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Innovation key to_competitiveness
 

Innovation key to_competitiveness

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  • To remain competitive, today’s companies need to do more than simply deliver products or services that are better or cheaper than those of their rivals. They must also add features, improve performance and reduce prices more quiclkly. They must be faster to launch new lines. If they want to grow, they may have to create entirely new markets. The real stars reinvent themselves – not once, but over and over again. The internet, which allows intangible information and ideas to be traded and exchanged instantly, across any distance, is the most recognisible symbol of today’s global, knowledge-driven economy. But the economic and social impacts – not just of the internet, but of technological advances in many areas, and the rapidly increasing knowledge content of all industries, and all jobs – go much wider than a few dot.com start-ups. They present challenging opportunities, and equally challenging threats, to firms of all sizes, in traditional as well as high-tech sectors who must respond to these challenges of globalisation and the knowledge-driven economy. In this context, innovation – the capacity to assimilate and convert new knowledge to improve productivity and to create new products and services – is of critical importance. Innovation plays a central role as an engine of growth in employment and competitiveness, and as a cornerstone of enterprise policy.
  • Competitiveness and prosperity will increasingly depend on knowledge generation and knowledge management.
  • The birth of new stars – innovative, high-growth companies emerge from critical masses of research, education and investment capacity. A critical mass of commercially oriented research expertise can attract industrial technology users. Such clusters draw investors and consultants, creating favourable conditions for the birth of fast-growing, high-tech companies, which in turn are a magnet for new talent and new money. When all components are linked, innovation is self-reinforcing. (Giulio Grata, Director of the European Commission’s Innovation Directorate) In systems such as Silicon Valley, the richness of the interactions between the players itself becomes a major feature of the business environment. Where talent, technology, ideas and money are all at hand, a culture of innovation is self-reinforcing. Deals can be done quickly, new companies are easily formed, and growth is often spectacular. It is in industrial clusters, concentrated geographically as well as sectorally, that such a virtuous circle is most easily established – allowing productive specialisation to flourish and sustain itself through the continuous upgrading of technologies and products.
  • To survive in the new competitive environment, no enterprise can afford to stand still. All have to be open to new ideas, new ways of working, new tools and equipment, and be able to absorb and benefit from them. A policy to enhance innovation must be present in a modern enterprise policy as one of its main components. Innovation is not a one-off event, but a continuing response to changing circumstances. Ideally, it doesn’t just solve a problem but creates new capacity, opening up opportunities for further innovation. SMEs need training to raise the level of their change management and innovation management skills.
  • It is speed and ease of access to information, above all, that will drive the knowledge-based economy. The lifeblood of any successful innovation system is communication and interaction – the direct and open links between people in companies and universities, in banks and patent offices, which speed the flow of human creativity. Innovation, the source of sustained advantage for most companies, depends upon the individual and collective expertise of employees. While individual creativity is important, exciting, and even critical to business, the creativity of groups is equally important. The creation of today’s complex systems of products and services requires the merging of knowledge from diverse national, disciplinary, and personal skill-based perspectives. Innovation – whether it be revealed in new products and services, new processes, or new organisational forms – is rarely an individual undertaking. Creative cooperation is critical. When a group of diverse individuals addresses a common challenge, each skilled person frames both the problem and its solution by applying mental schemata and patterns he or she understands best. In a well managed development process, these varying perspectives foster creative abrasion, intellectual conflict between diverse viewpoints producing energy that is channeled into new ideas and products. Thus, intellectually heterogeneous groups are more innovative than homogeneous ones. The diversity of information that functionally dissimilar individuals bring to the group improves performance in terms of creativity. In today’s environment of rapid change and technological discontinuity, the management of organisational knowledge is fundamental to effective performance. However, traditional organisational roles typically don’t address either knowledge management or the cross-functional, cross organisational process which it is created, shared, and applied. To meet the challenges of the rapidly changing world, organisations and companies must create new organisational roles to support the knowledge pipeline process. Creating competitive advantage today requires developing and leveraging organisational knowledge. Leading-edge firms consider their knowledge to be a strategic asset, and actively and explicitely manage it as such. Effective knowledge management also demands effective communication.
