Innovation & Austerity


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On May 2nd, Geoff Mulgan, Chief Executive of Nesta discussed the opportunities society has to overcome the barriers that fiscal challenges present to innovation.

Following the 2008 global financial crisis Geoff laid out the challenges ahead during his 2009 TED Talk: “I think what connects the challenge for business, the challenge for government and the challenge for communities now, is both simple and difficult. We know our societies have to radically change. We know we can’t go back to where we were before."

Innovation & Austerity

  1. 1. Social Innovation Generation presents Innovation and Austerity A presentation by Geoff Mulgan Chief Executive, Nesta In partnership with Global Leadership SeriesMay 2nd, 2012 1  
  2. 2. Presenta(on  to  MaRS    Innova(on  and   Austerity     2  
  3. 3. 3  
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  7. 7. Policy  and  Research   Investment  in  innova(on,  ₤bn,  2007   R&D   14.9 Design   22.1 Organisa(onal   26.1 innova(on   Training  &     32.1 skills  development   SoSware   20.2 development   “Go-­‐to-­‐market”   14.5 Other  (copyright,  etc)   3.5 Total   133.4 7  
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  9. 9. 9  
  10. 10. Innova(on  skills   •  Core  innova7on  curriculum   •  Blended  learning  materials   •  Founda7onal  layer  of  ‘free  to  air’  modules   •  Face  to  face  training   •  An  eLearning  plaIorm/LMS     10  
  11. 11. Contribu(on  to  produc(vity  growth,     %,  2000  -­‐    2007   Total   2.72   Labour  quality   Capital  Total  factor  produc7vity   investment   6%   (wider  benefits  of   1.27   innova7ons)   28%   Investment  in   0.54   47%   innova7on   20%   Capital  investment   0.75   Innova7on   investment   TFP   0.17   Labour  quality   0 1 2 3 Source: Innovation Index 11  
  12. 12. Investment  in  innova(on,  ₤bn,  2007  R&D   14.9 %  of  business  output  Design   22.1 Training   Org  innov  Organisa(onal   26.1innova(on   Design   SoZware  Training  &     GTM   32.1skills  development   R&D   SoSware   Other   20.2 development  “Go-­‐to-­‐market”   14.5Other  (copyright,  etc)   3.5 14.1%  of  private  Total   133.4 sector  output   Source: Innovation Index 12  
  13. 13. Health spend as % GDP versus adult mortality rate   16 15Health spend as % GDP 14 13 12 11 10 9 8 7 6 40 60 80 100 120 Adult mortality rate Source: OECD Health Data 2010 13  
  14. 14. Change in health spend share of GDP versus % improvement in adult mortality rate 3.0%% growth in share of GDP (p.a.) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% % improvement in mortality rate (p.a.) 14  
  15. 15. Traditional1. Pure  economies  –  stopping  doing  things  ,  asset  sales  2. Economies  of  trimming  –  freezes,  efficiency  savings,  focus   on  essen7als  3. Economies  of  delay  –  to  capital,  pay  rises,  recruitment   15  
  16. 16. Organisational4.  Economies  of  scale  –  eg  aggrega7ng  call  centres,  back  office  5.  Economies  of  scope  –  eg  one  stop  shops,  mul7-­‐purpose  personal   advisers,    capital  integra7on,  administra7ve  consolida7on  6.  Economies  of  flow  –  eg  automa7on,  hospitals  specialising,   aggrega7on  by  condi7on    7.Economies  of  penetra(on  –  eg  street  concierges,  u7li7es,  energy    8  Circuit  economies  –  reducing  failure  demand  (hospital  repeated  re-­‐ admissions)-­‐  eg  Social  Impact  Bonds,  preven7ve  investment  models     16  
  17. 17. Relational9  Economies  of  responsibility  –  passing  responsibility  out  to  ci7zens   (eg  self-­‐tes7ng,  new  charges,  community  asset  transfer)  10  Economies  of  visibility  –  mobilising  public  eyes  (public  contracts)   and  the  power  of  shame  (eg  surgery  rates)  11  Economies  of  regula(on  and  risk  –  adap7ng  appe7tes  for   regula7on,  reducing  inspec7on,  compliance  costs  etc  12  Economies  of  commitment  –  shiZing  provision  from  low  to  high   commitment  people  and  organisa7ons  (tapping  into  eg  volunteer   labour,  social  enterprise,  mo7va7on…)   17  
