Ideas and money alone won't get us there...

Why a joined-up, total system for innovation is what Scotland needs now

Eureka!Europe has proudly contributed thoughtful, evidence-based insights and ideas to the Scottish Government's 2022 Innovation Strategy consultation.

Like every carefully crafted tartan cloth, the fabric of Scotland's innovation system needs to be thought-out and joined up. You can't start weaving without a plan.

As a business working with innovative organisations across the UK, Europe and Middle East, we appreciate the many challenges of bringing about lasting change in an innovation culture. There is no quick fix; any worthwhile transformation may take months or years.

Scotland is on its own innovation and entrepreneurship journey, with economic growth as the measure of success.

A few weeks ago we were encouraged by colleagues in Scottish Government to make a contribution to the open consultation on the country's innovation strategy. Part of the homework was reading the detailed Economic Evidence Paper, issued by the office of the economic advisor.

We found the questions in the consultation document clear, thoughtful and provocative. We focused on those questions that highlighted the lack of an overall innovation system, which is an issue that crosses over sectors and technologies.

Our final submission-in-full also turned out to be a really useful manifesto of what the Eureka!Europe team believes about evidence-based innovation.

Here are the highlights from our executive summary:

Businesses need to recognise the need to innovate and want to grow.

This is especially true for the SMEs that make up 90+% of the Scottish economy, and who provide most of the job growth. However, it must be recognised that a proportion of these businesses legitimately do not want to grow. Therefore, the focus of the Scottish Government’s effort and resources needs to be on their ‘ambivalent’ and ‘ambitious’ SME peers, the early adopters and the willing.

There are effective parts of the Scottish innovation and entrepreneurial ecosystem, but there is no overarching innovation system design

At the moment, the many parts are being individually optimised (funded, improved, resourced, managed). A ‘total system’ redesign is required, with defined sub-systems that include: Education, Alignment, Collaboration, Validation Testing, Business Opportunity Recommendation, Funding and Intellectual Property. Existing sub-systems such as Research can be integrated and adapted where required, ensuring the overall system goal of economic growth can be realised.

Academia and Business collaboration is most effective when the working relationships are facilitated by skilled third parties

Advising on the initial ‘fit’ of know-how (academia) and requirements (business), these 'guides' provide continuity throughout the innovation project and across its various phases. Importantly, they also minimise the interfaces and hand-off points between government agencies and other service providers.

A combination of money, mentorship, and skills development drives better return on investment.

Investing a portion of start-up / scale-up funding in innovation and entrepreneurial capability building means that the money works harder; creating internal know-how allows entrepreneurs to ‘try again’ if their first ideas fail and allows successful SMEs to repeat their success with new services, products or business models in the future. Supporting and coordinating the entrepreneurial journey requires skilled innovation facilitators, who know how to make effective use of Scotland’s total innovation system.

Change the funding imbalance between Higher Education R&D (well-funded) and Business R&D (under-invested).

A successful and sustainable innovation system allocates 80-90% of the innovation budget on the development and delivery of the innovation. With clearly defined Idea Creation and Validation Testing sub-systems at the front end of innovation, research shows the odds of innovation success are increased by 250%, with most of the budget available for commercialisation.

We've backed up our thinking with references and hard data. If the ideas in our submission have sparked questions or fresh thinking - get in touch connect@eureka1europe.com .

📝 READ OUR FULL SUBMISSION

What does an Innovation Culture need?

An Innovation Operating System is the Rock that aligns an organisation and it's people with Leaderships Mission for Innovation.

For a Business to function and grow sustainably it must have a series of Operating Systems.

A Sales Operating System with Aims and Measures to sell products and services to Customers.

A Manufacturing Operating System with Aims and Measures to make Products and Services for Customers.

A Supply Chain Operating System with Aims and Measures to get Products and Services to the Customer.

A Finance Operating System is a System with Aims and Measures to maintain solvency and meet legislative requirements.

The need for such Systems is clearly understood. They are documented, followed and used to measure performance and make improvements.

But what about an Innovation Operating System?

Surely to have an Innovation Culture you must have a System with Aims and Measures to innovate? In common with the other Business Operating Systems it should be documented, followed and used to measure performance and make improvements. Otherwise, how do people know how to achieve good, let alone great, innovation?

Research commissioned by the US Department of Commerce after the 2008 Financial Crisis found that Companies with an Innovation Operating System grew their profitability by 96% compared to Companies without an Innovation Operating system where it grew by a mere 4%. And the differences are as huge in sales of new products/services, sales to new customers and employee growth.

An Innovation Operating System that is visible, documented and understood is the Rock that protects People and Companies against change.

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Do finance professionals count - when it comes to organisational innovation?

Are finance professionals key players or just cheerleaders on the fringes of innovation. Does it matter...?

Help us find answers to this question! Click on this image 👆🏻to take our 5-minute survey.

My partners and I at Eureka!Europe, and our colleagues at AICPA-CIMA, are intrigued by the role of finance professionals in enabling innovation in organisations.

In our experience, the process and practice of bringing to market successful new business models, products and services is a team sport. Rather than the preserve of a few clever individuals in a back office somewhere, effective and sustained innovation is driven by collaboration, diversity and informed participation.

Rebecca McCaffry, in her article, 'Risk and Innovation - Polar Opposites' (CGMA) quickly gets to the heart of challenge when it comes to the role of finance professionals in innovation: "We don't like failure, losses, negative net present value (NPV), unbalanced balance sheets..." It's a professional culture thing; a preference for precision, certainty, and facts. Perhaps it's a 'right-brain preference' thing...

"[As finance professionals] we don't like failure, losses, negative NPVs, unbalanced balance sheets..."

But beyond the territory of cliches and stereotypes lies the simple reality that finance professionals hold privileged positions in organisations. They have excellent analytical and problem-solving skills. Paraphrasing AICPA's Dr Martin Farrar in a recent report, finance professionals are at the heart of organisational governance, strategy, risk management and business performance. They usually own the processes, systems, and management information that control change and measure value.

So, does this particular community of organisational influencers impact the process and practice of effective innovation? How do they interact with innovation currently, what role might they play, and what challenges do they face in doing so?

We suspect that CFOs, FDs, Management Accountants, and Commercial Directors are often left out of the innovation process. Or perhaps they're engaged only when it comes to asking for money to fund an innovation project; usually, when it's too late for them to help shape the assumptions and thinking at the heart of the concept.

This is a frustrating experience for everyone involved, and the 'big idea' loses value along the way.

Gate-keeper behaviours can erode innovation value by an average of 50%...

In fact, research from the Innovation Engineering Institute shows that reactive, 'gate-keeper' behaviours and corporate processes (focused more on risk elimination than value creation) can erode innovation by an average of 50%...

That's how big and bold ideas become boring 'safe bets'… It doesn't have to be that way.

So how can finance professionals help? What role should they play in innovation as value creation? What innovation skills might they need?

What do you think? Share your experience and help us get smarter by contributing to our 5-minute survey ... click on the button below 👇🏻

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