  • Experts interviewed under the survey were asked a question : “What are the three most critical issues for entrepreneurship in your country?” All the issues raised during the interviews have been classified and a count made of how often they were mentioned. The nine entrepreneurial framework conditions were ranked on the basis of the frequency with which an issue was raised: Government policies Education and training Financial support Cultural and Social Issues Research and Development Transfer Government Programmes Commercial Professional Infrastructure Access to Physical Infrastructure Internal Market Ease of Entry The number of times each of the nine topics was mentioned was used to determine the emphasis among experts within each country.
  • Technology and business incubators can be considered akin to each other. The major distinction is that the latter cater to a wide range of occupants, while the former primarily focusses on nurturing hi-tech start-ups. According to OECD interpretation,technology incubators present a technology-oriented variant on the business incubator theme. Technology incubators take a range of institutional forms operating as integrated, or sometimes separate organisations. In common with business incubators, generally the range of stakeholders and objectives associated with technology incubators is diverse. There is a considerable similarity in the type of services offered by business and technology incubators. However, technology incubators more frequently provide technology related services and support (source: OECD, “Business Incubators: International Case Studies”, 1999). The term “technology business incubator (TBI)” is becoming popular at present to emphasise both technology commercialisation and business development nature of the services provided to tenants.
  • TBIs are generally linked to technical universities and have access to their expertise and other knowledge resources. They are often established within a technology park or some other source/s of technological expertise and support. TBIs require pro-active management and mentoring staff with specific expertise related to development of technology-growth businesses. It would include knowledge of technological market developments, proficiency in intellectual property rights and information technology applications, and familiarity with practices of risk finance rising for technology-based ventures. Finally, clients of TBIs may require some specific requirements or equipment such as high speed and/or capacity computing or telecom equipment, rapid prototyping machines, or testing equipment.
  • The nature of the ‘new’ economy has profound implications for the way the new business is financed. High-tech start-ups go through multiple funding rounds. Equity financing conventionally follows a trajectory from friends & family, business angels, through venture capital (VC), to an initial public offering (IPO). Venture capital cannot finance innovation on its own. Too many VC funds remain unwilling to invest in high-tech start-ups in the early stage, often because they lack the investment appraisal capacity to act as ‘first investor’. To be fully effective, venture capital must form part of an unbroken investment chain. Dynamic innovation demands an unbroken financing chain, from seed capital to stock market. Development of networks of business angels as sources of pre-revenue seed funding and management guidance is essential and will encourage VC funds to make more early-stage investments. Business angels are wealthy individual investors - usually, people who have made their own money as entrepreneurs. Better equipped than banks and most capital funds to assess the potential of very young business, they contribute not only equity but also much needed business expertise, offering company founders hands-on support and advise. Angels bridge the gap between the personal savings of entrepreneurs and their families and friends - often an important source of seed capital - and the ‘second round’ financing which venture capitalists are able to offer. In US they have helped to fuel the remarkable self-sustaining innovation and economic growth of the past decade by recycling entrepreneurial wealth and talent locally and regionally. In Europe, Business Angel Networks (BANs), generally funded by public money, have proved to be remarkably effective - raising awareness among potential investors, providing and independent and confidential matching service, and training entrepreneurs to prepare and present the information that angels will require. BANs stimulate the flow of informal risk capital to start-ups with high growth potential. To ensure seamless integration of financing through the life cycle of a company, good relations between the business angel and VC communities are essential. Stock markets for high growth companies also stimulates venture capital activity by offering an ‘exit route’ of flotation. They offer a means for venture capital funds to realise a return on their investment in new companies.
