In­no­va­tion: how can we make it hap­pen?

How can the govern­ment en­cour­age in­no­va­tions with­out dis­tort­ing com­pe­ti­tion? By cre­at­ing a stronger link be­tween busi­ness and re­search, writes An­dré Kudel­ski, en­tre­pre­neur and pres­i­dent of In­no­su­isse, who is no stranger to ei­ther.

Bulletin - - Contents -

Link­ing busi­ness and re­search al­lows new things to emerge.

We live in a glob­al­ized and highly net­worked world. When the topic is in­no­va­tion, think­ing only in terms of re­gional cat­e­gories is no longer enough. The key ques­tion for coun­tries is not only whether in­di­vid­ual busi­nesses can be in­no­va­tive, but also what re­turn on in­vest­ment can be gen­er­ated at a na­tional level from the funds that are di­rectly or in­di­rectly spent on pro­mot­ing in­no­va­tion.

For all in­tents and pur­poses, what we are see­ing right now is an in­no­va­tion arms war. For many coun­tries, this is among their top pri­or­i­ties. The rapid growth of pri­vate or pub­lic-sec­tor in­vest­ments made in some coun­tries is, in turn, forc­ing com­peti­tors to in­crease their own spend­ing on in­no­va­tions in or­der to main­tain a bal­ance.

But such a mas­sive in­fu­sion of cap­i­tal does not solve all of the prob­lems. Every govern­ment in­ter­ven­tion dis­torts com­pe­ti­tion, at the prod­uct level as well as in terms of the abil­ity of com­pa­nies to at­tract ta­lent. There­fore, it is crit­i­cal that govern­ment in­volve­ment re­spects the over­all well-be­ing of the coun­try and its econ­omy and does not ar­bi­trar­ily dis­tort com­pe­ti­tion.

FLEX­I­BLE SMES, TOP- NOTCH RE­SEARCH In Switzer­land, there are two es­sen­tial as­pects to in­no­va­tion pol­icy that have to be taken into ac­count.

The first is the coun­try’s eco­nomic struc­ture, which is based pri­mar­ily on small and medium-sized com­pa­nies. SMES rep­re­sent a sig­nif­i­cant part of our gross do­mes­tic prod­uct, they

are our most im­por­tant em­ployer and, for the most part, they are able to adapt quickly to eco­nomic de­vel­op­ments.

The sec­ond as­pect is Switzer­land’s de facto sta­tus as an aca­demic su­per­power. Not so much due to the ab­so­lute size but be­cause of the qual­ity of its uni­ver­si­ties and re­search in­sti­tutes, which are among the best in the world. Shar­ing these re­search find­ings with com­pa­nies – SMES most of all – rep­re­sents a gen­uine op­por­tu­nity for our coun­try.

And yet we have to be more prag­matic when it comes to our abil­ity to trans­fer this re­search and to do so more quickly than the rest. In fact, if you look at the in­no­va­tions achieved on the other side of the At­lantic over the last few decades, these are of­ten based on re­search find­ings de­vel­oped in Europe. There­fore, it is crit­i­cal that our coun­try and its busi­nesses ben­e­fit from the re­search tak­ing place here in our col­leges and uni­ver­si­ties.

In­noINNOSUISSE AS A CAT­A­LYST This is the think­ing be­hind In­no­su­isse, the Swiss In­no­va­tion Agency. One of our main re­spon­si­bil­i­ties is help­ing busi­nesses, most of all SMES, to get in­no­va­tive projects up and run­ning by giv­ing them ac­cess to the re­search tak­ing place at the uni­ver­si­ties.

In­no­su­isse fa­cil­i­tates this co­op­er­a­tion and con­trib­utes to the fi­nanc­ing of such projects (see chart on page 46), as­sum­ing up to 50 per­cent of the costs. How­ever, its in­volve­ment is lim­ited to project costs in­curred at the re­search in­sti­tutes at the uni­ver­si­ties. There are those who lament the law­mak­ers’ de­ci­sion lim­it­ing our in­volve­ment to uni­ver­si­ties and pub­lic re­search fa­cil­i­ties. Yet, it is not the task of In­no­su­isse to sub­si­dize pri­vate-sec­tor busi­nesses. Rather, we aim to cre­ate an in­cen­tive for aca­demic re­search in­sti­tutes so that they have a rea­son to fac­tor in the needs and re­quire­ments of the SMES in the work that they do.

