Making Innovation Flourish

The failure of market failure: Towards a 21st century Keynesianism

This morning saw the launch of a new NESTA provocation by Will Hutton and Philippe Schneider on The Failure of Market Failure: Towards a 21st century Keynesianism.  The provocation updates the age-old debate about the efficacy of state intervention versus laissez faire, and in so doing is fiercely critical of economic frameworks used to inform policymaking in the UK. The primacy of the concept of market failure in policymaking - the view that state intervention can only be justified when it can be demonstrated that free markets cannot do better - comes in for particular criticism.
 
The provocation updates the debate in two ways: first, by reference to developments in institutional economics, psychology and behavioural economics which the authors see as jarring with the behavioural and motivational assumptions traditionally made by policymakers; and second, by interpreting the current financial crisis as prima facie evidence that markets need government ('markets fail more often than they do not'). If the UK is to successfully innovate, the authors argue, policymakers must recognise the importance of the government and the private sector working together, not falsely pitch them at opposite sides.
 
At this morning's policy breakfast to launch the Provocation, Will Hutton argued that a number of crucial policy interventions in the UK have been sacrificed at the alter of market failures. For those working on policies to support future innovation and creativity, where well-defined market failures are by their nature difficult to anticipate and evidence, this is a sobering thought. Will finished his comments with a call to the British academic economics profession among others to respond to the thesis set out in his Provocation. Going ahead NESTA looks forward to playing its role in facilitating the debate.

The fallacy of localised innovation systems

This week we launch two new NPRU reports stemming from the Innovation and Place research programme. One report focuses on the new forms of globalisation characterised by the entrants of new players using new tools to engage in global business, and another focuses on the absorptive capacity of UK nations and regions. Initially, we became interested in the two topics of globalisation and local absorptive capacity from an Emerging Markets perspective, the rise of the BRICS and what does that mean for the UK. While we did cover these grounds pretty well in the globalisation report, the most provocative messages came from the absorptive capacity report (Innovation by Adoption). In this report we came to the following conclusions:

• Knowledge exploitation happens through multiples routes. The routes to moving a new idea, technique or discovery from its birth place to the market are diverse. Exploitation does not always happen through production lines co-located between a university and a firm, but can occur through multiple pipelines of deployment. A new technique can be learnt through formal and informal networks, by a local professor, expert, a firm or a university. Utlimately, a new technique will diffuse widely and become a known practice to a wide sprectrum of users who will pick it up through formal or informal training.

• Creation and exploitation do not always have to be co-located. There is no point for cities, regions, and sometimes not even countries to try create all the components of an innovation system within their boundaries. If your city or region is good at popping out new discoveries and ideas, but bad at exploiting them locally, then your best most optimal option is to team up with another city, region, or foreign country to help you exploit your discoveries and ideas at a massive scale.

• New value is, more often than not, a result of a successful adoption-exploitation process rather than creation-exploitation. The ultimate benefactors of one innovation will always be the wider users who will create more value from it than the original creators. Put simply, you don't need to have invented the computer to exploit it for creating new value for yourself.

• Innovation policies should support the capacities needed to be competitive within global value chains. The obsession with creating all encompassing national and regional innovation systems that seek to function as localised factories of innovation are doomed to failure. It has not worked in the past and there are no reasons to believe that they will work in the future. Instead focus on what you can do best within an innovation system that is intrinsically global.

Tim Berners-Lee on the future of the web

Just finished listening to Jonathan Freedland interviewing Sir Tim Berners-Lee live on stage at the Innovation Edge conference.  It's always odd seeing your heroes, and for once, he didn't disappoint.  TBL was charming, self-effacing, and more importantly, made interesting and intelligent points on the future of the web.  NESTA has helped fund the Web Science Research Initiative which he has set up, and he outlined most of his reasons for setting this up in an all-too brief video linkup.

What lessons can be learnt from the way he developed the web?
You need to give people space and time to find solutions.  Give them a chance to try and see the bigger picture, to find the generalised solution where possible.  And if you are asking or funding someone to develop a solution then don't micromanage them.  Specifically, if you tell them what to produce in too much detail  you'll end up with the same old ideas you had. 

And bear in mind that the end destination can come from left field - he quotes a possibly apocryphal story of Einstein's 'if we knew what we were doing it wouldn't be called research.'.

What are his hopes and fears for the 'adolescence of the web'?
Berners-Lee was very keen to point out the distinction between the people who use the web (and therefore the society that this creates or reflects) and the technology, or 'substrate' as he calls it, that underpins the web. 

Fundamentally, he sees the web as 'humanity interacting' or more prosaically, as 'humanity connected'.  Technology should not get in the way or dominate.  So, the web should be neutral, enabling new ways of democracy, new ways of doing science etc...
 