  • “ Knowledge-based technology-led companies have special characteristics. First, they are harder to assess as investment opportunities than conventional firms, due to the speed of technological development and the central role of people and ideas. Second, costs tend to be front-loaded. In the fields of biotechnology and electronic commerce, for example, it is necessary to invest heavily in development long before any revenues are generated. Third, growth capital is required at an early stage, in order to access global markets from the outset - retained profit is seldom sufficient to finance growth. All this makes debt financing totally inappropriate. Banks are unwilling to lend against intangible assets and are not equipped to assess these new business models, while the companies do not have sufficient revenues to service loans. A knowledge-based economy needs equity finance”. (Prof. Colin Mason, University of Southampton) According to the Global Entrepreneurship Monitor’s (GEM) “2000 Executive Report” (http://www.entreworld.org/GEM2000) informal private investments in emerging and new businesses dwarf the more formal venture capital outlays. For the United States alone, GEM estimates total private investments in entrepreneurial companies in 1999 to be more than US$ 63 billion – far more than the US$ 46 billion the professional venture capital industry invested during the same period in start-ups and growing firms.
  • As a general rule, venture capitalists expect three out of every ten companies they invest in to go bankrupt and three or four to join the ‘living dead’ - surviving, but not successfully enough to be floated or sold. The remaining three or four become quoted companies or are sold on, providing a multi-fold return on investment. One of them will be ‘the home run’ - a company that generates a return on investment equivalent to the whole capital of the fund.
  • Venture capital is money invested by investment professionals in fast growing companies that have the potential to be significant economic leaders in their market. Professional investors provide the capital required at important stages of the company development in exchange for a commensurate equity stake in the company. • Successful startups are hard to identify • The team is critical to the business • 90% of startups which VCs pick actually fail • Most ideas never become large successes Source: Artemis Ventures Business Environment
  • Members of the Web communities would have access to the following services: Sharing of knowledge and ideas Posting of business opportunities Access to community-specific online news, databanks and support services Matching of prospective partners File sharing (with possibility of on-line tracked correction) Building of the project team Access to external services Project preparation and management (with different level of access given to the project team and external experts) Expert forums (with E-mail notification about the responses received) Discussion rooms (with E-mail notification about the responses received) Chat rooms (general and project specific) Possibility of building personal/corporate sites User-customized work space Administration and reporting tools

Innovation key to_competitiveness Innovation key to_competitiveness Presentation Transcript

  • Innovation – Key to Competitiveness
  • Changing Global Scenario New realities the companies should consider to be competitive: Shortening life cycle of products Globalisation of world economies Globalisation of technologies Shift of emphasis from manufacturing to knowledge-based economies Postulate on new technology: If you understand it, it is obsolete
  • Globalising Knowledge-based Economies: Realities Idea & Concept Product Design & Prototype Market
  • Signals For Change The Innovation Imperative New or improved products or services The Organization New or improved processes Maintained or improved competitiveness
  • Technology Acquisiton Top success factors in global competitiveness.... 0.32 0.36 0.39 0.48 0.56 0.57 0.59 0.59 0.59 0.68 Skilled Labour Quality assurance Strategic alliances New sources of capital Key R&D talent Government finan. Assist. Increased exports Financial management skills Mang. company strategey Develop. of new technology
  • Technology exchange - between companies Technology exploitation - from R&D to industry Technology Acquisition
  • Technology Acquisition Chain “ The chain is no stronger than its weakest link” English proverb
    • Marketing:
      • Networks
      • Agents
      • Retailers
    • Financing:
      • Loans
      • Venture Capital
      • Grants
    • Negotiation:
      • Technical
      • Financial
      • Commercial
    • Studies:
      • Technology
      • Feasibility
      • Market
    • Search:
      • Information
      • Opportunities
      • Partners
  • New Reality - Knowledge-based Economy OECD estimates that between 1970 and 1995 more than half the total growth in output of the developed world resulted from innovation, and the proportion is increasing as the economy becomes ever more knowledge-intensive
  • Sustainable Innovation Environment Critical mass of commercially oriented research expertise Industrial technology users Investors and consultants, creating favourable conditions for the birth of fast-growing, high-tech companies New talents & new money
  • “ Every organization-not just business-needs one core competence: innovation” Peter F. Drucker Sustainable Innovation - Key to Success. And Survival.
