The 3 ‘i’s versus the 3 ‘r’s

This blog post is coming to you from the west coast of the United States of America. It is an interesting place to be right now, as the US swings into election mode for 2012 and therefore looks more thoroughly into its soul. A good bit of the public discourse here follows similar patterns to those across the Atlantic: concerns about economic recession, public debt and unemployment – as well as criticism of the behaviour of bankers, property speculators and politicians. But what caught my eye was an article in the local newspaper here, reporting on an opinion poll that found most Americans feel that 2011 was a bad year; and yet they viewed 2012 with optimism.

Of course 2012 may turn out to be as bad or worse for all of us. Many commentators are predicting exactly that. But I cannot help feeling that the irrepressible American tendency to be optimistic gives them an edge, and a sense of purpose and energy that Europeans sometimes lack.

And here’s something else that attracted my attention. A local politician here said recently that the country will be in peril if everyone just focuses on what he called the three ‘R’s: ‘regulation’, ‘risk’ and ‘routine’. What was needed much more was a push for three ‘i’s: ‘innovation’, ‘information’ and ‘initiative’. Events over the past 3-4 years have pushed people to look for more regulation, when in fact there is not that much evidence that we had too little: rather, we had too little effective application of regulation, and not enough appropriate information. In the end increased regulation usually settles down as bureaucratisation, and a mentality in which caution stifles the drive for renewal.

Universities are in exactly this position: where some believe that more regulation and less autonomy is the answer. It almost certainly isn’t. More responsibility and a greater sense of community is needed, but that’s something quite different.

My hope for 2012 is that we don’t all become mesmerised by the problems we now face, and that we allow innovation and initiative to flourish, while also recognising that we need to do this as a community with a common cause.

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PRTLI Cycle 5 – a broad outline

All credit to the government, and to the Taoiseach and the Minister for Enterprise, Trade and Innovation in particular: this is a very significant investment in the state’s R&D capacity. Details can be found here. The total investment in this cycle is going to be €358,729,000. In the context of the current economic climate, this is a courageous and entirely correct policy decision. Also to be welcomed is the fact that around €260m of that will be capital investment, which is where the most urgent needs are now to be found.

As this morning’s report in the Irish Times indicated, the biggest winners are Trinity College Dublin and University College Dublin, but most universities received strong support, including DCU: all our key proposals have been supported with significant funding. Some institutions may not have received what they were hoping for, but it seems to me that the overall balance is not distorted.

A more detailed analysis will follow later today, where I shall in particular look at the content of the successful proposals and consider how that may help Ireland’s drive to be recognized as an innovation hub.

Innovation Ireland

Within a few hours of the launch of the report of the Innovation Taskforce I was sharing a platform with one of its members, Chris Horn, at a small public meeting in Rathfarnham. The topic was science and education, and both of us were able to use the report in making some of our key points. It seems to me that the territory covered by the Taskforce report is one that has begun to interest the public, with at least a vague realisation dawning that we cannot return to old-style employment creation in labour-intensive industries. The game has changed, and we must adapt. What this report is really about, therefore, is how we go about doing that.

So how do we go about it? Well, in 60 different ways, if you use the list of recommendations in the report as your point of departure. Probably rather more, actually, as some of these recommendations are really clusters of related proposals. These range from the high level and visionary, via the large-scale operational, to rather more minor ones. Some are practical and easily capable of implementation, some are highly aspirational, some are fairly intangible. If you were to do what perhaps some will do, and open the report immediately  at chapter 14 with its list of recommendations, you would be able to follow these easily enough, but you could perhaps wonder what the big overarching idea is. In fact, the foundation of the report is the notion of an innovation ‘ecosystem’, and the recommendations are intended to give effect to that. Like many such concepts, it can become a tad grating when repeated too often, but let us stick with it. The term is of course borrowed from science, where it refers to the interaction between organisms and their physical environment. It’s actually quite a useful metaphor, as it allows an exploration of the interaction between what the report calls the ‘different elements’ (including entrepreneurs, education, tax, finance, public institutions, R&D, and so forth). Actually, the ecosystem could have been developed a bit more, distinguishing for example between the ‘organisms’ (entrepreneurs, educators, officials etc) and the ‘physical environment’ (taxation, finance etc).

