Innovation - A Driver for Economic Growth In Scotland PAUL LEWIS 23 April 2010

Build a globally competitive business environment Grow globally competitive sectors Grow globally competitive companies An economic development agency that helps Scotland… Scottish Enterprise Working with partners to help achieve the Scottish Government’s purpose of increasing sustainable economic growth

Low Business R&D Few Companies of Scale Low Productivity Uncompetitive Demand Side Asset Performance Creativity 15% UK - HEI Patents National Resources 20% Euro wind/tidal sub-sea capability: life science excellence Competitive Supply Side Existing Assets Double To Achieve OECD/ Top Quartile Scotland’s Economic Challenge Double 15%

Sweden3.8% Finland3.5% OECD Average2.2% UK1.8% Scotland1.6% Investment Demand Pull Risk Component >Business Sectors >Companies of Scale >High Growth Companies = HIGH GROWTH Total Investment as % GDP BERD as % Total Investment 74% 71% 68% 61% 38% Research & Development Investment

Productivity Challenge

Participation Drivers of Productivity PRODUCTIVITY EnterpriseInnovationInvestmentCompetitionSkills Growth Population Productivity + 15% (= +£18.7bn GDP) Business base + 32,000 VAT businesses Business R&D spend +£760 million pa Exports +£380m pa

The Evidence “The findings of the Index to date show that innovation may be responsible for the lion’s share of the UK’s productivity growth from Two-thirds of UK private sector productivity growth between 2000 and 2007”. NESTA Innovation Index Innovation is strongly linked to business growth across a range of sectors. It may come as no surprise that innovative software firms enjoyed a much faster growth rate than non-innovative ones (13% average revenue growth per year compared to just over 0%). Council of Economic Advisors report - Productivity and Innovation. “Innovation Nation report” - McKinsey Does Innovation Produce Growth?

Scottish Government’s Economic Strategy Increased priority given to Innovation & Commercialisation, recognised as a key driver of competitiveness Specific priorities to increase Scotland’s performance on innovation, beyond the focus on science & technology - skills & business models as well as product and services. Strengthen links between Scotland’s research base & business innovation to address low levels of R&D. Utilisation of ICT. Innovation - The Successful Exploitation of New Ideas Creation of Customer or Citizen Value. SE Approach to Innovation

Commercialisation Clear line of sight to the market Market-based approach Maximising the sunk investments Focus on “commercial champions” “Addressing significant market opportunities” Business Innovation Broaden innovation beyond science and technology New Visible Innovation Service Increasing the pool of “innovative active” “The successful exploitation of ideas for business growth” Innovation System Improve the business environment for Innovation in Scotland’s key sectors Innovation is industry-specific “Building a sustainable innovation system in our key sectors” Scottish Enterprise Innovation Policy

Web, Info Guides and Tools Promotion Advice Support Winning Through Innovation Events Innovation Support Grant R&D Grant Innovation Specialists Innovation Sector Support SMART Innovation Partners Collaboration Enterprise Europe Scotland Innovation Celebration Get business to do more innovation Get more business to do innovation Business Innovation Broaden innovation beyond science and technology New Visible Innovation Service Increasing the pool of “innovative active” “The successful exploitation of Ideas for business growth” Design, Services & Business Model Innovation Industry- Specific Support

Business Innovation Broaden innovation beyond science and technology New Visible Innovation Service Increasing the pool of “innovative active” “The successful exploitation of Ideas for business growth” Business Innovation Web, Info Guides and Tools Promotion Advice Support Innovation Support Grant R&D Grant Innovation Specialists Innovation Sector Support SMART Collaboration Enterprise Europe Scotland Design, Services & Business Model Innovation Industry- Specific Support Winning Through Innovation Events Innovation Partners Innovation Celebration Winning Through Innovation Stimulating a culture of innovation 1,200 delegates in 2 years Speakers including:- Barry Gibbons, former Global CEO of Burger King Brian Williamson, Chief Executive, TIGER EYE Helen Battersby, ex-Sales and Marketing Director, Gleneagles Hotel