    • New products & services
    • Better ways for reaching customers
    • More efficient production techniques
    • Quality improvements
    • Novel cleaner production methods
    • Improved management systems
    • New approaches to gathering and dissemination of information
    • Better internal climate and services
    • New forms of employee & stakeholder participation
    Innovation - conversion of new knowledge into new products and services
  • Information Sources Important for Innovation Source: EU Community Innovation Survey (CIS), 1999 The lifeblood of any successful innovation system is communication and interaction
  • Per cent of innovating companies with abandoned or delayed projects Factors Preventing Introduction of Innovation at SMEs (EU Survey, 1998)
  • Activities to Promote Innovation among SMEs
  • Innovation is not a one-off event, but a continuous response to changing circumstances. Ideally, it does not just solve a problem but creates new capacity, opening up opportunities for further innovation Continuous Innovation: Motivation of all Employees Becomes Critical In the Information Technology industry, the recommended share of employees in the company ownership is around 30%
  • Innovation Index Source: The Global Competitiveness Report 2000, World Economic Forum
    • R&D spending by government & private sector
    • Quality of R&D institutions and S&T education
    • Cooperation between R&D sector and industry
    • Pioneering of own products & processes
    • Incentives for innovation
    • Access to venture capital
    • Ease of starting businesses
    • IPR protection
    Components
  • Technology Index Source: The Global Competitiveness Report 2000, World Economic Forum
    • Technological leadership on the global market
    • Aggressiveness in absorbing new technology
    Components
  • Critical Issues for Entrepreneurial Activity: GEM 2000 Survey Source: GEM Report 2000 1
    • Most often mentioned by experts
    3
    • Third
    2
    • Second
    2 1 3 USA 2 3 1 S.Korea 1 2 3 Singapore 2 1 3 Japan 3 2 1 India 2 3 1 Germany 2 1 3 Australia Finance Cultural, Social Norms Education & Training Government Policy
  • Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies
    • Cross-border Web-aided communities
    • Local communities & networks
    To develop vibrant communities of stakeholders
    • Business angels
    • Venture capital
    • High-tech stock markets
    To develop effective risk financing mechanisms
    • Technology business incubators
    • Innovation support systems
    • Regional associations
    To promote growth of technology-led enterprises
    • Joint R&D
    • Joint commercialisation
    • Sub-contracting
    To promote (cross-border) technological cooperation Areas of Critical Intervention Critical Technological Development Tasks
  • Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies
    • Cross-border Web-aided communities
    • Local communities & networks
    To develop vibrant communities of stakeholders
    • Business angels
    • Venture capital
    • High-tech stock markets
    To develop effective risk financing mechanisms
    • Technology business incubators
    • Innovation support systems
    • Regional associations
    To promote growth of technology-led enterprises
    • Joint R&D
    • Joint commercialisation
    • Sub-contracting
    To promote cross-border technological cooperation Areas of Critical Intervention Critical Technological Development Tasks
  • Cross-border Technological Cooperation: Building on Mutual Strength - Examples ASEAN Countries ASEAN Industrial Projects ASEAN Industrial Complementation Programme ASEAN Industrial Joint Venture Programme Russia ! Advanced R&D Republic of Korea ! R&D Commercialisation India ! Advanced Biotechnology Japan ! R&D Commercialisation
  • Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies
    • Cross-border Web-aided communities
    • Local communities & networks
    To develop vibrant communities of stakeholders
    • Business angels
    • Venture capital
    • High-tech stock markets
    To develop effective risk financing mechanisms
    • Technology business incubators
    • Innovation support systems
    • Regional associations
    To promote growth of technology-led enterprises
    • Joint R&D
    • Joint commercialisation
    • Sub-contracting
    To promote cross-border technological cooperation Areas of Critical Intervention Critical Technological Development Tasks
  • Technology Business Incubation Technology incubators nurture hi-tech start-ups and present a technology-oriented variant of business incubators
    • hands-on management assistance
    • access to financing
    • business and technical support services
    • shared office space, access to equipment
    Incubators provide: Business incubation is a dynamic process of business enterprise development. Incubators nurture young firms, helping them to survive and grow during the startup period when they are most vulnerable.