  18. 18. Traditional1.  Pure  economies  –  stopping  doing  things  ,  asset  sales  2.  Economies  of  trimming  –  freezes,  efficiency  savings,  focus  on  essen7als  3.  Economies  of  delay  –  to  capital,  pay  rises,  recruitment   Require  innova7on   methods,  usually  across   Organisational organisa7onal   boundaries  4.  Economies  of  scale  –  eg  aggrega7ng  call  centres,  back  office  5.  Economies  of  scope  –  eg  one  stop  shops,  mul7-­‐purpose  personal  advisers,    capital  integra7on,  administra7ve   consolida7on  6.  Economies  of  flow  –  eg  automa7on,  hospitals  specialising,  aggrega7on  by  condi7on    7.  Economies  of  penetra(on  –  eg  street  concierges,  u7li7es,  energy  8.  Circuit  economies  –  reducing  failure  demand  (hospital  repeated  re-­‐admissions)-­‐  eg  Social  Impact  Bonds,   preven7ve  investment  models     Relational Require  rethinking  the   rela7onship  between  9.  Economies  of  responsibility  –  passing  responsibility  out  to  ci7zens  (eg  self-­‐tes7ng,  new  charges,  cnd   public  services  a ommunity   asset  transfer)  10. Economies  of  visibility  –  mobilising  public  eyes  (public  contracts)  and  the  power  of  sci7zens     hame    11. Eeconomies  of  regula(on  and  risk  –  adap7ng  appe7tes  for  regula7on,  reducing  inspec7on,  compliance  costs   etc  12. Economies  of  commitment  –  shiZing  provision  from  low  to  high  commitment  people  and  organisa7ons  (tapping   into  eg  volunteer  labour,  social  enterprise,  mo7va7on…)   18  
  19. 19. 19  
  20. 20. 20  
  21. 21. 1.  Prompts  for  innova(on       21  
  22. 22. Prompts  for  innova(on   Cost  escala(on     New  perspec(ves  and  insights   Failure  demand     Crises       New  evidence  and  theories   Problems     User  feedback       Poli(cal  mandates   Gaps  in  the  market      Campaigns  and  pe((ons     New  technologies     New  funding  programmes     Complaints     Demand         Unmet  needs         Opportuni(es       New  paradigms   22  
  23. 23. How  can  we  systema(cally  prompt  innova(on?    Literature  reviews     Market  research       Interviews   Trend  spogng      Collec(ng  and   Academic  studies      analysing  data     Surveys     Foresight       Horizon  scanning        Social  and  economic  data         Scenario  planning         Focus  groups             Map  assets   Iden(fying  opportuni(es        Understanding  problems     Challenge  assump(ons         Observa(on   Ask  different  ques(ons         Ethnography Community researchers System  mapping     Map  the  current  system         Genera(ng  insights       Map  customer  journeys   Issue  trees   Reframe  problems       23  
  24. 24. Collec(ng  and  analysing  data...         ...and           mapping   future  trends   24  
  25. 25. Breaking  issues  down  ...            ...and   mapping   systems           25  
  26. 26. Seeking  different  perspec(ves   Wild  cards  Professionals   Customers  and   and  wider   end  users   workforces     The   challenge       Advisors  and           experts    Leading  edge  prac((oners   Decision-­‐makers   26  
  27. 27. Genera(ng  new  insights     27  
  28. 28. The  aim  of  this  stage  of  work?     A  well-­‐understood  and   clearly-­‐defined  problem   or  opportunity:  eg  cost   structures   28  
  29. 29. 2.  Genera(ng  ideas  and  proposals     29  
  30. 30. Aim  to  generate  LOTS  of  ideas     “The  way  to  get   good  ideas  is  to   get  lots  of   ideas,  and   Brainstorms           throw  the  bad   ones  away.”   TRIZ           Dr  Linus  Pauling,   American  chemist  and   bio-­‐chemist     30  
  31. 31. Genera(ng  ideas  and  proposals         Ideas  marketplaces           Fes(vals  and  camps             Compe((ons  and  prizes         Crowd-­‐sourcing               Incen(ves           Skunkworks               Collabora(ve  enquiry             S(mula(ng  thinking     Crea(ve  thinking  tools        Networking               Brainstorms           Ar(sts/thinkers  in  residence             Developing  ideas     TRIZ           User-­‐led  design           Theory  of  change             A  teams             Design  tools           31  
