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.
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.