Northern Ireland:
Towards a Framework for Smart
Specialisation
July 2014
1
Smart Specialisation theory
Eco-System
Eco-System
Feedback
Coordination
Coordination
Feedback
Rebuilding and Rebalancing the economy
2
Presentation Structure
1
2
3
4
5
6
7
Regional Context
Analysis
Entrepreneurial dynamics
Critical Mass and Priorities
Governance
Implementation and budgets
Measuring the Process
3
Regional Context
•1.8 million inhabitants
•Smallest of UK regions
•Devolved Government
•Large public sector
•Large service sector
•SME dominated
•480 companies out of
80,000 involved in R&D
•Low in EU Innovation
Scoreboard
4
Regional Context
Programme For Government
Economic StrategyStrategic Framework
Innovation
Strategy
(draft)
5
S3 Process Inception
MATRIX
Science
Industry
panel
established
2006
Independent
Review of
Economic
Policy 2009
Northern
Ireland
Executive
Sub-Committee
on the
Economy
Joined S3
Platform
May 2012
Northern Ireland
Economic
Strategy 2030
March 2012
Draft
Innovation
Strategy
2013
Public Consultation
NI S3
policy
‘Expert
Reviewed’
July 2013
Innovation
Strategy
2014- 2025
ERDF
Operational
programme
2024-2020
Public Consultation
Draft
Economic
Strategy
Northern
Ireland
Executive
Sub-Committee
on the
Economy
Public Consultation
Public Consultation
•Public Authorities &
Agencies
•Civil society
•International experts
•Actors of knowledge
•Investors
•Private Enterprises
Economic
Strategy
Steering
Group
Consultation
Response
Document
Economic
Strategy
Working
Group
Consultation
Paper
Public Consultation
6
Regional Context
Economic Strategy for Northern Ireland 2012
Focus on;
• Innovation
• Export Led Growth
• Regional Strengths
“An economy characterised by a
sustainable and growing private
sector, where a greater number
of firms compete in global
markets and there is growing
employment and prosperity”
7
7
Regional Context
Public Sector dominated Economy
- Public sector expenditure 63% of GDP
8
Regional Context
% of BERD financed by Government
BERD as % of GDP
9
Regional Context
Northern Ireland: ‘Innovation Follower’
10
Regional Context
Northern Ireland In-House R&D expenditure 2010
Large Companies
SME’S
Total%
Manufacturing R&D
80.6%
19.4%
73.4%
Service R&D
14.75%
85.15%
26.6%
All Industries R&D
63%
37%
100%
Northern Ireland Research and Development Statistics 2010
11
Regional Context- Challenges in NI
Public
Sector
• Public Sector dominated economy (63% GDP)
Labour
Market
• Service Sector Dominated (Lower value)
Brain Drain
SME
Dominated
• High reliance on Government support for B.E.R.D.
• High number not in employment (High Economic inactivity)
• One-third of students leave to study elsewhere
• Less than half of these (44%) return when degree is complete
• 80% of NI private sector employment is in SMEs (under 60% for UK)
• Only 22% of turnover is in large firms compared with 51% in UK
Innovation • Lagging behind top EU performers in R&D spend
and R&D • 480 out of 80,000 involved in R&D
• Low in Innovation Scoreboard
12
Analysis
Porter’s Diamond
Cluster Analysis
Analysis of Technology
specialisations
FDI analysis
Foresight
13
Analysis
Porter’s Diamond- Strengths
Firm Structure/ Rivalry
•SME Dominated Economy
•SME make largest contribution in the UK
•Companies beginning to be export orientated
•Large increase in BERD in 2010
Factor Conditions
Demand Conditions
•Proximity to Europe, North America & India
•Small region with devolved Government
•Younger population than UK & EU average
•Skills system founded on industry needs
•Outperforms UK & EU in secondary education
•Literacy levels similar to OECD average
•Good Region for pilot projects
•World class Telecommunication infrastructure
•Demand traditionally linked to UK &
Republic of Ireland
•Access to Global Markets
•A resilient Agri-food sector
•Competitive ICT base
•Competitive Science & Technology sector
•Good recent record in FDI
•Clusters in Aerospace, Science & Technology,