The report then lists six principles that guide the content. As there were also six ‘elements’ in the ‘ecosystem’ I was expecting direct links between these, but that did not turn out to be the case, though there are some overlaps. Still, the principles are sensible enough, and set out the approach that will need to be adopted for Ireland to be an innovation hub: a focus on entrepreneurship, the availability of seed and venture capital (slightly irritatingly referred to as ‘smart capital’), an innovative education system, the prioritisation of government-identified flagship projects, the focusing of research projects to address national priorities. You may notice that’s only five principles: I omitted principle number 2 because, to be honest, I couldn’t make anything tangible of it (a call for a ‘coherent national effort’ to establish, attract and grow enterprises).

So what do I think of all this? Well, we need to be able to wave this report at anyone who may think of investing here in a high value setting and who wants to be convinced that we are serious about a high value knowledge economy. Many of the questions or concerns that such a person might have are addressed and/or answered here. I suspect that it will help us to raise our game as a country. If I have a quibble, it is that this is not particularly a visionary document; it focuses on achievable actions and the elimination of hygiene factors, rather than a big vision thing with one or two key headline-grabbing audacious proposals; worthy rather than exciting.

The report does two rather more specific things – one good, one (as I would argue) bad. The good one is that it recommends raising our national R&D spend to 3 per cent of GDP, over a period extending to 2020. Whether this is going to happen, or how, will be the subject of a post early next week.

The bad one is the promise of a specific number of jobs. The Irish Times had warned us that the report would hold out the prospect of creating 120,000 jobs. In fact it suggests 117,000. But the methodology used for determining the number is to my mind highly doubtful, drawing on job creation in Silicon Valley start-ups and enterprises and extrapolating from that a very notional figure that might (or as the report acknowledges, might not) apply in Ireland. And it throws around other possible metrics based on other potential conditions. But as we have discussed in a previous post, this attempt to forecast directly created jobs is not sensible, and in any case not achievable in this form.

Finally, the report dwells quite a bit on higher education, and the handling of intellectual property: again, the subject of another post over the next day or two. But so as not to keep you in suspense, what it says on higher education is not perhaps the strongest part of the report.

Still, even if this report is not perfect, it is what we have, and we must run with it. The country’s future is at stake.

Ireland’s EU Commissioner: Research, Innovation and Science

The European Commissioner-designate for Research, Innovation and Science, Ms Máire Geoghegan Quinn, had her confirmation hearings before the European Parliament last week, and by all accounts acquitted herself very well – the Irish Times described her as ‘unshakeable in her self-confidence’, which perhaps is the more remarkable as this is a new area for her. But she was clear and emphatic in her views, by all accounts well informed, and she drew a favourable response from the MEPs present.

However, her views are also reported to have created some tensions between Fianna Fail and the Green Party back in Ireland. The Commissioner designate does not of course represent Ireland at the Commission, much less the government parties, but of course she was nominated by the Taoiseach and to that extent what she says can have a political dimension back home. At the confirmation hearings she is reported to have expressed support for research into nuclear energy and genetically modified crops, both of which were rejected by the original FF/Green programme for government, presumably at the instigation of the Green Party.

If the reports of her statements at the hearing are correct, I think it is important to express strong support for the Commissioner designate. As I have mentioned previously, I am extremely uneasy about a commitment (for whatever reason) not to undertake research on something: rejecting additional knowledge for ideological reasons is not a respectable position and should not find its way into anyone’s programme. In fairness, individual Green politicians have been open to research and debate on nuclear power, while however still declaring that they will remain opposed to its use. I am not aware of any similar openness to a GM foods debate.