  • Specific Features of Technology Business Incubators Generally linked to universities , research centres Links Established within a technology park or close to other sources of technological support Location May require specific equipment (computing, testing, rapid prototyping, etc.) and other technical expertise Services Management & mentoring staff require specific expertise in dev’t of technology-led businesses Staff
  • Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies
    • Cross-border Web-aided communities
    • Local communities & networks
    To develop vibrant communities of stakeholders
    • Business angels
    • Venture capital
    • High-tech stock markets
    To develop effective risk financing mechanisms
    • Technology business incubators
    • Innovation support systems
    • Regional associations
    To promote growth of technology-led enterprises
    • Joint R&D
    • Joint commercialisation
    • Sub-contracting
    To promote cross-border technological cooperation Areas of Critical Intervention Critical Technological Development Tasks
  • Innovation Financing Chain Venture capital cannot finance innovation on its own. Dynamic innovation demands an unbroken financing chain, from seed capital to stock market. The financing chain is no stronger than its weakest link. T Y P E O F F I N A N C E R E Q U I R E D P R I N C I P A L S O U R C E S O F F I N A N C E Idea Pre-seed Own funds Family Friends Start-up Seed Dev’t funds Business Angels Fortification Hi-tech stock markets Expansion Growth Venture Capital VC companies
  • Growing Role of Risk Financing Mechanism for High-tech Start-ups Speed of technological change Role of debt and risk financing Private investments in emerging and new businesses dwarf the more formal venture capital outlays. In US alone total private investments in entrepreneurial companies in 1999 was more than US$ 63 billion – far more than the US$ 46 billion the professional venture capital industry invested during the same period in start-ups and growing firms.
  • Average Success of VC Financing (US pattern) Company growth Return on investment
  • New Technology Financing - Success Rates 6 in 1000 business plans get funded on average The No 1 reason a start-up’s valuation is cut due to incomplete executive teams 10% of start up in a given venture capital portfolio will succeed 6 out of 1,000,000 technology ideas will result in IPO
  • Critical Tasks in the Era of Globalisation, Innovation and Knowledge-driven Economies
    • Cross-border Web-aided communities
    • Local communities & networks
    To develop vibrant communities of stakeholders
    • Business angels
    • Venture capital
    • High-tech stock markets
    To develop effective risk financing mechanisms
    • Technology business incubators
    • Innovation support systems
    • Regional associations
    To promote growth of technology-led enterprises
    • Joint R&D
    • Joint commercialisation
    • Sub-contracting
    To promote cross-border technological cooperation Areas of Critical Intervention Critical Technological Development Tasks
  • Services Available to Web Communities of Technology Transfer Stakeholders
    • Project preparation and management
    • Building of the project team
    • File sharing
    • Pooling of resources
    • Access to external services
    • Discussion room
    • Chat room
    • Administration & reporting tools
    Project Development:
    • Access to relevant online news, databanks and support services
    • Sharing of knowledge and ideas
    • Posting of business proposals
    • Matching of prospective partners
    • Expert forums
    • Chat rooms
    • Personal/corporate sites
    • User-customized work space
    Stakeholder Networking:
  • Thank you