  32. 32. Crea(ve  thinking  tools   CREATIVE  SOCIAL  DESIGN  TOOLS  ™       ^   inversion  (peasants  become  bankers,  pa(ents  become   doctors)     ∫     integra(on  (personal  advisers,  one  stop  shops,  portals,   speeding  flow)     x   extension  (extended  schools,  outreach)     ∂   differen(a(on  (segmen(ng  services  by  groups,  or     personalisa(on)     +     addi(on  (gegng  GPs  to  do  a  new  test,  libraries  running   speech  therapy)     -­‐   subtrac(on  (no  frills,  cugng  targets,  decluuering)   t   transla(on  (airport  management  into  hospitals,  business     planning  into  families)     g GraSing  an  element  from  one  field  into  another,     crea(ng  a  new  fusion  (coaching    into  a  secondary  school) Design  tools             ∞ crea(ve  extremism  (pushing  ideas  and  methods  to  t32   heir  
  33. 33. Camps  and  fes(vals          Generate  many  viable  ideas  in  a  short  (me  frame      Bring  new  teams   Collabora(ve  together  around  an   enquiry            idea  or  challenge         Design  tools           33  
  34. 34. Prizes  and  incen(ves     reducing  carbon   emissions         Collabora(ve   enquiry            From  measuring  longitude...       Design  tools               34  
  35. 35. The  aim  of  this  stage  of  work?     An  idea  or  set  of  ideas     to  develop  and  test  with   clear  poten(al  for  savings   35  
  36. 36. 3.  Prototypes  and  tes(ng     36  
  37. 37. Prototypes  and  tes(ng     Product/service/process  design            Cost  benefit  modelling                                 Design                      Rela(onship  mapping                          Co-­‐design      Blue-­‐prin(ng                    Prototyping                         Rapid  Prototyping                     Proof  of  concept            Market  tes(ng                             Simula(ons                   Business  cases                       Trials       Experimental  zones                 Pathfinders               Open  tes(ng                   Beta  tes(ng                 Pilots             Evalua(on                       37  
  38. 38. Developing  products   Collabora(ve   enquiry             Design  tools           5  years  and  5,172  prototype     38  
  39. 39. Developing  services   39  
  40. 40. Nesta  has  developed  tools  and  processes  that  anyone  can  use  to  develop  and  test  a  service  idea     Design  tools           40  
  41. 41. Formal  pilots  and  tests   Design  tools           41  
  42. 42. Cost  benefit  modelling   Step 1: Identify all Step 3: Estimate the inputs to the service costs of all the inputs Cost figure = Unit cost Activity measure Step 4: Calculate the Step 2: Identify all unit cost outputs to the service How  is  it  a  beuer  use  of   resource?   42  
  43. 43. Support  for  development   Incubators  provide  a  suppor(ve   environment  to  develop  ideas   into  business  proposi(ons   They  usually  offer  a  combina(on   of  funding,  Collabora(ve   mentoring,  resources   and  connec(ons                 enquiry   Brainstorms          Accelerators  create  a  fast-­‐track  to  market  for  promising  enterprises     Design  tools           43  
  44. 44. 44  
  45. 45. 4.  Sustaining  and  embedding     45  
  46. 46.        Sustaining  and  embedding   Leadership  and  governance      Public  regula(on                                       Organisa(on  and     Policy     management  models     commitment     Collabora(ve   Skill  and  capacity  development                       enquiry         Designing  teams                       Brainstorms           Venture  finance     Business  models       Loans,  equity  and  quasi-­‐equity     Crowd  funding   Grants  for  growth                                               Programme  funding                       Design  tools           Social  Impact  Bonds   46  
  47. 47. More  systema(c  measurement,   assessment,  evalua(on   47  
  48. 48. Slide 48
