Innovative Public Procurement and Grand Challenges

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VTT's Matti Pihlajamaa's presentation dove into the depths of transformative innovation policy and the potential of innovative public procurement. Find out more at the ORSI project website: https://www.ecowelfare.fi/en/

Leadership & Management

D.Sc. (Tech) Matti Pihlajamaa, Senior Scientist
VTT Technical Research Centre of Finland
Innovative Public Procurement and Grand Challenges
What Is an Eco-Welfare State seminar 21.1.2020

The evolution of science, technology and innovation policy
1
Figure: Diercks et al., 2019
The three framings: Schot & Steinmüller, 2018

The evolution of science, technology and innovation policy
2
Figure: Diercks et al., 2019
The three framings: Schot & Steinmüller, 2018
”Innovation for growth”
- WW2→
- Boosting basic research
and private R&D for
economic growth

The evolution of science, technology and innovation policy
3
Figure: Diercks et al., 2019
The three framings: Schot & Steinmüller, 2018
”National Systems of
Innovation”
• 1980s→
• Creating institutions,
policies and networks that
ensure national
competitiveness.
”Innovation for growth”
- WW2→
- Boosting basic research
and private R&D for
economic growth

The evolution of science, technology and innovation policy
4
”National Systems of
Innovation”
• 1980s→
• Creating institutions,
policies and networks that
ensure national
competitiveness.
”Innovation for growth”
- WW2→
- Boosting basic research
and private R&D for
economic growth
”Transformative
innovation policy”
• 2010s→
• Promoting innovation
for solving grand
challenges
Figure: Diercks et al., 2019
The three framings: Schot & Steinmüller, 2018

Why do we need transformative innovation policy?
Problems with promoting innovation for
innovation’s sake:
– Economic competitiveness is
not sufficent to solve many
environmental and social
problems
– Innovations produce negative
effects: emissions, inequality,
oppression, excessive use of
natural resources…
– We are unable to address
these negative externalities by
regulation
– Significant share of global
human capital goes to
generating unnecessary or
harmful innovations
5

Creating demand for an eco-welfare state
• Need for a ’normative turn’ in
innovation policy
• Until recently, the policy
measures to tackle ’grand
challenges’ have mostly
focused on investing in
research (e.g. Lund
Declaration 2015;
Horizon2020).
• New emphasis on demand-
side measures: public
procurement as an engine for
promoting and guiding
innovation.
6

The potential of innovative public procurement
In Finland, public authorities
spend ca. 35 billion € annually
7

Innovative public procurement
8
Type Aim In practice
Pre-commercial procurement:
buying solutions that don’t yet exist
Increase R&D towards solving
societal problems
Buying concepts or prototypes for
solving an identified problem
Procurement of new innovative
solutions: government as a lead
user
Boosting further innovation,
generating customer references
Buying novel solutions with few
use cases
‘Catalytic’ procurement of
innovation: catalysing the
development of innovations for
broader public use
Market creation for innovative
solutions
Aggregating the demand of
multiple procurers: KEINO buyer
groups in Finland
Innovation-friendly
procurement: practices for
ensuring that innovative solutions
are not excluded
Wider diffusion of innovations Market dialogue, quality criteria,
functional or outcome-based
specifications
Modified from Uyarra et al., 2020

Challenges for research and practice
• From grand challenges to concrete actions
• Improving procurement skills and capabilities
• Scaling local successes
• From innovative public procurement to effective policy mixes
• Challenges from directionality:
– Co-creating desirable futures
– Vulnerable to lobbying and political opportunism
– Avoiding ‘picking the winners’
– Taking care of those who the innovations affect in negative ways
9

Thank you
Matti Pihlajamaa
D.Sc. (Tech), Senior Scientist
Ethics and responsibility of innovations
VTT Technical Research Centre of Finland
Vuorimiehentie 3, Espoo, P.O. Box 1000, 02044 VTT, Finland
Phone: +358 40 673 1050
Email: matti.pihlajamaa@vtt.fi
10

