Innovation’s New Champion

By: Haydn Shaughnessy

Policy makers in the USA and EU are looking at how they can design innovation programmes that support global competitiveness. In this series we are looking at Europe’s new ‘Innovation Union’, which reflects the new growing significance of innovation in Government policy. We’ll be following up with more on US and Asian innovation thinking. In Part II of our Innovation Union series, we talked with Peter Droell, head of innovation at the European Commission.

Innovation was an important part of the Lisbon objectives (2001 – 2010), the policy framework that should have given Europe global leadership in the knowledge economy. Now acknowledged as failing to reach its ambitious targets, the EU is embarking on a new strategy, The Innovation Union, where innovation is the most important plank in the EU drive for competitiveness and employment growth.

That sounds good in principle but innovation can also be very abstract and theoretical. It raises questions also about what can be planned at the centre for an activity that is driven by individual decision making.

Can the EU strike the right balance between cohesive policy making and an activity that is highly fragmentary? And does it really understand the practice of innovation management?

Peter Droell’s department at the European Commission was responsible for drawing up the Innovation Union policy and now for testing its main features out in the market.

I started by asking him what has changed since the Lisbon Strategy  – are we facing different types of challenges or a different scale of challenge?

— Well, it’s both. And there are similar challenges as well as bigger ones. There is the overall challenge of prosperity and growth, which was also part of the Lisbon target; and now there is the challenge of climate change which was becoming evident when Lisbon was designed but now we know the energy challenges much better. How we understand innovation has also changed, how we understand new forms of innovation. User-driven innovation, service innovation, social innovation have all become more important.

— And if you look at China there is now the same intensity of innovation as the EU. That too is a change.

— It’s not just a challenge though, it is also an opportunity. It is a very positive development and it means the EU and China are better able to address challenges together. We have many initiatives with China particularly in the field of science cooperation and we are looking at how we can extend this to innovation we help European companies in China, for example with a help desk on IP.

— To increase collaboration with China, Russia, India, Brazil we need to identify common interests, and organise policy dialogues on how the innovation system works in each region to define actions of joint interest, be it clusters or other fields.

So, some of the same challenges, some new challenges and new opportunities. Is the Innovation Union policy though a fundamental change in how the EU addresses these challenges, moving it away from science and technology development ?

— I wouldn’t call it a fundamental change but a step change. It is a change towards addressing societal factors. It is the first time that we have defined an overall concept for an Innovation System that involves aspects such as skills, knowledge creation, an internal market for innovation, social and territorial cohesion and international cooperation.

It is the first time that we have defined an overall concept for an Innovation System that involves aspects such as skills, knowledge creation, an internal market for innovation, social and territorial cohesion and international cooperation.

— There are also a number of entirely new initiatives, for instance the innovation partnerships bringing together resources at the EU, national, and regional levels to deliver breakthrough solutions as well as demand and supply side measures.

— On top of this, we are also using all the instruments we have used in the past such as standards and IP.

When the Commission was drawing up the Innovation Union did it factor in the profession of innovation management, the need for skills there?

— Not particularly in relation to innovation management but we have thought of this around a broader set of skills – entrepreneurial culture, e-skills for example. And we are testing the possibility of a new form of University ranking, one that would include innovation along with science quality, industry-academic relations, inter-disciplinary aspects, those types of measures that don’t currently get measured in University rankings.

Is there are risk here that we are trying to create a system for an activity that is essentially ad hoc?

— I don’t think there is a risk that we are in a situation where the innovation system would become a straight jacket. We know innovation depends on many different factors, all  described in the many hundreds of books each trying to say what it is and how it comes about: open, serendipitous, etc. However, the companies we talk to complain about one major issue – over-regulation. Then comes access to funding.

— Over-regulation is really specific to Europe. It is seen as an old problem and there is a lot of truth in that. We are working to overcome it. But we also need to recognise that regulation can be a big driver of innovation. This is particularly the case in the environmental arena. If you think of regulations around Co2 emissions, light bulbs, eco-design and energy relevant products.

Over-regulation is really specific to Europe. It is seen as an old problem and there is a lot of truth in that. We are working to overcome it. But we also need to recognise that regulation can be a big driver of innovation.

The policy papers talk about applying a ‘think small’ approach to innovation, in the same context as public-private partnerships which traditionally have involved big players on each side of the equation. What does the EU mean by ‘think small?’

— This is based on an economic structure where two-thirds of EU economic power lies with SMEs and employment also comes from there, so we have to look to the specific needs of small companies but also of micro-companies. We have to do this in any policy we undertake and ask what does it mean for smaller companies, for example with accessibility to standards and protection of intellectual property.

Will the EU also be thinking small in relation to access to finance?

— Yes. If we talk about SMEs it is very difficult to ensure they get fast, tailor-made support directly from Brussels. We do this in research and development where the needs of small companies are dealt with in the Framework programmes but for supporting SMEs with loan guarantees and venture capitalist we work with the European Investment Fund and commercial banks, in other words via intermediaries. It means some of the beneficiaries don’t know that the support comes from the EU which is good in that they get support but perhaps bad in that we aren’t able to highlight the EU’s role.

Over the past five to ten years we’ve seen the funding requirements of start-ups decline rapidly so that for really quite small sums of money people can start up a new company and get to market. Can the EU cater for this type of funding?

— I personally am a very strong believer in micro-finance. We have some micro-finance initiatives under the structural funds and some member states also have initiatives, though it is not the case in all member states. And it is not easy to implement. We have not specifically included micro-finance  in the Innovation Union because it is already happening elsewhere. The major problem though seems to be a substantial lack of VC funding or loan guarantees inn the growth phase of a company and this is where we put the emphasis.

Readers of Innovation Management magazine might be entrepreneurs, or be involved in large companies of the public sector.  Might the EU be able to assist in the development of this as a professional cadre?

— I think it is very important. In ten years from now we will have specialised courses and faculty in innovation management. We have to distinguish what we can do and what is an EU competence. In education our competence is limited. We can’t create an EU curriculum for example. However, we have launched an EU Institute of Innovation and Technology and the knowledge and innovation communities have recognised a huge need, and have created summer schools where innovation management is included. This is something we can do.

As the Commission launches the Innovation Union is there a way that the innovation management profession can begin to interact with the initiative?

— Yes. Interaction is always good and we are open for that. I think one task is to improve the framework and create space for innovation that includes management. Innovation is the centre of Europe’s engine for growth and creating the future we aspire to. They have a key role and perhaps have been underestimated. I am very optimistic about Europe. It is a leading region and this does not come automatically. It comes from good governance and from people who create companies and do social  innovation.

— Social innovation is very important and we have a lot of creativity at the community level where there are pressing needs. People find ways of dealing with these, often the most unexpected ways.

— All this happens on a daily basis but is not scaled up. Some big companies have found that in these projects there are many ways to identify future needs. So we will provide a platform for scaling these and there may be a way also of connecting innovation management. It could be a very strong link to include innovation management in this field.

By Haydn Shaughnessy