It would be hugely damaging for Ireland to be seen as a place that is hostile to innovation and research, and these elements of the programme for government always seemed to me to be counter-productive in our current ambition to develop an effective knowledge economy. I hope that Ms Geoghegan Quinn’s strongly stated views have an impact back in Ireland and that they prompt us to redouble our efforts to provide ethically aware research leadership in all areas, even those that make some of our politicians uncomfortable.

Universities: finding a third mission

When in March of this year Trinity College Dublin and University College Dublin launched their joint initiative, which they branded an ‘Innovation Alliance,’ the following comment appeared in the announcement:

The new 4th level TCD / UCD Innovation Academy will begin the process of defining and mainstreaming innovation as the 3rd arm of the university mission alongside education and research.

In many ways the two institutions’ announcement downplayed their existing initiatives that had developed a ‘third arm’, but in any case such an additional element of core mission had by then established itself quite firmly in all the Irish universities. It is probably well accepted everywhere that there is an additional element of core activity in all universities alongside teaching and research. TCD and UCD have labelled it ‘innovation’, but with no disrespect to the two universities that may be too vague to explain what this additional element might entail.

Traditionally many academics would probably have described the academy’s core activities as ‘teaching’ and ‘scholarship’. As more emphasis came to be placed on the view that universities should develop and extend knowledge rather than just disseminate it, ‘scholarship’ was transformed into ‘research’, with the change implying that there was an imperative to publish the outputs from scholarship. Published research (particularly in high profile publications) allowed the academic community to share information, and where possible pass on relevant elements of it to a wider (and often non-academic) audience.

Over time, a third core mission began to be identified. Some of the origins lay in the desire of governments to secure a wider benefit from the public investment in higher education. Rather than just focusing on providing the final element of education for school leavers, universities were increasingly expected to transfer knowledge more widely to the community in settings where that transfer could secure social or economic benefits, for example in supporting community work or in transferring intellectual property to those who would most effectively be able to exploit it for the purposes of economic activity and trade. Some of this latter activity was called ‘technology transfer’, but the overall mission is more usefully described as ‘knowledge transfer’ or, indeed, ‘knowledge exchange’. The latter is at the heart of what in the United Kingdom has become known as ‘third stream’ activity, so called because it has been funded under a third stream of resources (with teaching and research) by the funding bodies. An analysis of that funding in the British system can be seen here.

It seems to me to be undoubtedly right that universities and other higher education institutions should be expected to disseminate the benefits of their knowledge and expertise widely; the old idea of educating the elite has long been dropped in strategic rhetoric, but must also be transcended in practice. That this should be a third mission again seems to be obviously right. But for this to make a difference in practice it needs to be driven, both in the sense that it needs to behave a proper place in the organisational structure and that it needs to be accepted and championed by the faculty. That in turn requires that it is based on excellence and integrity, and that it is recognised in career development.

Not all third mission activities need to be the same in all universities, in that there should always be some diversity of mission more generally. But what is necessary is that in each institution there should be a clear strategy for this, which is understood and accepted and which has identifiable targets and outputs. Times being what they are, some of it will be about diversifying income streams. But the heart of this mission is the same as for any other part of the academy: to discover, develop, disseminate and transfer knowledge for the benefit of society.

Debating innovation

A few days ago on June 18 the Oireachtais (Irish Parliament) Joint Committee on Education and Science held a session on ‘Business Innovation and Research’, and heard presentations from invited persons on the topic of research as a driver of economic development. One of those invited was Professor Frank Gannon, Director General of Science Foundation Ireland. From the report (which can be read here) there was a lively discussion. It makes for interesting reading, because the politicians present were making a serious and constructive attempt to understand the significance of investment in science research, and while the questions were probing they were not hostile.

