1. Challenge driven innovation
What will the Nordic business environment look like in the future?
5-6 March 2013, Stockholm
Jari Romanainen
5 March 2013
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2. 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
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3. 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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4. 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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5. Conceptual 3-step approach to CDI
Step 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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6. Conceptual 3-step approach to CDI
Step 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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7. Conceptual 3-step approach to CDI
Step 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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8. 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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9. Experiences of CDI and systemic policies
Healthcare 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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10. Experiences of CDI and systemic policies
Growth 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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11. Finnish Ecosystem for Innovative SMEs
Identifying Identifying needs
opportunities Societal challenges
”Product Track”->proactive measures targeting inventors
Ideas ”Growth Track” Lead Markets
Spin-offs from large companies
IKK, TUTL Public procurement
Entrepreneuship
education Demand
Competences Innovative SME Markets
Customers
Vigo
YIE funding Venture capital
Business angels
Public pre-seed (funds, international investors)
and seed equity
Money funding Crowd funding Growth funding
Fiscal incentives Markets for early stage
(investors, companies) investments
Entrepreneuship culture General business environment
(attitudes) (fiscal, regulatory)
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12. 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 DM 01-2013 Copyright © Tekes