Innovation & Austerity

Social Innovation Generation presents Innovation and Austerity A presentation by Geoff Mulgan Chief Executive, Nesta In partnership with Global Leadership SeriesMay 2nd, 2012 1

Presenta(on to MaRS Innova(on and Austerity 2

RESOURCE LEARNING & EFFICIENCY FOR EMPLOYABILITY INDIVIDUALS & NEEDS OF COMMUNITIES AGEING WELL YOUNG PEOPLE IMPACT INVESTMENT VENTURE INVESTING FUND CATALYSING START UP SUPPORTING A SUPPORT DEVELOPING MARKET RESEARCH & POLICY SVI FUND BIG SOCIETY RECOMMENDATION FINANCE FUND S 6

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

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

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

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

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

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

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

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

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

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

1. Prompts for innova(on 21

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

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

Collec(ng and analysing data... ...and mapping future trends 24

Breaking issues down ... ...and mapping systems 25

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

Genera(ng new insights 27

The aim of this stage of work? A well-‐understood and clearly-‐deﬁned problem or opportunity: eg cost structures 28

2. Genera(ng ideas and proposals 29

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

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

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

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

Prizes and incen(ves ...to reducing carbon emissions Collabora(ve enquiry From measuring longitude... Design tools 34

The aim of this stage of work? An idea or set of ideas to develop and test with clear poten(al for savings 35

3. Prototypes and tes(ng 36

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

Developing products Collabora(ve enquiry Design tools 5 years and 5,172 prototype 38

Developing services 39

Nesta has developed tools and processes that anyone can use to develop and test a service idea Design tools 40

Formal pilots and tests Design tools 41

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

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

4. Sustaining and embedding 45

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

More systema(c measurement, assessment, evalua(on 47

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

5. Growing and scaling 51

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

DATA 53

Finance for growing social innova(ons Founda7ons Government Social impact bonds Crowdfunding 54

Doubling level of academicresults in 2 years 55

Diﬀerent ways to scale v.2 Business Franchising Licensing growth 56

6. Systemic change 57

Systemic change To get from here... ...to here... ...many things need to change in tandem 58

Transforming a system New technologies, Recalibrated products and markets services New policies and Behavioural regula(ons change 59

Transforming a system New technologies, products and Recalibrated markets services Age Unlimited Scotland People Powered Health !New policies and regula(ons Behavioural change 60

GOALS strategic Strategy Units Prizes Skunk worksPARTICIPANTS internal external accelerators Idea Factory Collaboratives 61 open

Large Well established methods, clear authority Impact Improvement, price pressure, performance management tools Small Fast (<1) Speed Slow (3+)Slide 62

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

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

Cost Boomerang; early savings, higher long-term costs dynamic savings Slide 65 Time

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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Innovation & Austerity

by Social Innovation Generation on May 07, 2012

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