Egils MilbergsCenter for Accelerating Innovation
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The Innovation EconomyCapital
Land
LaborKnowledge
& Intangibles
AgricultureIndustrialKnowledge
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Good News
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Elephants and Dragons: The New Economic Superpowers?
China Overtakes the G3; India is Close Behind
Source: Goldman Sachs, Report 99
Germany
20000
50000
25000
2010 2020 2030 2040 2050
US
China
India
Japan
GDP ’03US$bn
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Competitiveness
THENJapan:• High-cost, high-wage,
advanced tech - “just like us”• We have Entrepreneurial
advantage, they have Industrial Policy advantage
• Rule of Law• IP Protections• Subsidized currency, buying
our debt• National Security: allies
NOWChina: New Mix• Low-cost, low-wage,
advanced tech• Entrepreneurial• Using Industrial Policy• Limited Rule of Law• IP Theft model – FBI:
$300b/year• Subsidized currency, buying
our debt• Nat’l security – peer
competitor
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U.S. R&D Investment the World’s Largest, But Others Increasing Their Investment Faster
Source: OECD Data, Council on Competitiveness
High %R&D/GDP
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Disintermediation of Value ChainResearchInventionProduct Dev.DesignCreativity
EngineeringPrototypingProductionManufacturing
BrandingMarketingDistributionServices
INNOVATION VALUE CHAIN
VALU
E C
APT
UR
ED
AdvancedEconomies
Developing Economies
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PDA
Cell phone
PC
Percent of U.S. households with:100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%0 10 20 30 40 50 60 70 80 90 100 110 120Years since product invented
Television
Radio
ElectricityTelephone
Air Travel
Automobile
Innovation is Accelerating
Sources: J. Gerry Purdy’s presentation “The Next 50 Years in Mobile and Wireless” at Silicon Ventures, Trade press, Industry sources
Internet
Center for Accelerating Innovation
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Continuous Improvement PathDesign to x…
Customer SatisfactionCost Optimization
EntrepreneurshipNew Products and Services Globalized Business Models
Emergent/Disruptive Technologies Organic Innovation Structures
Real Time/Self Configuring Enterprises
short medium long
PotentialActivated By
2 – 3 % annually
5 – 10 %
20 – 30 %
30 – 40 %
Time
US Innovation PotentialInnovation G
ain
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Innovation Model Is Shifting
Development
Linear Model Ecosystem Model
Research
Commercialization
• Single discipline• Hierarchical governance• Closed system• Internal talent• Controlled process• IP hoarded• Product centric• Forecasting demand
• Multidisciplinary• Self organizing
relationships• Open innovation • Access talent everywhere• IP commons• Customer centric • Sense and respond
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ROCKFORD INNOVATION ECOSYSTEM
Creative Class Meets to Develop a Global Innovation Hotspot
Graphic Illustration of the forum
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How Innovation Ecosystems Evolve
Growth Node
InnovationEcosystem
Nascent Relationships
Virtual Cluster Trajectory
None or few firmsGrowth potential
Few to many firmsFast growthKey linkages
Virtualized functionsAccelerated collaboration
Many nodesDense linkagesNetwork to Network
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New Learning Systems
FlexibleSupply Chains
Increased Efficiency
Higher Quality Goods & Services
Better Decision-making
UniqueBusiness Models Larger Markets
Robust ResearchTools
Less EconomicVolatility
Adaptive Workforce
AcceleratedProductivity
Innovative Products& Services
INFORMATION AND COMMUNICATION TECHNOLOGY(hardware, software, applications, networks and telecommunications)
Tax Revenues
CompetitivenessLower CostsMore Job
Opportunities
Revenues
More Profits
Higher Standard of LivingGDP, Quality of Life
Higher Wages
More ChoicesLower Prices
Modified chart from: ITIF
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Innovation Vital Signs
Joint Initiative:
Surveyed 52 Public Reports, 3126 Indicators– 18 Global Reports – 10 National Reports – 15 Regional Reports – 9 Enterprise Reports
Industry Indicator Survey – variety of sources and data types available
Center for Accelerating InnovationCenter for Accelerating Innovation
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BusinessModels
ValueOutputsImpacts
MarketDemand
Macro-EconomicConditions
National Mindset
Innovation Ecosystem Major Subsystems and Linkages
Public Policies
Infrastructure
Talent
Networks
Capital
R&D
Source: Egils MilbergsInnovation Framework
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Global Indicators
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National Indicators
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Regional Indicators
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Enterprise Indicators
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Innovation Indicators Are Evolving (slowly)
1st GenerationInput
Indicators(1950s-60s)
2nd GenerationOutput
indicators(1970s-80s)
3rd GenerationInnovation Indicators
(1990s)
4th GenerationProcess
Indicators(2000 + emerging
focus)• R&D expenditures
• S&T personnel• Capital• Tech intensity
• Patents• Publications• Products• Quality change
• Innovation surveys
• Indexing• Benchmarking
innovation capacity
• Knowledge• Intangibles• Demand and
outputs• Clusters and
networks• Management
practices• Risk/Return• System Dynamics
Source: Milbergs and Vonortas, Measurement to Insight, a paper prepared for the National Innovation Initiative
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What Did We Learn?• Like human health no single indicator captures innovation’s
changing nature and multiple features.• And report frameworks differ widely, no consensus• Measures are for manufacturing not service sector• Available indicators dominated by input R&D and Talent factors • Connection between inputs to outcomes is weak and non-linear • Output indicators focus on economic measures, not quality of life• Sparse “hard” indicators for industry management practices• Limited “soft” indicators on knowledge content, culture, intangibles,
global innovation patterns, creativity, skill requirements• Timeliness, accessibility and presentation format needs
considerable improvement
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Measurement Issues• Knowledge as assets• Global trade in tasks• Service sector innovation• Entrepreneurship• Intangibles • Linkages (beyond geographic clusters)• Innovation management practices• Relationship of indicators to policy• The national mindset and media
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Commerce Advisory Committee Measuring Innovation in the 21st Century
INNOVATION DATA COLLECTION· Improvements in service sector data · Improvement in measurement of intangibles (including intellectual property) · Leverage understanding of innovation through expanded sharing of and access to existing
data in firms STRUCTURE OF THE NATONAL INCOME AND PRODUCT ACCOUNTS· Development of annual, industry-level measures of total factor productivity · Creation of a national innovation account by BEA as a satellite account · Publish economic data based on data on firms as well as establishments to provide more
meaningful estimate of employment in innovation occupations NEW INNOVATION OUTCOME MEASURES· Development of a firm level measure of innovation intensity such as the ratio of annual
revenue from products launched in the last three years to total annual revenue · Development of a market share based measures · Development of a national index of innovation aggregating different measures INNOVATION RESEARCH· Assessment of the effect of collaboration and partnerships on innovation · Analysis of administrative records and survey data to identify entrepreneurial start-ups and
study their early life cycle · Easier access to and analysis of publicly available firm data · Identification of drivers of and impediments to innovation
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Innovation Competitions• Demand side incentive• Expands range of ideas
(e.g. Solar Decathlon)• Attracts innovators
around the world • Inspires students• Empowers entrepreneurs• Raises public awareness
of exemplary designs, products and services
Aachen Innovation Prize
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Concluding Points• US innovation policy is an incomplete
cocktail—boosting inputs not outcomes.• National Innovation Dashboard: toward the
right metrics and value creation• Solve “wicked problems” with innovation
ecosystems• Innovation President essential to lead at
national and global level.
Questions, comments and insights
Egils MilbergsCenter for Accelerating Innovationwww.innovationecosystems.com