What is the rationale behind web science?
"We found that people doing interesting things tended to fall between various stools - computer science, psychology, economics etc.  The web needs to be thought of less as a series of connected computers to 'humanity connected'.  There are more web pages out there than neurons in your brain.   It's a very big system - one which we rely on - and it is not obvious what its properties are?   Will the blogosphere keep a check on the press?  Or will the blogosphere turn into a rumour mill and spread hatred etc - as part of a cultural revolution?
 
Is the web stable?  TBL is arguing that we need a science to understand this.  And we have a duty to understand it, so that we can take care of it.  He spoke of the unexpected or unintended effects of the micro leading the macro - eg ebay's role in driving down the prices of new items.

How fragile is the web?
Commenting on the 'megalapse' or the potential for the web to meltdown.  TBL argues it's more subtle threat than this.  Will the web be a force for the good?  The web may work fine but the society may not be one you want to live in, eg the use of email has arguably passed the tipping point of spam usage.

Is the future of innovation about collaboration?
The world is full of groups working and making their 'own language' .  The web should be making this more transparent and enabling more people to contribute.  Challenges in medical advances can only be done collaboratively, the problem is simply too big for an individual to keep in their head.  How does this work when one person's head has half the idea and if another has the other half.  How can the web help enable this solution?

Well, how can it?

*Update - podcast now online here

Part of the national character?

We're underway at the Innovation Edge.  There are thousands of people here - delegates, speakers and exhibitors.  There's a very real buzz around and it's a nice day to boot!

Chris Powell, our Chair, has set out the agenda for the day, looking to remind ourselves of the need for innovation in the first place, and to discuss where the leading edge of that innovation may be or take us.  In a broad overview of the state of innovation in the UK, he spoke of the ways that DIUS and DCMS are helping to embed innovation in the UK, and citing examples such as the Fairtrade Association of innovation in action.

Jonathan Kestenbaum, our CEO, has built on these themes by restating our mission - to improve both the capacity and climate of innovation in the UK.  He summarised it in three key areas:

• risk - NESTA is at it's best when it takes risks, experiments.  Innovation flourishes when there are a committed set of risk-takers in this country.
• the power of partnerships, collaborations.  In the diversity of disciplines, sectors and approaches comes real breakthroughs.  And it's not just us - there are a growing set of public sector, voluntary and other organisations driving this forward.
• a huge national appetite for doing things differently.  There is a common misconception that Britain has no appetite for innovation, which is simply not true.

Real innovation is not an elite activity the way it used to be - it's now part of the national character.  He left us with a quote from Bobby Kennedy - 'the future belongs to those with passion, with reason and with courage'.

Do you agree?  Is innovation now part of the British mind-set?  Do we have the right skills and attitudes, or are we on the way to develop these?

*Update - Podcasts are now being uploaded - first sessions are now online.

Preparing for the Innovation Edge

It's a little over 18 hours away from the start of our flagship conference at the Royal Festival Hall.  The organisation is buzzing, and there's a hive of activity going on making sure that the event is both an interesting, enjoyable and useful experience.

As Roland has already mentioned, we will be trying to capture a flavour of the day both on twitter and on this blog.  If you are blogging on the day, drop me a line or tag your content 'innovationedge' and I'll add you to the list.

I'm particularly curious to see how this kind of micro-blogging and backchannel will pan out with such a mixed audience.  Will it be just the social networks crowd participating?  Or will more of the policy and investments audience join in?  What lessons can we draw from this form of rapid-fire, informal, communications - and how does it relate to our other channels and methods of communication - will blogging reduce or magnify the impact of the reportage that will follow?  Are the blogerati looking forward to the same things I am?

I guess we all find out tomorrow....

Matt Rhodes at Freshnetworks is blogging the event as well

Preparing for the Future: preparing for the long-term by embracing the short-term

Young people do not seem to be under any illusions that the future working environment is going to be tough and that a job for life is no more.  This is borne out in research that we commissioned on young people’s perceptions of the future world of work and is also confirmed in our latest essay on how to equip young people for a rapidly changing world. 

In this article, 17-year-old Phil Croft argues that the future workplace is likely to be based on short-term contracts.  He puts forward some interesting suggestions for helping young people deal with this - from encouraging greater adaptability in students to facilitating more project-based work in schools.

For some students, more of an emphasis on applying their knowledge, rather than just acquiring it, is likely to improve their motivation for learning. Where the project-based learning is grounded in real challenges and dilemmas facing organisations, both learners and organisations can benefit.

We are working with Space Unlimited, a group that facilitates groups of young people to work on a particular problem posed by a company.  Space Unlimited has found that their programme provides skills development for the participating students and fresh insights for the companies.

Of course, I’m mindful that such schemes require time and resources to broker but surely the benefits outweigh this.  What do you think?

Preparing for the Future: A Generation of Mentees

Luke Skywalker knew how to be a good mentee and as a result, the whole universe was at his fingertips…..

In the second of our series on preparing young people for a rapidly changing world, entrepreneur Tom Hadfield highlights the importance of mentoring.