business services, Financial Services, Tourism,
Creative Industries
•Collaborative Networks
•Competence Centres
•Innovation Centres
•MATRIX (Science & Technology Panel)
•NISP clustering across technology sectors
Supporting Industries (Clusters)
14
Analysis
Porter’s Diamond- Weaknesses
Firm Structure/ Rivalry
Factor Conditions
•Over-reliance on public sector – Fiscal “Subvention”
•Small private sector
•Low levels of entrepreneurship
•Low Innovation, Patients and absorptive capacity
•Brain Drain’ and workforce migration
•‘BMW’ Syndrome
•Reliance on a few large firms
Demand Conditions
•Reliance on UK and Republic of Ireland
Market
•Fiscal subvention affects demand
conditions
•Weak Skill profile compared to world leading
economies
•High proportion of workforce with no
qualifications
•Low living standards, productivity & wages
compared to leading economies
•Over reliance on a small number of firms for R&D
•Large amount of FDI in low value sectors
•Small private sector with over reliance on public
sector
•Very few cluster organisations
Supporting Industries (Clusters)
15
Analysis
Regional S.W.O.T . Analysis
Strengths









New devolved political system
Increasing Business Expenditure on R&D
A cluster of high value sectors in MATRIX identified
strategic markets such as Advanced Materials, Advanced
Manufacturing, ICT, Life and Health Sciences, Agri-food
and Sustainable Energy
World class ICT infrastructure
Central global location
Small coastal region with small diverse population
New Economic policy context of broad innovation
Excellent Universities and research base
Large public health & social services sector
Weaknesses







Opportunities









Ideal region for EU pilot projects
Opportunity to prioritise identified capabilities such as
Agri-food, Sustainable Energy, Advanced Materials/
Manufacturing, ICT and Life and Health Sciences.
Opportunity to develop ‘open innovation’ through an
‘Open Innovation’ Institute.
Opportunity to provide more access to finance
Opportunity to provide more Leadership in the
development of an Innovation Council and Chief Scientific
Advisor
Opportunity to use the public sector as a driver of
innovation through Innovative Procurement methods
Use of Creativity and design as a driver of innovation
Opportunity for innovative offerings using open data/ big
data
Opportunity to transform industrial legacy into new
strengths such as Creative Industries.
Low number of firms innovating
Low number of firms collaborating
SME dominated economy
Public Sector dominated economy
Poor access to finance and venture capital
Legacy of Industrial decline in Ship Building, Linen &
Textiles
Fractured ‘Innovation ecosystem’
Threats




Cuts in UK expenditure
Lack of innovative culture
Lack of critical mass
Corporation Tax higher than Republic of Ireland
16
Analysis
Analysis of Technology Specialisations
“Cross sectoral market opportunities”
17
Analysis
Analysis of Technology Specialisations
•
•
•
•
•
• 13 members (9 from industry)
• Focus on strategic markets not sectors
• ‘Now sight’ then Foresight
• Involving 100 companies
• R&D and science and technology issues
Emerging relevant technology priorities
Promotion of innovation, R&D, and creativity
Promotion of Collaboration
Overcome the perceived disadvantage of SME dominated economy
Reports build on regional strengths and skills capabilities
18
Analysis
Analysis of Technology Specialisations
“Then focused on more specific cross-sectoral markets”
•Priorities
•Collaboration
•Timescales
“Exploiting capabilities and
market opportunities”
19
Analysis
Advanced Manufacturing
Advanced Materials
Life & Health Sciences
Telecoms & ICT
Agri-food
20
Analysis
21
Analysis
Analysis of Technology Specialisations
External Sales
Exports
Percentage of Total Sales
120%
100%
80%
99%
91%
90%
94%
74%
72%
68%
58%
60%
40%
27%
27%
20%
0%
Adv Man
Adv Mat
Life Sci
ICT
Agrifood
22
Analysis