Innovation policy is a relatively new item on policy-makers’ agendas. t is only from the mid-1990s onwards that the term became popular among users. In generic terms, ‘innovation policy’ is traditionally conceived as a way to support the capability of countries or regions and their innovation systems in producing novelties and putting them to use. The academic and political debate about innovation policy has focused for decades on supporting the generation of innovations. This is best illustrated by the concepts and indicators used to assess and compare the innovativeness and competitiveness of countries, which concentrate primarily on supply-side conditions, activities, capabilities, and interactions. Moreover, innovation policy rational and policy instruments have been developed mainly in the context of developed countries. Demand-side innovation policy instruments may be defined as a set of public measures to increase the demand for innovations, to improve the conditions for the uptake of innovations, and/or to improve the articulation of demand in order to spur innovations and the diffusion of innovations. Such a broad definition of demand-based innovation policies implies twin rationales, namely, to promote and stimulate innovation and to increase the diffusion of innovation. In addition, this second rationale, the diffusion of innovation, further implies that the concept of innovation extends beyond the scope of 'new to the world' and encompasses innovations that are `new to a firm’ or to a certain geographical space.

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1. D.Sc. (Tech) Matti Pihlajamaa, Senior Scientist VTT Technical Research Centre of Finland Innovative Public Procurement and Grand Challenges What Is an Eco-Welfare State seminar 21.1.2020

2. The evolution of science, technology and innovation policy 1 Figure: Diercks et al., 2019 The three framings: Schot & Steinmüller, 2018

3. The evolution of science, technology and innovation policy 2 Figure: Diercks et al., 2019 The three framings: Schot & Steinmüller, 2018 ”Innovation for growth” - WW2→ - Boosting basic research and private R&D for economic growth

4. The evolution of science, technology and innovation policy 3 Figure: Diercks et al., 2019 The three framings: Schot & Steinmüller, 2018 ”National Systems of Innovation” • 1980s→ • Creating institutions, policies and networks that ensure national competitiveness. ”Innovation for growth” - WW2→ - Boosting basic research and private R&D for economic growth

5. The evolution of science, technology and innovation policy 4 ”National Systems of Innovation” • 1980s→ • Creating institutions, policies and networks that ensure national competitiveness. ”Innovation for growth” - WW2→ - Boosting basic research and private R&D for economic growth ”Transformative innovation policy” • 2010s→ • Promoting innovation for solving grand challenges Figure: Diercks et al., 2019 The three framings: Schot & Steinmüller, 2018

6. Why do we need transformative innovation policy? Problems with promoting innovation for innovation’s sake: – Economic competitiveness is not sufficent to solve many environmental and social problems – Innovations produce negative effects: emissions, inequality, oppression, excessive use of natural resources… – We are unable to address these negative externalities by regulation – Significant share of global human capital goes to generating unnecessary or harmful innovations 5

7. Creating demand for an eco-welfare state • Need for a ’normative turn’ in innovation policy • Until recently, the policy measures to tackle ’grand challenges’ have mostly focused on investing in research (e.g. Lund Declaration 2015; Horizon2020). • New emphasis on demand- side measures: public procurement as an engine for promoting and guiding innovation. 6

8. The potential of innovative public procurement In Finland, public authorities spend ca. 35 billion € annually 7

9. Innovative public procurement 8 Type Aim In practice Pre-commercial procurement: buying solutions that don’t yet exist Increase R&D towards solving societal problems Buying concepts or prototypes for solving an identified problem Procurement of new innovative solutions: government as a lead user Boosting further innovation, generating customer references Buying novel solutions with few use cases ‘Catalytic’ procurement of innovation: catalysing the development of innovations for broader public use Market creation for innovative solutions Aggregating the demand of multiple procurers: KEINO buyer groups in Finland Innovation-friendly procurement: practices for ensuring that innovative solutions are not excluded Wider diffusion of innovations Market dialogue, quality criteria, functional or outcome-based specifications Modified from Uyarra et al., 2020

10. Challenges for research and practice • From grand challenges to concrete actions • Improving procurement skills and capabilities • Scaling local successes • From innovative public procurement to effective policy mixes • Challenges from directionality: – Co-creating desirable futures – Vulnerable to lobbying and political opportunism – Avoiding ‘picking the winners’ – Taking care of those who the innovations affect in negative ways 9

11. Thank you Matti Pihlajamaa D.Sc. (Tech), Senior Scientist Ethics and responsibility of innovations VTT Technical Research Centre of Finland Vuorimiehentie 3, Espoo, P.O. Box 1000, 02044 VTT, Finland Phone: +358 40 673 1050 Email: matti.pihlajamaa@vtt.fi 10

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