Two issues did arise that are worth a comment. One of the members of the Committee asked the following question:

‘Professor Gannon touched on the issue of outcomes. What is the overall budget of Science Foundation Ireland since it started in 2003? He said its focus was on knowledge which would be useful in the economic context and spoke about jobs in terms of the people working for the organisation – the researchers, scientists and the leverage jobs created. However, has SFI a measure of the number of jobs it has provided in the real economy as a result of the investment in researchers and scientists? I am keen to see what the outcome of that investment is.’

In the discussion that followed the question referred to above, Frank Gannon indicated that any statistics that could be compiled in response might be suspect, but the questioner encouraged him to seek them, referring to any such data as ‘qualitative information.’ As unemployment has now gone back up to 10 per cent, it is probably tempting for us to revert to seeing job creation as the key yardstick for assessing the case for or outputs from any investment. But that is a mistake. It is highly unlikely that, in many contexts, we will ever again be able to translate public expenditure into jobs in such a direct way. That is not to say that investment in research cannot result in employment, but rather that it will not do so directly. The number of researchers employed in a research programme is a direct consequence, but in the bigger view that is neither here nor there. The real effect is that critical mass in research will create an environment in which corporate investment in the areas where that research is strong will become much more attractive. So for example, the kind of investment we will want to chase will now often be in the biopharmaceutical sector; any company contemplating such an investment in Ireland will probably do so only if they are satisfied that high level research is being conducted in Ireland and that relevant PhD graduates will be available. The latter graduates will also increasingly be needed for indigenous start-ups in that sector. So our research programmes may create little direct employment, but will be indispensable for investments that can create many jobs.

The other issue that was raised in the discussion was the fear of failure. As a country we have worked ourselves into a mindset where, whenever something goes wrong or a mistake is made, we want to identify the person responsible and do something to them which is described as ‘holding them to account’, but which in  reality is subjecting them to derision and scorn. The effect of this is that many who are guiding our key decision-making base their actions on caution and the avoidance of risk. At this point in our national development that could be deadly. We need to innovate like crazy, not just in small businesses and large companies, but in the public service, in politics, and indeed in the universities. We must stop wanting to punish failure, and initiate a new mindset that understands that we must try new things, not all of which will work; and that the correct response to failure is to learn from it and start again. Let us bring the blame game to an end.

My goodness, we’re struggling with the innovation idea

For about the last four years we have, as a country, been courting the idea of innovation as the driver of the economy. Maybe it all started when we read Michael Porter’s argument that as an economy matures it needs to move from being investment-driven to being innovation-driven. As we digested this, our approach to competitiveness was adjusted, and the government adopted the Strategy for Science, Technology and Innovation. More recently we have obscured the innovation agenda slightly by moving the language to concepts such as a ‘smart economy’ – which sounds good but doesn’t really disclose through the label what it means; but on the whole the innovation agenda is still alive.

At any rate, I hope it is, because there is no shortage of people wanting to have a go at attacking it.  Most recently this has been Constantin Gurdgiev, the editor of the magazine Business and Finance, though in this case writing in the Sunday Times newspaper. I don’t believe that the Sunday Times has published the piece on its website, so you have to go with my summary for the present.

In a nutshell, Gurdgiev believes that as a country we are seriously wasting money. He argues that all the investment in Science Foundation Ireland will yield peanuts in terms of start-ups and commercialised intellectual property. He believes that doubling the number of PhD graduates (a key goal of the Strategy for Science, Technology and Innovation) is ‘patently absurd’; and he argues that our universities are nowhere (and will be nowhere) in terms of global competitiveness. I am finding it more difficult to identify what he is arguing for (as distinct from what he is arguing against), but it seems to be more focus on ‘communications services’; he also mentions ‘marketing, sales and distribution.’

The first thing to say about all this is that we are actually going to go nowhere at all if we are not single-minded about what we are doing. If we adopt scientific innovation as our iconic aim today, but drop that tomorrow in favour of, say, being the home of global PR, and then something else next month, we won’t be much good at any of them and we won’t be taken seriously. This country put innovation – understood as investment in high value science and technology – at the heart of its development plan three or four years ago. This is not an agenda that produces all its benefits in eight months, and we had better stay consistent, because if we give any indication of loss of resolve now we lose all credibility. Companies have invested in R&D located in Ireland on the basis that we are investing in innovation, and right now there are people in laboratories all over Ireland working on discoveries that will provide both technological innovation and commercial focus. All of that can easily travel somewhere else. And we would have very little to replace it with.