Analysis of Technology Specialisations
90%
90%
R&D
93%
93%
Exports
12%
12%
Jobs
0%
20%
40%
60%
80%
100%
Proportion of NI Economy
23
Analysis
Foresight
System Scanning
Creates shared understanding of issues
Scenario Planning
Conceptual modelling of market opportunity
scenarios
Analysis & Selection
Prioritisation through negotiations among
stakeholders
Transformation
Establish relationship between future and
present for a change programme
Action Plan
Create structural and behavioural
transformations to exploit markets
24
Analysis
Foresight
Foresight Reports–2 – 5 – 10 year;
• Sustainable market opportunities
• Exploitation priorities
• Relevant wider global science and
technology innovations
• Early wins and longer term gains
• Synergistic actions required
• Enabling networks required
• Investments required
• Further analytical or horizon scanning
work to be undertaken
25
Analysis
Cluster Analysis- EU perspective
Northern Ireland star clusters* are:
Aerospace
Stone quarries
Business services
Construction
Financial services
Power generation and transmission
- Representing 79,700 employees (11% of total NI)
*Stars awarded for industries based on:
Size (within top 10% of employees in EU27)
Specialisation (focus is more than twice EU27 average)
Focus (within top 10% of clusters in the economy)
26
Analysis
Cluster Analysis- top 10 sectors in N.I. within EU context
Business services
Aerospace
Education and knowledge creation
Stone quarries
Construction
Financial services
Processed food
Power generation and transmission
Tourism and hospitality
Building fixtures, equipment and services
0
1
2
3
4
5
6
Total Score
Data extracted from cluster observatory
Size
Specialisation
Focus
Star clusters represent 11% of total NI employment
27
Analysis
Cluster Analysis-N.I. Industry Focus
Business services
Three largest sectors
are ‘star clusters’
Construction
Financial services
Education and knowledge creation
Processed food
Remaining largest
sectors are not ‘star
clusters’ but NI may
have strengths in
these areas
Transportation and logistics
Tourism and hospitality
Building fixtures and equipment
Distribution
IT
0
5,000
10,000
d) NI Industry Focus
15,000
20,000
25,000
30,000
Employees (2009)
28
Analysis
Cluster Analysis- Key groupings
NI below UK average although
above EU27
Proportion of Total Employment
14%
12%
10%
8%
NI below both UK and EU27
averages
6%
NI below both UK and EU27
averages
4%
2%
0%
Creative and Cultural
Business Services
NI
UK
Life Sciences
EU27
29
Analysis
EU Star Clusters in N.I. within EU employment context
Data extracted from cluster observatory
Star clusters represent 11% of total NI employment
30
Analysis
FDI Analysis
Research Capabilities Analysis
• Identified R&D intensive sectors
• Identified Research Capability (R.A.E. , R.E.F. etc)
• Alignment of research capability with FDI sectors
• Prioritisation of FDI sectors using Northern Ireland
Research Capability i.e. CRITICAL MASS
31
Analysis
FDI Analysis- Exploiting N.I. research base
High Correlation with Matrix Market Opportunities
32
Entrepreneurial dynamics
Knowledge Exploitation
Knowledge Generation
“ A wide range of
Innovation
programmes”
Knowledge Exchange
33
Entrepreneurial dynamics
“ A wide range of Innovation programmes”
Driving New Knowledge
Applying New
Knowledge
Technology Led
Competence Centres
Grant for R&D: Industrial
Research
Collaborative R&D
Adoption of
Knowledge
Building
Innovation
Open Access Facilities
Grant for R&D:
Experimental
Development
Knowledge Transfer
Partnership
Intellectual Property
TDI
Design
Developing Capacity
Proof of Concept
Innovation Advice
Innovation Vouchers
Market
Led
Business Innovation Link
Short Term Reward
Long Term Reward 34
Entrepreneurial dynamics
Collaborative Network Programme
“a collection of businesses working in conjunction to share their
complementary strengths and capabilities in order to achieve some
