The New Frontiers of Innovation Policy Richard Halkett, NESTA Policy & Research Unit SPRU, Freeman Centre Seminar Series 30 th November, 2007
Jan 09, 2016
The New Frontiers of Innovation Policy
Richard Halkett,NESTA Policy & Research Unit
SPRU, Freeman Centre Seminar Series
30th November, 2007
The UK’s ‘poor performance’ in innovation
Policy has focused on improving the UK’s ‘poor performance’
The UK lags behind its competitors on traditional indicators
Overall per capita expenditure on R&D
Business expenditure on R&D
Business levels of innovative activity
Extent of patenting activity
The overall impression is that the UK wastes its potential by failing to invest in innovation, particularly the commercialisation of ideas
The ‘linear’ model of innovation
Knowledge creation
What: Basic science + R&D
Where: Universities, industry R&D labs
Policy response: R&D tax credit, science budget
Knowledge transfer
What: Applied research, development
Where: Spinout companies, start-ups
Policy response: Lambert agreements, TTOs, KTPs, KTNs
What: Product manufacture
Where: Industry
Policy response: None
Commercialised product Consumption
What: Use/ consumption
Where: Individual consumer
Policy response: None
Hidden innovationInnovation that goes uncounted by traditional indicators
Six ‘low innovation’ sectors
Sector Sales/revenue R&D intensity*
Oil £360 billion 0.2 per cent
Construction £17 billion 0.5 per cent
Retail banking £82 billion 0.9 per cent
Education £36 billion <0.1 per cent
Legal aid services £2 billion <0.1 per cent
Rehabilitation £2 billion+ <0.2 per cent
Source: DTI/DfES/Home Office* R&D intensity refers to amount spent on R&D divided by sales
Type I hidden innovation
Based on science and technology but excluded from traditional indicators
Type I: Technology developmentLife-of-Field Seismic was developed by BP and ten other contractors
It uses permanent sensors on the seabed to create time-lapse movies of fluid and pressure changes to show recovery processes working in near real-time
This could increase recovery from Valhall by 60 million barrels, and by one billion barrels worldwide
Source: BP
The Integrated Subsurface Information System (ISIS) in the Valhall Field in the North Sea
Hidden Innovation
How innovation happens in six ‘low innovation’ sectors
Genetic testing in the NHS
Source: Science Museum
Pre-implantation Genetic Diagnosis (PGD) and Pre-implantation Genetic Haplotyping (PGH) procedures can weed out genetically defective embryos before pregnancy
Initial PGD research was conducted in the UK in the late 1980s. Guy’s Hospital Genetics Centre and Kings College London have recently refined PGH techniques
DNA analysis of Duchenne muscular dystrophy (DMD)
The Innovation Gap
Why policy needs to reflect the reality of innovation in the UK
Type II hidden innovation
Innovation in processes, organisational forms or business models
BAA’s Heathrow Terminal 5
Type III hidden innovation
Innovation from the novel combination of existing technologies and processes
The first direct building in Stourton, Leeds. first direct launched in October 1989 as the UK's first branchless telephone bank
Type III: Exploiting technology in new services
Type IV hidden innovation
Innovation that takes place ‘under the radar’ of many surveys
Type IV: Locally-developed small-scale innovation
Engineering consultancies
Source: Mott MacDonald
The Boston Central Artery/Tunnel Project site looking eastwards towards Logan International airport. The last section of jacked tunnel can be seen on the lower right.
The Innovation Gap
Why policy needs to reflect the reality of innovation in the UK
Hidden innovation in ‘traditional’ sectors
Rolls-Royce TotalCare contract covers technical support, management of spares, and product development
Rolls-Royce now makes 53 per cent of its revenues from ‘aftermarket’ services
10-year £1 billion contract with the Ministry of Defence
Users as innovators
What is user-centred innovation?
Traditional, Manufacturer-Centred Innovation Paradigm
Manufacturers identify user needs, develop products at private expense, and profit by protecting and selling what they have developed
User-Centred Innovation Paradigm
‘Lead users’ innovate to solve their own needs at private expense and then freely reveal their innovations
# of usersperceiving need
Time
Users innovate here
First manufacturer product appears here
Target Market
It has been shown that important innovations are often developed by pioneering usersJohn Heysham Gibbon – physician, USER – inventor of the heart-lung machine.
The death of a young patient in 1931 motivated Dr. Gibbon to develop a heart-bypass machine, to enable more effective heart surgery techniques.
Gibbon was dissuaded by all with whom he broached the subject but perservered.
In 1935 he successfully used a prototype heart-lung bypass machine on animals. In 1953 he first used a heart-lung machine on a human patient.
Why did a USER have to develop the first heart-lung machine?
At the start of something really new there is no “proven” market!