In this re­gard, In­no­su­isse sees it­self as a cat­a­lyst to stim­u­late the uni­ver­sity sec­tor, pro­vid­ing ad­di­tional fund­ing and kin­dling its in­ter­est for the eco­nomic im­pact of the re­search. With­out a doubt, In­no­su­isse’s in­ter­ven­tion model – aimed at stim­u­lat­ing col­lab­o­ra­tion be­tween busi­ness and uni­ver­sity re­search – is more ef­fi­cient than giv­ing the money only to busi­nesses. That doesn’t mean that com­ple­men­tary mod­els aimed only at ben­e­fit­ing busi­nesses can­not be con­ducive as well.

For in­stance, the govern­ment plays a key role in fund­ing risky but promis­ing in­no­va­tions. The pri­vate sec­tor is not al­ways able to fi­nance projects like these, as it is fre­quently fo­cused on short-term re­turns on in­vest­ment. And yet these kinds of in­no­va­tions are crit­i­cal for our coun­try’s fu­ture. The govern­ment can and must play an im­por­tant role here, one that ex­tends into an area be­yond the frame­work that the law­mak­ers have fore­seen to date.

CAL­CU­LATED RISK MAN­AGE­MENT An­other as­pect to be con­sid­ered in in­no­va­tion pol­icy is cal­cu­lated risk man­age­ment. Peo­ple are will­ing to ac­cept a rel­a­tively mod­est re­turn on a lowrisk project. How­ever, there are in­vest­ments that have an ex­tra­or­di­nary po­ten­tial for re­turns should they suc­ceed. Pre­cisely such projects also tend to be es­pe­cially risky, whether that risk is re­lated to tech­nol­ogy or the many un­cer­tain­ties as­so­ci­ated with the devel­op­ment of the mar­ket. Fund­ing projects like these is es­sen­tial be­cause it is the only way to help such am­bi­tious projects suc­ceed rather than re­gret­ting the ones that failed.

Sooner or later, those un­will­ing to take on risk in or­der to suc­ceed will be passed by and will have to ad­mit to tak­ing a risk that they just couldn’t af­ford. This prin­ci­ple ap­plies to both in­di­vid­u­als and busi­nesses – and to coun­tries as well.

An­dré Kudel­ski ( 58) is the pres­i­dent of In­no­su­isse, the Swiss In­no­va­tion Agency. In­no­su­isse dis­trib­uted 203.2 mil­lion Swiss francs in grants in 2017. An­dré Kudel­ski, an en­gi­neer, is also the CEO and Chair­man of the Board of Di­rec­tors of the Kudel­ski Group, a tech­nol­ogy com­pany with rev­enue of one bil­lion francs (2017).

As the bank for en­trepreneurs, Credit Suisse is in­volved in Switzer­land’s in­no­va­tive land­scape in a num­ber of ways, among them as co-founder of the Swiss En­trepreneurs Foun­da­tion (Swis­sef). Swis­sef, which re­lies ex­clu­sively on pri­vate funds, is un­der the pa­tron­age of Fed­eral Coun­cil­lor Jo­hann Schnei­der-am­mann. Its aim is to pro­vide sup­port to start-ups and en­trepreneur­ship in Switzer­land and to im­prove the ba­sic con­di­tions for the com­mer­cial­iza­tion of in­no­va­tive tech­nolo­gies. After com­ple­tion of the ap­proval process, at least 250 mil­lion Swiss francs will be raised for the fund be­hind this. The first in­vest­ments in young busi­nesses are planned for the first half of 2019. swis­sef. ch

Those not will­ing to take on risk will be passed by.

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