1. Innovation Systems in Transition by Erkki Ormala Professor of Innovation Management Aalto University, Business School

2. The role of governments –Justification –Innovation Policy Challenge –Innovation systems in transition –International/national issues Examples: –EU R&D&I Landscape –Digital Single Markets –Case Finland

3. Fundamental changes taking place Globalization Knowledge-based economies Digital society

4. Globalization From global capital and material flows to – global use and competition of knowledge assets – global Web-enabled knowledge flows – global mobility of knowledge workers – flexible relocation of operations The emergence of extended company and network orchestration

5. A knowledge-based age Technical progress Productivity improvements Economic growth Job & wealth creation

6. Innovative Firms have higher growth rates have higher productivity gains and create more jobs Innovation accounts for half of the economic growth and is the engine of structural economic renewal

7. Digitalization will change Innovation Environment/energy efficiency Media Digitalization of services/ecommerce Universal access/BoP Remote control/maintenance 3D printing/future manufacturing eLearning eHeath 7

8. Innovation networks enable new ways of knowledge creation and utilization Demand orchestration Innovation orchestration Architecture orchestration Supply orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Demand orchestration Architecture orchestration Supply orchestration Innovation orchestration Core Partners with orchestration capability to extended enterprise Core From traditional large enterprise

9. ICT is an enabler for low carbon solutions SMART2020 Report: ICT could reduce CO2 emissions by enabling reductions in other sectors up to 15 % of total global emissions by 2020

10. SMART 2020:The enabling effect of ICT Source: Climate group/GeSI: SMART 2020 Smart motors optimized motors and industrial automation Smart logistics Efficiency in transport and storage Smart buildings Better building design, management and automation Smart grid Better monitoring and management of electric grids In 2020, ICT could enable reductions of 7.8 Gt CO 2 e

11. EU Media Futures: Key Trends http://ec.europa.eu/information_society/media_taskforce/pluralism/forum/index_en.htm http://ec.europa.eu/information_society/media_taskforce/pluralism/forum/index_en.htm Digital convergence From linear value chain to a platform game Changing consumer behavior Disruptive innovations come from global players

12. 12 The mobile device is the centerpiece of the consumer purchasing journey in physical- world retail 12 Easy and exciting ways to discover the world around you Instant access to information and reviews that help in purchase selection Cost-effective ways to distribute purchase & loyalty incentives to consumers Efficient solutions for trading between businesses in markets These new boots have great ratings and are now on sale with this e-voucher. I’m sure I have earned them! I just received order confirmation for those t-shirts that are out of stock. I get much better pricing through this marketplace. ✔ Let’s go to the closest 7-Eleven so I can top- up the mobile with my earned loyalty points. By pointing with my phone at the Virgin poster I signed up for a chance to win tickets to Madonna’s concert – and also got her new single free of charge from the Virgin store.

13. Connecting the next billion “In 10 short years, what was once an object of luxury and privilege, the mobile phone, has become a basic necessity in Africa.” Paul Kagame, President of Rwanda

14. Affordability, access, motivation and competence – key drivers in reaching the next billion Access and affordability Motivation Compe- tence Access to technology and service both in terms of coverage and affordability. Capability to use the service including literacy and IT skills as well as usability, accessibility and educational activities. Personal value of the device, server and content – availability and awareness of. locally relevant and life- enhancing services. NOTES

15. Government involvement; Justification Market failure –R&D and innovation have large externalities which the companies cannot approriate Systemic failure –Institutional and policy mismatch will create a conflicting incentive landscape

16. Innovation Policy - a Challenge for Governments Predictable environment R&D and education Entrepreneurship and commercialization Favourable market conditions Institutional and regulatory reforms Systemic approach 16 © NOKIA EO.PPT /02.07.02

17. Institutional Reform From control towards facilitation and building framework conditions Delegation of powers, trust, respect for diversity and expertise Flexible structures, team work, issue management Personal incentives; clear targets; transparency; mobility Intersectorial coordination; open internal and external communication (web)

18. Regulatory reform Towards horizontal regulation Towards global solutions Towards industrial self-regulation Towards policy cooperation Towards building trust Towards predictable environment Towards speed and flexibility

19. 19 © NOKIA Elements of Favorable Innovation Environment FIRM Good understanding of the changing landscape Access to top-level research and high quality experts Easy access to Broadband; ability to use ICT Favourable regulatory environment; harmonized rules; IPR provisions; company statutes; taxation, etc Rich fabric of private partners; enabling vertical and horizontal integration Access to VC funding and support Access to market; Cost efficiency Macro economic stability Access to raw materials

20. Systemic Approach Innovation Policies are an essential part of governments' strategies to attain macroeconomic stability, economic renewal and full employment Innovation Policy is a horizontal policy which needs to be coordinated with a number of other policies (e.g. economic, industrial, education, regional policy) Innovation Policy should cover the whole system from knowledge generation through diffusion to knowledge utilization and commercialization (Innovation system) Networking is an essential part of modern Innovation Policy New structures and competencies are needed to facilitate effective Innovation Policy Innovation system is as weak as its weakest link

21. Future Innovation Policy STI Policies Corporate Governance Framework conditions Systemic Approach Predictable environment New organization and management principles Knowledge Sharing Regulatory and institutional Reforms Entrepreneurship

22. Examples

23. European R&D and Innovation Landscape Good, but fragmented scientific performance Declining industrial R&D Insufficient innovative performance Increasing competition from outside Low interest in science and engineering Inability to mobilize sufficient resources to respond to the global challenge

24. European R&D cooperation architecture Eureka EU R&D Framework Programme EMBL Cern ESA Cost ERA, OMC National Programmes and Institutions EIT JTIs

25. Horizon 2020 Excellent science: ERC, FET, Marie Curie actions, research infrastructures Industrial leadership: leadership in enabling and industrial technologies, access to risk financing, innovation in SMEs Societal Challenges: Health, food, clean energy, transport, climate, inclusive societies Budget by 2020 80 billion €

26. EU Digital Agenda 2010 Action areas of the Digital Agenda A vibrant digital single market Interoperability and standards Trust and security Fast and ultra fast internet access Research and innovation Enhancing digital literacy, eskills and inclusion ICT-enabled benefits for EU society International aspects of the digital agenda Implementation and governance 26

27. Completion of the Digital Single Market by 2015 would increase EU GDB at least 4% by 2020 copyright reform data privacy consumer protection intermediary liability radio spectrum standardization payment systems WEEE recycling schemes

28. Recent Developments 2008-2015 Strategic Centres for Science, Technology and Innovation (SHOKs) 2008-2015 University Reform 2010; Aalto University R&D Tax Incentive 2012 (discontinued 2014) Fiscal Venture Capital Incentive 2012 Significant cuts in R&D&I funding 2016-

29. The way forward Respect the new innovation paradigm Create an environment that attracts creative top talents Improve the framework conditions, innovation funding schemes and VC business opportunities Develop globally leading universities with a strong leadership and PPP culture Educate people for innovation, not only for research Look for the scientific frontier and cross disciplinary opportunities Build industrial ecosystems to gain leadership in the new emerging value domains Capture the critical knowledge assets to enhance value generation in the network economy

30. Four stages of competitiveness of a country DECLINE EU, Finland? Concentration on production factors Concentration on prosperity Concentration on innovation Concentration on investment Michael Porter ’Competitive Advantage of Nations’

31. Thank you