Business Innovation Broaden innovation beyond science and technology New Visible Innovation Service Increasing the pool of “innovative active” “The successful exploitation of Ideas for business growth” Business Innovation Web, Info Guides and Tools Promotion Advice Support Winning Through Innovation Events Innovation Support Grant R&D Grant Innovation Specialists SMART Innovation Partners Collaboration Innovation Celebration Industry- Specific Support Innovation Sector Support Enterprise Europe Scotland Design, Services & Business Model Innovation Tourism Innovation - +£15M

Web, Info Guides and Tools Promotion Advice Support Winning Through Innovation Events Innovation Support Grant R&D Grant Innovation Specialists Innovation Support Service SMART Innovation Partners Collaboration WTI Workshops Enterprise Europe Scotland Industry Specific Support Business Innovation Broaden innovation beyond Science and technology New Visible Innovation Service Increasing the pool of “Innovative active” “The successful exploitation of ideas for business growth” Innovation Case Studies Innovation Celebration Culture of Innovation Design, Services & Business Model Innovation R&D Company Support £30M invested – generating £400M of R&D. Business Innovation

Commercialisation Clear line of sight to the market Market-based approach Maximising the sunk investments Focus on “commercial champions” “Addressing significant market opportunities” Business Innovation Broaden innovation beyond science and technology New Visible Innovation Service Increasing the pool of “innovative active” “The successful exploitation of ideas for business growth” Scottish Enterprise Innovation Policy

Strong supply of IP: Research Assessment Universities efficiency report (Top 10 US vs Top 8 Scotland) Comparable 5-year performance with Denmark But we are not achieving outcomes and impacts sought Commercialisation - How We Compare

Challenge is to significantly increase the impact of initiatives. Some lessons:- –Impacts are highly concentrated - few firms deliver. –Focus resources: market sectors; “bigger” projects, increase chance of success. –Greater commercial focus - from the outset and on people dimension. –Don’t incorporate too soon - wait until the technology is sufficiently mature and market opportunity clear. –Invest more where we have proven market lead and capacity to secure economic results in Scotland - earlier stop/go decisions. The Challenge

Commercialisation Market-based integrated approach Increasing focus on commercial champions Consistent SE approach Maximising the sunk investments “Addressing significant market opportunities”Commercialisation

Commercialisation Clear line of sight to the market Market-based approach Maximising the sunk Investments Focus on “commercial champions” “Addressing significant market opportunities” Business Innovation Broaden innovation beyond science and technology New Visible Innovation Service Increasing the pool of “innovative active” “The successful exploitation of Ideas for business growth” Innovation System Improve the business environment for Innovation in Scotland’s key sectors Innovation is industry-specific “building a sustainable innovation system in our key sectors” Scottish Enterprise Innovation Policy

Scotland has over 70% of the UK’s tidal power which has been estimated at 13 billion kilowatt hours per annum Scotland’s position at the end of a long Atlantic Ocean fetch produces tremendously energetic waves Scotland’s Wave and Tidal Resources

£100 Bn investment Up to 48,000 jobs Up to £38 Bn GVA R&D SFC Research Pools Offshore & Sub-Sea Expertise Renewables Innovation for Scotland Test & Demonstration Energy Infrastructure

 30,00 employed in sector  Large clinical trials infrastructure - commercial and academic  Strengths in major disease areas:- oncology; diabetes; cardiovascular medicine; inflamation Scotland’s Life Science Industry £1.3 billion GVA Edinburgh Bio Quarter; Centre for Regenerative Medicine;

Innovation - the Challenge and the Solution Critical we encourage more companies to engage in innovation – stimulate demand. “Raising the Bar” on commercialisation outcomes Importance of building Innovation “partnerships” to deliver “system level” change in sectors Role for Knowledge Exchange – beyond IP - skills, connections, knowledge/culture.Conclusions

Innovation - A Driver for Economic Growth In Scotland PAUL LEWIS 23 April 2010