  49. 49. Implementa(on  involves...    •  Loans   •  Organisa(onal  structure  •  Equity   •  Governance  structure  •  Quasi-­‐equity   •  Legal  forms  •  Crowd-­‐funding   •  Recruitment   Business   •  Skill  development       People  and   models  and   governance   finance     Reputa(ons   and   Intellectual   effec(veness   capital   •  Evalua(on   •  Quality  assurance     •  Building  opera(onal   •  Building  brand  profile   systems  and  processes  to   •  Marke(ng     deliver  for  customers     49  
  50. 50. 50  
  51. 51. 5.  Growing  and  scaling       51  
  52. 52.    Growing  and  scaling        Growing  an  organisa(on   Licensing                                                or  venture     Mergers  and  acquisi(ons                            Federa(ons  and  chains                             Copying                               Collabora(ve   Franchising                             Adop(ng                       enquiry   Dissemina(on                          Storytelling                       Brainstorms           Broadcas(ng                       Campaigning                       Networking                         Training        Changing  behaviour                                 Incen(ves                           Coaching                                                   Adver(sing                         Open  source                           Networking                           Design  tools           52  
  53. 53. DATA 53  
  54. 54. Finance  for  growing  social  innova(ons     Founda7ons       Government   Social impact bonds Crowdfunding         54  
  55. 55. Doubling level of academicresults in 2 years 55  
  56. 56. Different  ways  to  scale  v.2     Business   Franchising   Licensing   growth   56  
  57. 57. 6.  Systemic  change   57  
  58. 58. Systemic  change    To  get  from  here...  here...   ...many  things  need  to  change  in  tandem     58  
  59. 59. Transforming  a  system  New  technologies,   Recalibrated  products  and   markets  services    New  policies  and   Behavioural  regula(ons   change   59  
  60. 60. Transforming  a  system  New  technologies,  products  and   Recalibrated  markets  services     Age Unlimited Scotland People Powered Health !New  policies  and  regula(ons   Behavioural  change   60  
  61. 61. GOALS   strategic   Strategy Units Prizes Skunk worksPARTICIPANTS internal    external   accelerators Idea Factory Collaboratives 61   open  
  62. 62. Large Well   established   methods,  clear   authority  Impact Improvement, price pressure, performance management tools Small Fast (<1) Speed Slow (3+)Slide 62
  63. 63. Large Easy  in  principle   –  but  weak   ins7tu7ons  Impact Faster adoption of proven practice Improvement, price pressure, performance management tools Small Fast (<1) Speed Slow (3+)Slide 63
  64. 64. Large More radical innovationImpact Faster adoption Hard  for  most   public  services  –   lack  of   Improvement, price ins7tu7ons,   pressure, performance methods,   financing  models   management tools Small Fast (<1) Speed Slow (3+)Slide 64
  65. 65. Cost Boomerang; early savings, higher long-term costs dynamic savings Slide 65 Time
  66. 66. 66  
  67. 67. 67  
  68. 68. Stages  of   Understanding   Idea(on,   Pilots,   Sustaining,   Scaling  innova(on   problems,   genera(ng   prototypes,   embedding   opportuni(es   op(ons   tests  Evidence   Exploratory,   Drawing  on   Plausible   Clear   Strong  required   comprehensive evidence  but   account  of   evidence  of   evidence,   formal  and   not    overly   how  impact   impact,  data   confirmed   emerging   constrained;   could  be   genera7on,   through   knowledge   hybrids;   achieved   valida7on   mul7ple   assemblies;   using   research  tools   user   evidence,   inc.  RCT   engagement   prac77oner   knowledge   etc  Finance   Very  low,   Small  sums;   Moderate;   Significant:   Large:  required   grants,  open   grants,   grants;   programme,   programme,   conver7ble   conver7ble;   equity,  loans   equity,  loans,   stage-­‐gate   PBR,  SIBs  Risk   n/a   High  risk   High  risk,  but   Medium  risk   Low  risk  handling   appe7te,  and   measures  to   appe7te;     appe7te;     likely  failure   de-­‐risk:   scope  for   strong   rate   implementa7 adapta7on;   capacity;   on  capacity   reversibility;   fidelity     68   etc   choice  
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