require often changes in institutional practices and structures,

sometimes these changes need to be fundamental

Should aim for transferrable solutions Must understand which of the key elements of the solution are context

(society/community) specific and which are not Generic platform, adaptable business models, tailored products and

services

Need to experiment / pilot in real life context / large scale Functionalities of systems can only be realised when experimenting

with the full system in real scale Solutions are always shaped by user experiences

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Implications of Challenge Driven Innovation 2

All potential barriers have to be addressed simultaneously Any actor can prevent or seriously hinder systemic change Incentives must address all actors: society/community, individuals,

enterprises, political institutions, public sector, research actors, etc. (appropriate incentive structure)

Some barriers can be removed quickly, other may take long time

Weak problem owner means lack of leadership Typically public sector, society or user community with very little or no

knowledge, skills and experience in innovation Typically no clear longer term vision or strategy Fragmented governance system

Society/community acceptance is vital Changes in institutional practices needs to take place both at

individual and at community/society level Society/community must be engaged in the process (social shaping)

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Conceptual 3-step approach to CDIStep 1 – Feasibility Understand the challenge and its underlying reasons Understand to what extent the challenge and its underlying

reasons are society specific and to what extent they are generic Identify the appropriate system which needs to be addressed and

how it is linked to the outside world Understand the existing systems, relevant actors and activities,

key drivers, barriers and on-going and future trends Analyse and address lack of innovation capabilities, especially

among problem owners and user community/society Engage problem owners, preferably in leading role Identify a limited number of potential innovative approaches

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Conceptual 3-step approach to CDIStep 2 – Experimentation Assign leadership to problem owners (supported by other key

actors) Ensure society/community support through participation Create interactive platforms for all key actors Experiment / test / pilot and further develop / shape the selected

innovative approaches in large scale real life environments with real societies/communities

Invite potential adopters to participate in the experimentation (foster learning-by-doing, enhance innovation capabilities, provide further insight into potential barriers, social embeddedness and other aspects of transferability.)

Validate which of the innovative approaches can lead into innovative solutions

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Conceptual 3-step approach to CDIStep 3 – Roll-out Launch several adoption projects in parallel in different social and

systemic contexts Facilitates wider adoption of innovative systemic solutions

(opening of larger markets, enhanced demand) and thereby provides a stronger incentive for enterprises to participate in experimentation

Parallel implementation of several adoption projects enhances mutual learning and innovation capacity

Adoption in different contexts verifies transferability of the innovative solution and facilitates access to global markets

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CDI and Innovation Policies Today Innovation policies are still mostly focused on facilitating

innovation (science/research driven, market/opportunity driven) Demand driven innovation policies (and CDI) have emerged on

the policy agenda, but remain mainly as part of rhetoric Most countries have started to experiment with demand side

policy measures and initiatives (procurement, awards, consortia) Real systemic CDI policies are still missing Horizon 2020 may provide a new framework CDI in Europe The most difficult underlying barriers can be found from the

governance system and from the incentive structures. o The governance failure can be addressed by strengthening strategic

intelligence to allow the design of more evidence based, longer term and systemic policies, as well as breaking departmental walls.

o Establishing appropriate and sustainable incentive structures to enhance the demand for innovations may require quite fundamental changes in traditions, organisational cultures, etc.

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Experiences of CDI and systemic policiesHealthcare and education Rationale

Healthcare clearly identified as a challenge (e.g. ageing, costs) Education not identified as a challenge (e.g. PISA), but as an

opportunity (potential for exports) Many aspects are more or less taboo, i.e. difficult or impossible to

address (tuition fees, public service production, etc.) Highly institutionalised structures, incl. many NGOs Distributed and fragmented regional and national structures

Key policy measures Joint/collaborative programmes with Ministry of Social Affairs and

Health, and Ministry of Education and Culture Shared overall objectives, coordinated calls, consortia projects, etc. Tekes funding for enterprises and research, Ministry funding for public

sector partners Innovative Public Procurement

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Experiences of CDI and systemic policiesGrowth entrepreneurship ecosystem Rationale

Many large multinational enterprises are relocating their business activities (especially manufacturing) internationally

Strong academia industry networking and collaboration Low innovative entrepreneurship compared to potential Significantly increased interest in entrepreneurship, especially among

students (vibrant communities, e.g. at Aalto university) Availability of skilled labour (e.g. restructuring of Nokia and ICT sector) Lack of early stage private venture capital, limited exit opportunities,

Key policy measures Funding for young innovative enterprises – money Programme for private accelerators (Vigo) – competence Market driven funding for research organisations – tap into research

potential and develop more effective commercialisation structures Tax incentives for business angels – smart money Reform of public venture capital funding – smart money

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Finnish Ecosystem for Innovative SMEs

11-2009

Innovative SME

General business environment(fiscal, regulatory)

Entrepreneuship culture(attitudes)

Competences

Ideas

Money

DemandMarketsCustomers

Fiscal incentives(investors, companies)

Growth funding

Venture capital(funds, international investors)

VigoYIE fundingPublic pre-seed and seed equityfunding

IKK, TUTL

”Product Track”->proactive measures targeting inventors

Identifyingopportunities

Spin-offs from large companies

Business angels

Public procurement

Lead Markets

Entrepreneushipeducation

Identifying needsSocietal challenges

”Growth Track”

Markets for early stage investments

Crowd funding


Concluding remarks CDI has significant potential for economic growth and for

addressing societal challenges (incl. environment)

The potential of CDI remains largely untapped, especially with respect to societal challenges

The key barrier for CDI is lock-in in existing traditions, practices and institutions – not lack of money

CDI requires new systemic policies and approaches

Nordic region is potentially an ideal environment for CDI (similar challenges, context, etc.)

However, tapping to this potential requires new forms of collaboration both at political and at practical levels (cross-border procurement of innovation, smart regulation, etc.)

Joint CDI initiatives addressing selected common challenges (e.g. smart cities) could provide a platform for developing the Nordic region as a globally leading market 01-2013