We need to get out of the mindset of bean counters, in particular the idea that what we must count is jobs. Innovation is not in the first instance about jobs. It is about economic progress, and about work, and about wealth, and about social benefits. Some of that my result in what traditionally we have called jobs, but even where innovation creates jobs the link may be too indirect to allow anyone to count anything much. But what innovation will deliver is a potential for serious economic growth. Jobs are a by-product of that.

If this country dodges the demands of an innovation economy, then we had better get ready for sustained decline. We have no other offers on the shelves, and none we could put there with much credibility. We need to be consistent, and we need to stay the course.

Commercialising university research

Today I attended a meeting at which I was closely questioned by a businessman along the following lines. What, he wanted to know, had been the benefit to the country of the hundreds of millions invested in university research programmes? How many jobs had been created? How much taxation had been secured for the state? In fact, how much value (if any) was all this research generating? Not particularly waiting for my answers (which I think he felt could only be ‘nothing’ and ‘none’), he said the time had come for the government to stop funding this unaffordable luxury and give the money instead to the IDA (the foreign direct investment agency of the state) so that ‘real jobs’ could be created.

I suspect that this is a beguiling argument for some, but it needs to be stopped dead in its tracks. The problem is, many academic leaders will answer such questions by saying that investment in research is an investment fore the long term, that it cannot yield results quickly, that it creates the right mood for international investors, that product development arising from research in life sciences takes a generation, and so forth. All reasonable points, but they are argument losers in this setting.

Still, we need to make it clear in public debate that the old model of taxpayer investment in economic development is dead: building advance factories, filling them with relatively low level manufacturing, or more recently call centres, paying international companies grants and subsidies to make their investments here worthwhile – all these are yesterday’s game and won’t come back. It’s not that we won’t be able to create jobs any more, but rather that the methods have changed. In the past you could almost calculate that just so many Pounds (or Euros) would create an industrial job. Today we have no idea what the cost is, because it is not a direct process. Most of the high value jobs that we must create in the future will have been made a realistic prospect not by direct grants and subsidies (now more difficult anyway under EU laws and other regulations) but by the steady creation of a knowledge infrastructure that will allow the companies’ own investment to be a productive one.

I still believe that the announcement by Trinity College and UCD recently that their Innovation Alliance would create 30,000 jobs was a bad misjudgement, because it won’t. Even if wholly successful, their Alliance may not create 3,00o (or even 300) jobs. But this alliance, and other initiatives already long under way by other institutions or yet others still to come, may create conditions in which major investments by others will be attractive and will create significant employment.

The key issue in this is how we develop, protect and commercialise intellectual property arising out of research. Some research will not in any immediate sense produce IP that can or should be commercialised. But some will, and what this requires is an infrastructure of expertise and assistance that identifies the potential value of research early and puts in place the supports that will move it towards commercialisation, either through an appropriate spin-out corporate structure or the licensing of the IP. All universities and most other colleges now have incubator facilities that have this capacity, and these various facilities now require appropriate inter-institutional coordination (preferably initiated by the institutions themselves) to ensure that they create and maintain value and pool resources, particularly expertise.

We cannot go back to being the Ireland of 1995. That’s gone. We need to ensure that the Ireland of 2015 built on the successful commercialisation of knowledge and research. Without that it will not have recovered its prosperity. And unless businesspeople and politicians of all shades absolutely understand that and work with it we are doomed to long term decline.