Tom argues that “the art of how to ask for advice from mentors, how to distil the key lessons and how to apply them to our own lives is one of the best kept secrets in education”.

This is a refreshingly novel idea. Effective mentoring benefits all parties involved. For the mentor, it provides a personal development opportunity. For young people, it encourages them to seek advice and guidance, and, as Richard Reeves argues in last week’s essay, to continually question. A successful mentoring relationship can provide young people with some of the skills likely to be needed to succeed in the future workplace, such as confidence, enquiry skills, reflection and flexibility.

Is the current education system the right environment for successful mentoring relationships to develop? Much support is given to training the mentor. But how do we support young people to ask the right questions in a environment which focuses on knowing the right answers? As always, I am keen to hear your views.

DIUS White Paper: Towards an Innovation Nation

Last summer, the Department for Innovation, Universities and Skills (DIUS) faced a significant challenge: it was a new department, charged with a wholly new responsibility, much of which depended on exerting influence across Whitehall.

The Innovation Nation White Paper demonstrates intellectual leadership, presents an ambitious new direction for UK innovation policy and lays out how the UK will keep track of its performance against this new framework. Carrying through the implications of its analysis to their full extent will be challenging for DIUS if it remains traditionally structured, and constant effort will be required to remain at the cutting edge of innovation policy.

As always, I’m keen to hear the thoughts of the NESTA community.

Making innovative places (part two - observations)

Continuing from yesterday's post - reflecting on the first NESTA Summit: Making Innovative Places, held on 12 December at NESTA's head office in London.  You can see videos of highlights from the event here.

I've tried to capture some of what I felt were the main lessons of the day - I'll post more next week.

1. History matters – James Simmie and Ron Martin from Oxford Brookes and Cambridge Universities respectively presented the interim findings of their research on path dependence.  Path dependence means that a region’s past industrial structure and performance will have a significant bearing on its future.  But like so many powerful theories, it sounds deceptively simple.  To put it in context, demonstrating this would mean thinking again (and ideally quite quickly) about cluster-creation policies and about the ‘real’ choices that cities and regions face when attempting to shape their futures.

Download the reports from the NESTA website

2. Innovation goes global – It’s always the way.  We staged a major conference about the criticality of thinking on a sub-central level about innovation policy and already the delegates were ahead of us.  Several pointed out that thinking smaller than the nation also meant automatically thinking larger than the nation too.  Firms and individuals increasingly have less respect for administrative boundaries, so why should innovators or, for that matter, innovation policy?  Luckily, our very own Sami Mahroum was at least one step ahead.  He is already talking to me about the international bent of his next research strand.

3. Don’t create, absorb!  Michael Kitson, James Simmie, Ron Martin and Paul Benneworth all addressed to various degrees the concept of ‘absorptive capacity’.  This is bedded in sound theory and masses of empirical observation – that many innovations that create value result from the identification, absorption and recombination of existing ones.  Taken to an extreme, one can imagine a highly innovative economy that creates no new knowledge but simply takes it from elsewhere, applies it to problems and creates value-generating solutions.  Thinking in these terms means thinking of universities not simply as producers of knowledge, nor as ‘transferors’ of technology, but as highways of international knowledge and homes to bright people who know where good ideas are.

Download the reports from the NESTA website

4. Leading in harmony – If it wasn’t obvious already, Richard Leese’s address at lunchtime proved that regions don’t lead themselves.  Paul Benneworth’s report took this observation to new analytical heights.  He identified not only a ‘regional innovation journey’ that stacked up remarkably robustly against the eleven case studies in his report and (by all accounts) the experience of the practitioners in the room.  His presentation was helped by his highly accessible 2x2 matrix which went on to describe four types of leadership styles through the analogy of musical groups – from a few leaders leading a lot of innovation actors (an orchestra) to lots of actors without any leadership (enthusiastic improvisational jazz).  I’m pleased that he stopped before he decided to characterise either the nations and regions of the UK and/or our leadership of this group of research projects.

Download Richard Leese's speech and Q&A (MP3) or watch them online.

Thoughts?

Making innovative places (part one)

Over the next few days I will be reflecting on the first NESTA Summit: Making Innovative Places. It was quite a day. Stephen Timms, Sir Richard Leese and AnnaLee Saxenian delivered keynote addresses and we launched three final reports, one interim report and one policy briefing. 

That all sounds very impressive but I said it then and I’ll say it again: the 90 delegates were collectively as impressive as the ‘big names’ and I hope that much of the value will live on in the connections made as much as the evidence heard and opinions formed.

‘Yesterday’ actually started on Tuesday. The Daily Telegraph picked up on a pre-publication copy of ‘Rural Innovation’ and extensively quoted Dr. Sami Mahroum, the NESTA Senior Policy Analyst who has driven our ‘place’ agenda.  In a significant article, Richard Tyler talked of a ‘new industrial revolution’ that was going ignored by central innovation policymaking. He wasn’t wrong.