Hidden InnovationHidden Innovation
Richard Halkett, Executive Director, NESTA Policy & Research Unit
OECD Innovation Workshop
29th October, 2007
NESTA is the National Endowment for NESTA is the National Endowment for Science, Technology and the Arts
• The largest single endowment in the UK exclusively devoted to innovation
• NESTA’s aim is to transform the UK’s capacity for innovation
• We invest in early stage companies, inform innovation policy and encourage a culture that innovation policy and encourage a culture that helps innovation to flourish
The Innovation GapThe Innovation GapWhy policy needs to reflect the reality of innovation in the UK
Sectoral composition of national economiesSectoral composition of national economies
Finland Japan Sweden US UKUK Germany France
High-tech
5.6 3.1 3.0 2.8 2.52.5 2.4 2.4
Medium-high
4.6 6.0 6.5 3.4 3.63.6 9.6 5.0high tech
Low 89 8 90 9 90 5 93 8 93 993 9 88 0 92 6Low tech
89.8 90.9 90.5 93.8 93.993.9 88.0 92.6
Source: OECD
Engineering consultanciesEngineering consultancies
The Boston Central Artery/Tunnel Project site looking eastwards towards Logan International airport. The last section of jacked tunnel can be seen on the lower right
Source: Mott MacDonald
section of jacked tunnel can be seen on the lower right.
Genetic testing in the NHSGenetic testing in the NHSPre-implantation Genetic Diagnosis (PGD) and Pre-g ( )implantation Genetic Haplotyping (PGH) procedures can weed out genetically defective embryos before pregnancy.
Initial PGD research was Initial PGD research was conducted in the UK in the late 1980s. Guy’s Hospital Genetics Centre and Kings Genetics Centre and Kings College London have recently refined PGH techniques.
DNA analysis of Duchenne muscular dystrophy (DMD)
Source: Science Museum
q
Hidden InnovationHidden InnovationHow innovation happens in six ‘low innovation’ sectors
Six ‘low innovation’ sectorsSix low innovation sectors
Sector Sales/revenue R&D intensity*Sector Sales/revenue R&D intensity
Oil £360 billion 0.2 per cent
Construction £17 billion 0.5 per cent
Retail banking £82 billion 0.9 per cent
Education £36 billion <0.1 per cent
L l id i £2 billi <0 1 tLegal aid services £2 billion <0.1 per cent
Rehabilitation £2 billion+ <0.2 per cent
Source: DTI/DfES/Home Office* R&D intensity refers to amount spent on R&D divided by sales
Type I hidden innovationType I hidden innovation
Based on science and technology but Based on science and technology but excluded from traditional indicators
Hidden innovation in oil productionHidden innovation in oil productionLife-of-Field Seismic was developed by BP, GEOSPACE developed by BP, GEOSPACE and nine other contractors
It uses permanent sensors planted on the seabed to create ptime-lapse movies of fluid and pressure changes to show how recovery processes are working i l tiin near real-time
This could increase recovery from Valhall by 60 million barrels BP estimates that its barrels. BP estimates that its ‘Field of the Future’ programme could increase recovery worldwide by one billion barrelsThe Integrated Subsurface Information System
(ISIS) in the Valhall Field in the North Sea y
Source: BP
(ISIS) in the Valhall Field in the North Sea
Type II hidden innovationType II hidden innovation
Innovation in processes organisational Innovation in processes, organisational forms or business models
Type II: Organisational innovation
BAA’s Heathrow Terminal 5
Type III hidden innovationType III hidden innovation
Innovation from the novel combination of Innovation from the novel combination of existing technologies and processes
Type III: Exploiting technology in new services
The first direct building in Stourton, Leeds. first direct launched in October 1989 as the UK's first October 1989 as the UK s first branchless telephone bank
Type IV hidden innovationType IV hidden innovation
Innovation that takes place ‘under the Innovation that takes place under the radar’ of many surveys
Type IV: Locally-developed small-scale innovation
Innovation is changingInnovation is changing
Global collaborations and partnershipsGlobal collaborations and partnershipsNUMAR’s 1988 patent application lodged at the application lodged at the European Patent Office
A drill log showing oil and water reservoirs
Nuclear Magnetic Resonance (NMR) is increasingly used in oil exploration to identify and extract reserves. The application of NMR was developed in h di l fi ld b ll d the medical field by a company called
NUMAR. NUMAR then worked with service companies to develop the tools that could be employed in oil
Source: EPO/Halliburton
Old ideas in new placesOld ideas in new places
Corus’ Living Solutions off-site manufacture of accommodation units for the Ministry of Defence. 10,700 units are being manufactured for MoD personnel near Salisbury Plain and Aldershot
Corus’ Living Solutions fully-fitted steel-framed modules are manufactured at its Shotton works in North Wales and delivered to site as ‘building blocks’ ready for assembly Off-site manufacture is cheaper faster results in less ready for assembly. Off site manufacture is cheaper, faster, results in less faults, and reduces waste and transport costs
The metals company formed a joint venture with construction contractors Mowlem and KBR to access the tacit knowledge and networks of the sectorMowlem and KBR to access the tacit knowledge and networks of the sector
Source: Corus
Type I: Technology developmentComplementary innovations
Valhall Field in the North Sea, location of the world’s first Life-of-Field Seismic system
BP’s Life-of-Field Seismic process
Hidden innovation in ‘traditional’ sectorsHidden innovation in traditional sectorsRolls-Royce has signed an innovative 10-year an innovative 10 year £1 billion contract with the Ministry of Defence to keep Royal Navy
b i t submarines at sea
The TotalCare contract covers technical
t t support, management of spares, and product development
Rolls Royce now makes Rolls-Royce now makes 53 per cent of its revenues from ‘aftermarket’ services
Implications for policyImplications for policy
Implications for policyImplications for policy
• Policy needs to support systems and include Policy needs to support systems and include promotion and diffusion, not just invention
• Developing a full innovation strategy will depend Developing a full innovation strategy will depend on working closely with industry to identify the innovation that matters
• A sector-relevant Innovation Index would better guide policy development
• Innovation needs to be at the heart of – and across – government policy
Recommendation: Develop sector-specific innovation agendas with industry
UK construction industry innovation agenda
Recommendation: Create a UK-specific Innovation Index
UK construction industry benchmarking KPIs
The impact of wider policies and conditionsThe impact of wider policies and conditions
7,000 350
es,
mill
ion
(mm
boe)
5,000
6,000 Exp
lorat250
300
Oil price crash
Tax changes
rce
dis
cove
rie
oil
equiv
alen
t (
3,000
4,000
tion an
d ap
pra150
200
crash
Promote li
Tota
l re
sour
bar
rels
of o
1,000
2,000
aisal wells
50
100
licences
Year
1970 1975 1980 1985 1990 1995 2000 2005
Source: DTI/UKOOA
Recommendation: Place innovation at the heart of government
Recent policy developmentsRecent policy developments
1. Changes in machinery of government
2. Reformed Technology Strategy Board
3. Lord Sainsbury’s Review of the Government’s Science & Innovation Policies
4 Comprehensive Spending Review & Pre Budget Report4. Comprehensive Spending Review & Pre-Budget Report
[email protected]@nesta.org.uk
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