Robotic system for neurosurgery
Biocompatible implant for hernia repair
Examples of lead user-developed innovations
Of course, users aren’t always the innovators
Innovations Samples: User Mfr Suplr Other NA Total (N)
Scientific Instruments 77% 23% - - 17 111
Semicon & PC Crd Process
67% 21% - 12% 6 49
Pultrusion Process 90% 10% - - - 10
Tractor Shovel Related 6% 94% - - - 11
Engineering Plastics 10% 90% - - - 5
Plastics Additives 8% 92% - - 4 16
Sports Equipment 58% 27% - 15% - 48
Many users innovate
Industrial Products N % innovating
Printed Circuit CAD – Urban and vH 136 24.3%
Pipe Hanger Hardware – Herstatt and vH 24 36%
Library IT Systems – Morrison Roberts, vH 102 26%
Software security features – Franke and vH 131 19.1%
Surgical Equipment – Luthje 262 22%
Consumer products N % innovating
Outdoor Products – Luthje 153 9.8%
“Extreme” sports equipment 197 19.2%
Moutain biking equipment – Luthje, Herstatt, vH 291 19.2%
Open innovation
“Closed” Innovation “Open” Innovation
Open innovation
InnoCentive
‘Seekers’ ‘Solvers’
Companies like InnoCentive help open innovation clients like P&G search “outside the firm”
Other exciting areas…
Public and social innovationThere are four factors for sustainable growth: ‘pull’; ‘push’; strategies that connect pull to push; and learning and adaptation. Many social innovations have foundered because these are missing or ‘out of sync’. However, maximising social impact is not the same as growing organisations
In and Out of Sync
The challenge of growing social innovations
Spectrum of models of diffusion and growth
Creative and cultural industries
Source: Work Foundation
The UK has the largest creative sector in the EU, and probably the largest in the world relative to GDP.
Innovation and creativity in the wider economy are stimulated by the creative industries. This captures a shift in which a critical mass of economic activity is knowledge production, as firms deploy new techniques and technologies to meet changes in demand.
The creative industries: a stylised typography
Staying Ahead
The economic performance of the UK’s creative industries
Rural innovationRural innovation is likely to be an important area for innovation, for example in environmental and sustainable technologies.
In part this is being driven by the need for the diversification of traditional sectors, such as farming.
The resulting forms of innovation are likely to impact on both rural and urban areas.
Harlock Hill, Cumbria, the site of five turbines owned by the Baywind Energy Co-operative
Cities and regions
Cities offer the advantages of proximity, density and variety.
Some are ‘urban hubs’ which attract business and generate innovation through critical mass. Others offer ‘local links’ where clusters of businesses and connections make the whole greater than the sum of the parts.
Actors must play different roles along the ‘regional innovation journey.’
Innovation in UK Cities
Findings & policy implications
Importance of framework conditions
Source: DTI/UKOOA
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Tax changes
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Hidden innovation policy
Despite the focus on ‘generic’ interventions such as R&D support, there are many examples of interventions to stimulate and support innovation in specific sectors.
These are rarely considered (or coordinated) as mainstream ‘innovation policy.’
Constructing Excellence has acted to coordinate and support improvement and innovation initiatives in the construction sector
Recommendation: Develop sector-specific innovation agendas with industry
UK construction industry innovation agenda
Recommendation: Create a UK-specific Innovation Index
UK construction industry benchmarking KPIs
What we’re learning
There are not always policy recommendations…
Government cannot do this alone
Policy must move beyond science-based manufacturer-led innovation to encompass other forms that come from elsewhere in the supply chain
Policy needs to support systems and include diffusion and adoption, not just invention
Developing a full innovation strategy will depend on working closely with industry to identify the innovation that matters most to each sector
A sector-relevant Innovation Index would better guide policy development
Innovation needs to be at the heart of – and across – policy
Recommendation: Place innovation at the heart of government
• What organisations say they do
• What organisations actually do
• Which portions & linkages of the innovation system they are positioned to address
• Coverage of relevant stakeholders
• Coverage of the UK
• Size & source of budget
• etc…
Many dimensions of comparison
Four broad groupings around innovation
Policy/ governance
Research-led Practice-led Influence-led
Enterprise Insight
Commentators
A functional Ecology of Innovation
Policy/ governance
Practice-led
Research-led Influence-ledx RCUK
x PRESTx SPRU
x Pembridge
x Enterprise Insight
x IP2IPO
x UCSF
x RSA
x Design Council
x Arts Councilx BVCA
x CBIx Demos
x IPPR
x Commentators
x DTI
x HMT
x RDAsx DCMS
Each group has strengths and weaknesses
Strengths (+) Weaknesses (-)
Policy/ governance
Actually decide policy
Significant budget
Access to stakeholders
No long-term view
Inflexible resource allocation
Political shadow
Research-led Independence
Rigour of analysis
Abstract/irrelevant
Poor communication
Practice-led Practical experience Lack of time for reflection
Influence-led Well-connected
Articulate
Flexible
Heavily London-centric
Message > content
No long-term view
Lack of resources
Recent policy developments
1. Changes in machinery of government
2. Reformed Technology Strategy Board
3. Lord Sainsbury’s Review of the Government’s Science & Innovation Policies
4. Comprehensive Spending Review & Pre-Budget Report
5. Likely White Paper/DIUS strategy Q1 2008
You are invited to...
NESTA’s Place Summit: Making Innovative Places Wednesday 12th December
from 9.30am to 7pm at NESTA, 1 Plough Place, London
We will be launching three new pieces of research looking at the role of regions in stimulating innovation.
The day will be rounded off with a keynote speech by AnnaLee Saxenian, author of “Regional Competitive Advantage” and “The New Argonauts”, on the attributes of innovative regions, with a particular focus on the role of policy in stimulating (or preventing) innovation.