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

SMEs – no risk, no reward?

Behaviour and Motivation of Businesses in Scotland (Ipsos Mori 2018)

Research conducted by Ipsos Mori across Small and Medium sized Enterprises (SMEs) in Scotland was commissioned by the Scottish Government in 2018 because at the time

• Scotland produced only half as many scaling start-ups versus the rest of UK.

• Scotland was below the EU average for medium sized enterprises engaging in innovative behaviours.

The Research grouped businesses into three categories: Growth Averse (don’t want to grow), Ambivalent (want to grow little and slowly) and Ambitious (actively want to grow). As you can see from the diagram above

- Growth Averse prioritise lifestyle choices

- Growth Ambivalent fear risk

- Growth Ambitious want rewards

Across the piece, however, SMEs cited a lack of skills, a lack of time and resource, financial constraints and uncertainty about the future as barriers to future growth.

That is perhaps why when we move forward to Scotland in 2021 and look at the National Performance Framework Indicators we see that the number of registered businesses per 10,000 adults has remained fairly static around 390 since 2016 and the number of High Growth businesses remains flat at 1.1% over the same period.

In addition, the percentage of innovative businesses dropped from 45% in 2017 survey to 32.2% in 2019, which is the latest data available.

Remember, most of this data is pre-covid. It may be even worse now!

What’s happening is that the very people the support structure in Scotland is set up to help don’t have the time, money or inclination to take what they see as unnecessary risks to attain the rewards from growth.

That is quite a conundrum. How do you solve it?

Reduce Risk and Increase Reward

What if there was a proven system for innovation that could reduce risk and increase reward for SMEs who were not Growth Averse?

There is! It is known as Innovation Engineering, and has been used by tens of thousands of SMEs to deliver successful innovations. That is not an opinion or an empty boast. It is simply a fact, based on freely available data.

The Innovation Engineering Institute has the only data base in the world with over £15 billion pounds worth of innovations in its pipeline as evidence. It has proven tools and techniques embedded in a total system for innovation guaranteed to reduce risk. Their own benchmarking comparisons with conventional business processes show a 10x greater innovation success rate alongside a 72% increase in value and 6x faster rate to market.

Significant rewards await any Growth Ambivalent or Growth Ambitious SME that has the vision to embed this system in their business. The team at Eureka!Europe stands ready to work with any SMEs that want to make that vision a reality

Create Time and Space

Of course, creating the time and space for SMEs to learn and apply innovation skills is a different kind of challenge.

One which requires the combined efforts of partners across the Scottish ecosystem to address.

My Call to Action to those public and private stakeholders is simple

- Read the Scottish Government Research that has been conducted with SMEs here.

- Look at the National Performance Framework Indicators to see the impact here.

- Collaborate NOW, with us to drive sustainable economic growth for Scotland here.

Surely the time is nigh for Scotland to realise its full innovation potential. Through Innovation Engineering an opportunity exists to bring about the change that has eluded us for so long.

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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