An innovation system … kind of …

Over the past two months, I’ve developed my ideas about the innovation landscape, the protagonists playing the main roles in innovation, and their interactions that range from competition to cooperation. Taken together, these ideas describe all elements of an innovation system and its context: a system that produces and delivers the innovation that is needed, to those that need it, when they need it. You might even picture this system as an innovation supply chain, a concatenation of interlinked process steps to deliver what is needed.

While this is an appropriate concept to describe innovation, let’s be aware of the considerable differences between that concept and the reality of innovation. Words like “system” and “supply chain” suggest a mechanical functionality, an almost deterministic approach to innovation; nothing could be further from the truth. They convey the idea of structures and processes, which are designed and implemented following a predefined master plan; again,  reality is far from that. The simple words conceal a complex truth: what appears to be an integrated, well-oiled machinery turns out to be a set of elements that are interconnected often by accident, but rarely with intent.

Take education as a case in point: higher education plays a significant role in a society’s innovation capacity. To develop and maintain skills and talent necessary to succeed in innovation, societies around the globe invest heavily in higher education. This direct link between higher education and innovation is clearly understood, it definitely drives decision-making. But what about basic education? While developing societies emphasise its relevance for the economic progress of the individual citizen, developed societies tend to take basic education almost as a given. Neither see it as the fundamental underpinning for their innovation capacity. Basic education is therefore not thoroughly considered when exploring ways to improve an innovation system. However, a society’s attitude towards innovation, at least in the long run, is more a result of the education of the population than of political debate. An attitude in favour of technological progress rather than suspicious of change would certainly accelerate the adoption of innovation.

Innovation is understood to be an investment into the future, often long-term. In order to encourage innovators to pursue their ideas, they must be sure to receive a return on their investment. Patents and intellectual property rights have been established for exactly that purpose: to make sure that an upfront investment is paid back over time, with a decent profit margin. These institutions have been created to support the investment of time, effort, and resources in innovation. Other institutions however, even though they can support or discourage such investments in the same way, are not seen in that innovation context. But think about it this way: as an investment, innovation requires an element of predictability. The rule of law and political stability are essential in this regard, but not sufficient. They must be paired with fiscal stability to frame an encouraging innovation environment. While these institutions are not created for the purposes of innovation, they will all have significant effect on a society’s innovation capacity, encouraging a society to be open-minded, to embrace change, to support an appropriate level of risk-taking.

Considering organisations, you will find that they can play different roles. Some have been directly established to contribute to society’s innovation capacity, e.g., research laboratories or universities. Others serve as agents to execute society’s general interests, e.g., in public administration or law enforcement. Yet others, especially those engaged in the economy, have their own internal innovation system. Think about companies that pursue their own innovation programmes, allocating resources to secure and possibly expand their future market share. While they are free to set their innovation targets according to their business needs, they do depend on the legal framework and other underpinnings that society provides them with. The same applies to entrepreneurs; regardless of their independence in thinking, they critically depend on the institutional framework that society defines for successful innovation. The ease of starting a new business is one example how a society could actually encourage an entrepreneur to pursue his idea. The banking system and access to capital are other examples.

Both, organisations and entrepreneurs, are embedded in and depend upon the larger innovation system provided by society. But that system, regardless of the very structured and intentional sound of the term itself, is not the result of a master plan; it has not been built from a comprehensive blueprint that precisely defined every single element, and the interrelations between the constituent parts. The opposite is true: society’s innovation system is the result of an evolution, sometimes gradual, sometimes radical, and often unintended. Many of the elements of the innovation system predominantly serve purposes other than innovation. They were developed to support tasks other than innovation. Still they affect the society’s innovation capacity, and many times that is a collateral benefit. As we go forward to improve that innovation capacity for the benefit of society, we must keep this reality in mind: even if we call it an innovation system, it is more messy than structured, more accidental than purposeful. And that absence of a mastermind is maybe the underlying reason for the adaptability of our innovation system.