common goal. By engaging in collaborative activities, it is envisaged that
companies can ultimately improve the productivity and compete more
effectively on the regional, national and international stages’
35
Example of S3 Process
Collaborative Networks “working together to achieve a common goal”
“ Government provides Industry Experts as Honest Brokers”
36
Entrepreneurial dynamics
Examples of Collaborative Networks
Plastics & Polymers
Medical Devices
Global Maritime
European Connected Health
Glantek
Whisple
37
Entrepreneurial dynamics
Examples of Collaborative Networks
38
S3 process in action
Recommendations
Consultation
Feedback
Short listing
Innovation ecosystem
Collaborative Networks
Competitive Call
•Route to Market
•Industrial Innovation Communities
•Limited Liability Partnership
•Competence Centres
•Innovation Ecosystem
•Open Innovation
Expression of interest
Industry
Scoping
Facilitation (by Industry experts)
39
Entrepreneurial dynamics
Competence Centre Programme
•Evolution of Collaborative Network Programme
•Based on Competitive Call process
•Potential Competence Centres in:•Sustainable Energy
•Advanced Engineering/ Composites
•Connected Health
•Cloud Computing
•Agri-Food
40
Entrepreneurial dynamics – business
to business mentoring
41
Entrepreneurial dynamics
Innovative Procurement – endorsed as policy across N.I. Government
Phase 1- Proof of Concept
Phase 2- Prototyping
N.I. - 3% of UK Applications
N.I. - 11% of UK contracts
N.I. - 12% of total UK funding
42 SBRI
Source: Technology strategy Board;
Innovative Public Procurement (SBRI)
Un-met Need
Competition Phase
S
B
R
I
Proof of Concept
X
Proof of Concept
Proof of Concept
Prototype
Full Open
Procurement
X
Proof of Concept
Prototype
Governance
44
Governance
Innovation Support Ecosystem
EUROPE
NATIONAL
LOCAL
Framework
/ H2020
R&D Tax
Credits
Government Departments
EU
Structural
Funds
TSB
Enterprise
Ireland
BIS
Invest NI
InterTrad
e Ireland
* Includes NISP, MATRIX, Sector Bodies etc
HE / FE
Other
Support
Orgs*
Public
Research
Institutes
46
47
Critical Mass & Priorities
48
Critical Mass & Priorities
Clusters
Rebalancing themes
49
Critical Mass & Priorities
50
Related Variety & Smart Specialisations
51
Related Variety & Smart Specialisations
Broad Smart Specialisations
1
2
3
4
5
6
A
Agri-Food
Decreased
processing times
Decreased
processing times
Increased
Demand of niche
foods
Intelligent
Energy
Systems
Functional
Food
Packaging & Shelf
life
B
Intelligent Energy Systems
Intelligent Energy
Systems
Intelligent Energy
Systems
Intelligent Energy
Systems
Intelligent
Energy
Systems
Intelligent
Energy
Systems
C
Connected Health
Remote Diagnostics,
Expert Systems
Medical DevicesIntelligent Sensors
D
Adv Man (Advanced
Engineering)
Intelligent Energy
Systems
Advanced
Engineering &
Composites
E
Film & TV production
F
Tourism
G
Social economy/ enterprise
Remote
Diagnostics,
Expert Systems
Decreased design
& processing
times
Decreased
processing times
Increased
attractions
Social enterprise
model in creative
industries
H
Financial services
Big data/ Data
analytics
I
Business Services
J
Could computing
K
Adv Materials (Advanced
Engineering)
Big data/ Data
analytics
Open data/ big
data
Decreased
processing times
Decreased
processing times
open data/ big data
opportunities
Open data/ big data
opportunities/ social
impact
measurement
Big data/ Data
analytics
Connected Health,
Remote Diagnostics,
Expert Systems
Niche food
products
Social enterprise
model in Tourism
e.g. Eco Tourism
Big data/ Data
analytics
52
S3 Priorities
Agri-Food
ICT
Advanced Engineering
Connected Health
Intelligent Energy systems
53
S3 Priorities
Agri-Food
ICT
Advanced Engineering
Connected Health
Intelligent Energy systems
54
S3 Priorities
Northern Ireland
Connected health
innovation
Centre(CHIC)
CHIC targets research in
e-Health
•digital health
•tele-health
•tele-monitoring
•disease management
•and home based care.
