Changing How We Measure Up The Innovators

By: Haydn Shaughnessy

An EU benchmark of national innovation capabilities has the United States out in front with some European countries falling behind the emerging economies. The US Government on the other hand is deeply concerned about its innovation capability. Haydn Shaughnessy asks if the benchmarks give us a way to rethink innovation.

“If Europe stands still we will see the US disappear into the distance just as we feel emerging nations breathing down our necks….Europe is 27 countries and our efforts on research and innovation have been more fragmented than we can afford. We now need to work together, so that in a few years’ time this Scoreboard tells a better story.”

So said Máire Geoghegan-Quinn, European Commissioner for Research, Innovation and Science in a speech in Brussels, February 1st, referring to the new European Innovation Scoreboard. Is the Scoreboard a fair way of measuring up the innovators or is a more radical view needed of how to manage innovation better?

The Scoreboard is complied from an investigation into innovation levels in the EU and competitor regions, judged across three sets of criteria;  enablers, firm activities, and outputs (the contribution of innovations to economic wellbeing). The USA appears to be approximately 50% more innovative across these factors, with Japan only a few points behind at 45%, China is catching up fast though seems to be surprisingly far back at around 60% off the EU’s pace.

It is the source of the EUs disadvantage that will surprise people more than its scale, though the scale too will raise eyebrows, and maybe even a smile, in American boardrooms where there are deep reservations about America’s continued ability to innovate. The word on Main Street these past three years is that America now lags behind its competitors.

Geoghegan-Quinn focuses on the EU’s innovation deficit and concludes: The largest gap appears in the “Firm activities” category where the EU27 lags behind in terms of public-private co-publications, business R&D expenditures, and, compared to Japan, in PCT (Patent Cooperation Treaty) patents. This shows that Europe’s research and innovation gap lies primarily in the private sector [emphasis added].

In other words the fault does not lie with the enabling infrastructure of human resources (education for example), finance and support, openness, and “excellent and attractive research systems”.

If the knee jerk reaction is to complain that, hang on, are you saying the public sector’s got it right and the private sector hasn’t, the truly shocking news is that Geoghegan-Quinn believes a lag in public-private co-publications, business R&D spending and Patent Cooperation Treaty patents, constitute innovative failure.

What does the benchmarking exercise actually show? The EU 27 includes countries as varied as Yugoslavia and the UK, Germany and Malta, France and Poland. It is difficult to understand why any administration would want to communicate a single message to these varied constituents.

The road to becoming an innovative entrepreneurial economy is a long one for Poland but it’s a road France has long been ambivalent about taking. The UK has a superficially innovative economy around design but a deeply handicapped and truly innovative engineering economy that has never found the support that German engineering can rely on. Does it add value to tell them all to buck their ideas up?

As Lisbon Council Executive Director Ann Mettler pointed out elsewhere on the site: a commitment to innovation is illustrated by how you spend your budget, and Europe spends half of its budget on cattle, fertiliser and pigs.

It’s a surprise them that the study is forgiving about enabling factors that the public sector takes responsibility for. It’s rare these days to hear a good word about the education systems of  some member states (or for that matter their competitors). Added to that, there is no straightforward association between R&D and innovation – in fact the mood may have shifted on this one to such an extent that influential voices now point out that R&D and innovation are not related in the modern economy.

The EU has been slow to recognise the basic truth that innovation changes itself. When intelligent, ambitious people compete, they change the ground rules. Innovation cannot sit still. R&D is arduous and long term. Today’s innovators are resetting the economy, shifting attitudes and changing behaviour on a global scale. They are not concerned with patents because they can start companies and begin to scale them for the cost of a patent application. R&D spending is less significant than it was, and that’s in part because many companies have thwarted themselves by over-investing at the margin of advantage, and in part because the changes wrought by social dynamics don’t require R&D expenditure.

So where does the value lie in the EU Innovation Scoreboard? Will any Government look at it and see either a guide to action or even a call to action that needs to be heard? A bit like the pronouncements that went with the Lisbon Strategy the answer is “maybe, sometimes”.

Does it need to be this way? The overlooked features in the Scoreboard are more important than those included. We need to understand better the dramatic ways that innovation is now driven by the social dynamics of our behaviour as customers and employees. We need to understand the drivers and implications of the historic peak in commodity prices. These too have been big drivers of innovation in the past (and are driving political change in North Africa).

We need to re-examine the way markets work and the way wealth is created. And as the IMF said, on the same day, “without jobs and income security, there can be no rebound in domestic demand—and ultimately no sustainable recovery.” The difference with the EU is that the IMF apportions blame to exporting countries such as Germany that continue to rely on exports, rather than domestic demand, for growth and a credit system that is now almost defunct.

We need to explore systemic innovations that overcome these barriers and to do that we need ask how systemic roadblocks and social dynamics are reshaping the innovation agenda. R&D and dubious education systems don’t quite cut it any longer.

By Haydn Shaughnessy