The road back to an exporting economy

The trajectory that led us to the particular circumstances we are now experiencing was becoming evident to some observers by the middle of this decade. It is interesting to quote what was said in the 2006 Annual Report of Ireland’s National Competitiveness Council:

‘While the economy has continued to grow strongly in the first half of this decade, the underlying impetus to this expansion shifted from the broadly-based, and export-led, growth of the late 1990s to a growth pattern that by 2005-06 had become entirely dependent on domestic consumption and investment.’

Of course other countries are experiencing the current recession also, as it is a global phenomenon; but Ireland’s position has been particularly stark. The problem for us is that we have developed a standard of living and a cost base that cannot be sustained on the back of domestic consumption only, as our economy is far too small for that. That fact was obscured for a short while by the abnormal volume of construction, but it was bound to become apparent to us sooner or later as demand for such levels of construction fell. So now we either need to scale back our expectations and living standards quite substantially, or we need to start selling our goods and services again in international markets. But here the problem is that what we were selling 10 years ago is now being sold at much lower prices by others; we are no longer competitive in those areas. So we need to start selling something new.

The goods and services we should now be exporting need to be much higher-value, and need to be innovation and knowledge-driven. We need to be offering new processes, new product design, new intellectual property to others who will then do the basic production. In short, if we are to become an exporting nation again we need to to support and develop the knowledge society.

The government has been right to support and fund high value research. We now need to make sure that this is being conducted in institutions whose overall funding base ensures sustainability.  This is the only realistic way out of the recession and back to prosperity for Ireland.

The innovation imperative – but what does it mean?

As we struggle to come to terms with the economic crisis and the changing economic landscape, one word that is on many people’s lips is ‘innovation’. There is a belief that if we are to emerge successfully from our current problems, we need to be a country in which innovation thrives. This is a view that I share. But when we come to consider what ‘innovation’ actually means, it is somewhat more complex.

Most modern thinking on innovation as a tool of economic regeneration are linked to the idea, espoused in particular by Michael Porter of the Harvard Business School, that competitive advantage is secured in particular through adding value to products and services on a ‘value chain’, in particular through research and development, and design. The location where this particular type of value is added is likely to have significant competitive advantages in the global market. This is what is meant (or what should be meant) by a reference to ‘moving up the value chain’ (the lower levels of which are mainly concerned with production).

In Ireland right now, moving up the value chain has become an imperative, and indeed this has been part of the language of economic and trading policy for the past few years. Innovation has been consistently mentioned as a national objective. But has it been widely understood what that means?

In a report issued by the OECD in 2007 (Moving up the Value Chain) it was noted that developed countries were running the risk of losing competitiveness in the traditional sense – i.e. losing ground in relation to labour costs, material costs, energy costs and infrastructure – without gaining a sufficient advantage in the ‘new’ competitiveness of knowledge and entrepreneurship.

But there is a particular challenge here for these turbulent economic times: the new innovation-based competitiveness is not cheap and requires very significant up-front investment. It needs a super-charged education system at all levels, a world beating technological infrastructure, a legal system that supports and protects innovation and intellectual property, and an environment that promoted entrepreneurship at every turn. Right now we are facing the temptation to cut costs everywhere, and there is often no adequate distinction drawn between costs and investment. The truth is, we need to invest in innovation like crazy. The things that brought us the Celtic Tiger are gone, and cannot be recovered even when the global recession disappears. And if we hold our investment in innovation until then, we will be too late.

We are standing at a crossroads, and we are in peril. And if we hesitate now, we are doomed. But if we do the right thing, we have every opportunity before us.

In fairness to the current Irish government, it has understood all this, and many of its moves are the right moves. But it needs to explain it better, and to help people to understand that this is everyone’s future, not just that of a few academics. The innovation ecosystem of the universities will, directly, create very few jobs (and I think Trinity and UCD were very unwise to promise 30,000 jobs in their recent programme); but it will establish the setting in which Ireland Inc will create and sustain hundreds of thousands of jobs and a realistic level of prosperity.

We have no choices now except this: to be an innovation economy. We need to understand what that means, and we need to move with determination. Innovation, properly understood, should now trump everything.