ICT
Connected Health
Centre for Advanced
Sustainable Energy
(CASE)
Intelligent Energy
systems
Advanced Engineering
Agri-Food
55
S3 Priorities
ICT
Connected Health
Intelligent Energy
systems
Advanced Engineering
Agri-Food
56
S3 Priorities
ICT
Connected Health
Intelligent Energy
systems
Advanced Engineering
Agri-Food
57
S3 Priorities
ICT
Connected Health
Intelligent Energy
systems
Advanced Engineering
Agri-Food
58
S3 Priorities
ICT
Connected Health
Intelligent Energy
systems
Advanced Engineering
Agri-Food
59
Measuring the Process
Rebuilding & Rebalancing themes
(Economic Strategy Themes)
Innovation &
R&D
Skills &
Employability
Competing
Globally
Business
Growth
Economic
Infrastructure
Key Innovation metrics (Innovation Strategy themes)
Knowledge
Generation
Knowledge
Exchange
Knowledge
Exploitation
Leadership &
Behavioural
changes
60
61
Measuring the Process
LONG TERM INNOVATION STRATEGY GOALS
NI
Moderate
EU regional ranking on innovation scoreboard
11th
UK regional innovation performance
Employment in knowledge-intensive sectors (as % of total employment)
32,200%
NI
KNOWLEDGE EXCHANGE
NI
KNOWLEDGE EXPLOITATION
NI
Total R&D expenditure
(£m)
521
Total spend on non-R&D
innovation assets (£m)
**
Turnover from innovative
goods & services (% of total)
25%
BERD by indigenous SMEs
(£m)
83
Firms with innovation activity
(% of firms)
27 %
Firms applying for a form of
innovation protection (%)
8%
Number of R&D companies
430
45 %
18 %
Private equity backed firms
(per 1,000 VAT businesses)
16
STEM graduates (as % of
total graduates)
Co-operation on innovation
activities (% of innovators)
HE income from collaborative
research (% of total income)
8%
University spin-offs (per
million persons)
27
KNOWLEDGE GENERATION
** To be developed
Measuring the Process
FULL DETAILS ON INNOVATION INDICATORS
Indicator
Measure
Source
Data
NI
UK
EU regional innovation scoreboard
-
PRO INNO
2008-10
Moderate
Follower
UK regional innovation ranking
-
Innovation Survey
2008-10
11 (12)
-
Employment in knowledge economy
as % of total employment
NISP Report
2011
4.6%
6.1%
Total R&D expenditure
£ millions
R&D Survey
2011
568
-
BERD by indigenous SMEs
£ millions
R&D Survey
2011
83
-
Total number of R&D companies
-
R&D Survey
2011
430
-
STEM graduates
as % of total graduates
DEL, HESA
2011/12
18%
22%
Total spend on non-R&D intangible assets
£ billions
NESTA Innovation Index
2009
-
108
Firms with innovation activity
as % of total firms
Innovation Survey
2008-10
27%
31%
Firms with co-operation agreements
as % of total innovators
Innovation Survey
2008-10
45%
47%
HE income from collaborative activities
as % of total income
HE-BCI, DEL
2010/11
18%
12%
Turnover from innovative goods & services
as % of total turnover
Innovation Survey
2008-10
25%
30%
HE spin-offs still active after 3 years
per million persons
HE-BCI, DEL
2010/11
27
16
Firms applying for innovation protection
as % of total firms
Innovation Survey
2008-10
8%
12%
Number of private equity investments
per 100,000 VAT businesses
BVCA, NISP Report
2011
16
32
LONG TERM STRATEGY GOALS
MEDIUM TERM KNOWLEDGE GENERATION
MEDIUM TERM KNOWLEDGE EXCHANGE
MEDIUM TERM KNOWLEDGE EXPLOITATION
Measuring the Process
Proposed ERDF programme Indicators
ERDF Priority
Indicators
Priority 1.Strengthening
Research, Technological
Development and
Innovation
No of R&D projects supported
Total planned investment of R&D supported
projects
No of R&D collaborative projects supported
Research jobs supported
No of companies supported engaging in R&D for
the first time
No of Proof of Concept projects supported
Private Investment matching public support
Priority 3. Enhancing the
Competitiveness of SME's
Number of projects supported
No of SME’S Supported
No of Jobs Promoted
Total Planned Investment
No of projects supported through NI Screen
funding
Leverage of additional direct NI spend to NI Screen
funding
Local Economic Development – indicator/s to be
developed
FEI – Performance indicators for FEIs TBC
Number of Tourism SMES supported
Revenue Increase of Tourism SMEs
Marketing Campaign Return on Investment
2018
Milestone
2022
Targets
400
£150m
1,000
£350m
TBC
TBC
1,500
TBC
3,500
TBC
30
70
£140m
£330m
700
30 [TBC]
450
£30m
30
1000
70 [TBC]
1,050
£70m
70
TBC
TBC
TBC
TBC
TBC
73
10%
£6 per £1
invested
TBC
170
TBC
£6 per £1
invested 64
THANK YOU
#InnovationNI
65