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Home > Business Strategy Viewpoints > The Art of Building Momentum for Innovation

Business Strategy Viewpoints

The Art of Building Momentum for Innovation

by Geoff Mulgan

Background

In this highly connected and globalized world economy it has become conventional wisdom that sustained innovation in products, services, and practices is the only route to long-term growth. But there is much less agreement on how this should be achieved. We know that governments everywhere play a central role not just in backing fundamental research and development, but also in helping technologies come to market; yet people are rightly wary of politicians or bureaucrats “picking winners,” and there are as many examples of spectacular waste as there are of success. We know that the competitive pressure of open markets stimulates innovation like nothing else.

But the notion that if only governments got out of the way innovation would flourish is a fairy tale, and close inspection of the underlying technologies of firms like Apple, Google, or for that matter General Electric, shows just how much they depended on public subsidy. In other words, it’s how you support innovation that matters: the fine detail of programs, policies, and networks makes all the difference, and what works in one era may not work in another.

This need to sharpen the focus on how to achieve innovation is the subject of this article, and in it I describe some of the work we do at Nesta, the national endowment for science, technology and the arts here in the United Kingdom.

Nesta, the UK National Endowment for Science, Technology and the Arts

Nesta, the charitable organization which I currently head, was born out of a hunch that the rules of the innovation game are changing. In the late 1990s the British filmmaker, David Puttnam, came up with a new way of combining public support with the creative entrepreneurialism that’s so vital to innovation in practice. Puttnam felt that there was a tremendous wealth of creativity in Britain, across both industry and the arts, that was being starved of capital, and in 1997 he managed to convince the Labour government of the day that an endowment that operated at arm’s length from government and politics would be better placed to take risks and back promising ideas and entrepreneurs. With the passing of the National Lottery Act in 1998, NESTA, the National Endowment for Science, Technology and the Arts (since 2012 just Nesta), was set up with a £250 million endowment from the UK national lottery and Puttnam became its first chairman.

Many other countries set up various kinds of research and development (R&D) and technology development agencies in the last decades of the 20th century. Science parks and technology transfer programs proliferated. But Puttnam believed that their focus—primarily on hardware—was too narrow for the 21st century and that it would be better to take a broader approach to backing creativity and innovation. Since then Nesta has worked as a funder, an investor, and a promoter of the idea that innovation matters far beyond high technology, in the creative industries as well as in manufacturing, and in the public sector as well as in business.

Measurement Tools for a Changing Economy

While most of our work at Nesta is practical, we have also pioneered new ways of measuring and analyzing the changing shape of the modern economy, and now we have the world’s best tools for putting the measurement of the creative industries, and innovation more broadly, on a more rigorous footing. Our Innovation Index—which measures commercial investment in innovation—has influenced statisticians from the Organisation for Economic Co-operation and Development (OECD) to the United States, and it shows that investment in innovation is as much about design and software as it is about traditional R&D and patents. It is now being adopted by many countries as a more accurate measure of innovation.

More recently, we have shown through new measures adopted by the UK government that the creative economy accounts for nearly one-tenth of GDP. The creative industries are defined in the UK government’s creative industries mapping documents as “those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property” (for link to the mapping documents, see under Websites in the More Info section). The latest figures show that the creative economy was responsible for some 2.55 million jobs in 2012, or one out of every 12 jobs in the United Kingdom, and that the largest subset within the creative economy is IT software and computer services, which employs 791,000. Interestingly, employment within the creative economy grew by 143,000, or 6.0%, between 2011 and 2012, whereas in the economy as a whole jobs grew by just 0.7%.

The sector is much bigger than it was a decade ago and is now almost as big as manufacturing, which currently adds around 11–12% to the UK GDP. Nesta has played its part in this growth—through backing entrepreneurial individuals, early-stage companies, mentoring, and running a digital R&D fund for the arts. But we’ve also extended our work out to innovation in the public sector. We run innovation programs in health care and education, and in fields such as services for elderly. Much of this involves backing NGOs and projects within the public sector.

We are also interested in new kinds of economic activity. A good example is “shared economy” approaches, where people pool assets, such as houses, cars, or consumer goods. These are spreading rapidly—providing cheaper services in a more social way and with less damage to the environment. A recent article in The Economist (2013) gave as an example the rented accommodation service provided by a San Francisco-based service, Airbnb, which now offers millions of rooms in tens of thousands of cities in nearly 200 countries. Only these are not hotel rooms but rooms provided by private households. Other examples were of shared cars, household equipment (like drills, used on average for barely 10–20 minutes in their whole lifetime), and books. These point to a future economy that can become much more efficient in consumption than our often very wasteful contemporary capitalism.

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Further reading

Books

  • Acemoglu, Daron, and James A. Robinson. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. New York: Crown, 2012.
  • Diamond, Jared. The World Until Yesterday: What Can We Learn from Traditional Societies? New York: Viking Penguin, 2012.
  • Jacobs, Jane. Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics. New York: Vintage Books, 1994.
  • Janeway, William H. Doing Capitalism in the Innovation Economy: Markets, Speculation and the State. New York: Cambridge University Press, 2012.
  • Landes, David S., Joel Mokyr, and William J. Baumol (eds). The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times. Princeton, NJ: Princeton University Press, 2010.
  • Mulgan, Geoff. The Locust and the Bee: Predators and Creators in Capitalism’s Future. Princeton, NJ: Princeton University Press, 2013.

Articles

  • Bound, Kirsten, and Ian Thornton. “Our frugal future: Lessons from India’s innovation system.” Nesta, July 2012. Online: http://tinyurl.com/pn6s37w
  • Bound, Kirsten, Tom Saunders, James Wilsdon, and Jonathan Adams. “China’s absorptive state: Research, innovation and the prospects for China–UK collaboration.” Nesta, October 2013. Online: http://tinyurl.com/ptdhrtg
  • The Economist. “The rise of the sharing economy: On the Internet, everything is for hire.” The Economist March 9, 2013. Online: http://tinyurl.com/cvaxrnw
  • Wikipedia. “Creative industries.” Updated March 16, 2014. Online: http://en.wikipedia.org/wiki/Creative_industries

Websites

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