Bridges for Innovation Between
Public & Private Sectors:
Experiences, Failures & Potentials
Phil Cooke
Visiting Prof, Center for Innovation, Bergen
University College, Norway.
Presentation to Public Innovation
Conference, Rena, Norway, 26 February,
2015
Structure of Presentation
Evolution of Public Innovation
•
•
•
•
Experience of Public innovation was
once strong. Neo-liberal emphasis
on “market” saw it fail
Yet, due to wars, military
innovation & large scale public
ownership of production facilities
(coal, steel, shipbuilding) and
utilities (telecom, energy, water
etc.) the “model” retained potential
Keynesian pact between public
innovation (e.g. Donald Davies,
NPL, inventor of packet switching
[basis of Internet]) and private
commercialisation (ARPANET >
Google, etc.)
The newer Israeli “model” widely
admired translation of public (often
military) R&D for Civilian purposes
Treorci, Rhondda, Wales (2013)
Commemoration of D. Davies
Norwegian Model of Public Innovation
• Arose strongly in new Oil &
Gas Extraction & Equipment
Industry in the 1970s
• Establishment of Statoil & NPD
regulatory regime in
“Entrepreneurial” phase (after
Engen, in Fagerberg et al.
2009)
• Followed by “Early
Consolidation” phase
“Norwayisation” of
engineering supply industry
(Kvaerner, Aker > concrete
drilling platforms > Condeep
“Troll A” – overall - K30-K40
jobs)...........
Norwegian Model (continued)
• “Maturation” phase: emergent NIS/RIS exposed
to tough competition but also enhanced
“Goodwill Agreements” R&D from NRC in
universities (expensive; big tax reliefs – 78%)
• Followed by “Reorganization” phase: decline of
infant industry protection & more
liberalised/globalised NIS/RIS. Oil price $9 per
barrel (!) in 1986.
• NORSOK (1993) consortium to cut NIS/RIS costs
by 50%. Oil policy& Regional policy interact. High
NRC and private R&D expenses as NIS/RIS
liberalises (e.g. RUTH Program – successful > Shell
Ullrigg Centre @ Stavanger)
Eclipse of the Norwegian Public
Innovation Model in Oil & Gas
• Finally, “Second Consolidation” phase seeks to halve
innovation costs again. Simpler, cheaper innovations;
job losses; NRC & Private R&D increases for
innovations in.........
• Subsea technologies, IT controls & floating rigs; more
involvement from SMEs; organisational innovations
help cut headcount costs but higher oil price gives
some protection.
• Aker-Kvaerner merge & internationalization grows
(Azerbaijan, Angola, Nigeria); Statoil & Hydro Gas & Oil
merge which completes the ending of Norway’s public
innovation regime in oil & gas.
Israeli Model of Public Innovation
• Recognise and recruit talented citizens and inmigrants
• Realise Civilian Innovation Potential from
Commercialised Military and Other Public
Investments
• Establish (Yozma) venture capital pool
• Establish decentralised National Incubator
programme(s)
• Aim to commercialise innovative publicly-funded
knowledge as Listed (NASDAQ) start-ups and
spin-offs
Benign Variant: Kinrot Ventures &
Cleantech Incubator
•
Kinrot, is a water technology incubator
formed by the Israeli Government’s
Technological Incubators Program
•
Kinrot has invested in around a dozen
cleantech start-ups since its privatisation in
2007
•
Incubator includes companies like Aqua
Digital, which is developing a remote water
metering solution
•
2010 - AquAgro Fund ($110 m.) acquired a
stake in Kinrot Technology Ventures from
Stern Partners Inc. of Canada
•
AquAgro will reportedly be required to inject
at least $3 million into Kinrot over the next
three years.
Israel’s Public/Private Start-up Evolution
•
Pythagoras Solar was founded in 2006 by Gonen Fink, previously at Check Point
Software, The company has an R&D centre in Hakfar Hayarok, Israel and a US
office in San Mateo, California
•
Ben-Gurion University of the Negev, a leader in research and development of
technologies in the fields of water, energy and the environment, will invest in Israel
Cleantech Ventures, Israel’s first cleantech focused venture capital fund
•
Israel Cleantech Ventures was established in 2006 to invest growth capital in
Israel's energy, water and environmental leaders. To date, the Fund has invested in
6 companies
•
Israel Cleantech Invests in Pythagoras Solar
Pythagoras is a solar energy company developing innovative photovoltaic
technology to revolutionize the cost of solar electricity.
•
Israel Cleantech Invests in AqWise
AqWise develops and implements innovative solutions for biological wastewater
treatment and rapid filtration using movable plastic biomass carriers
•
Israel Cleantech Invests in Emefcy Bioenergy Systems
Emefcy is designing an innovative wastewater treatment system which will harness
the energy inherent in organic components in wastewater
•
XJet Solar Energy Entrepreneur from Semiconductors
•
Orion Solar Energy Entrepreneur from Aerospace
Rotem Industrial Complex &
Incubator, Negev
Eilat-Eilot Cleantech Center
• The Office of the Chief
Scientist at the Ministry of
Industry, Trade and Labor in
2010 chose the Eilat-Eilot
group to establish and operate
a new renewable energy
technology center.
• The Eilat-Eilot consortium
includes a range of partners
such as Rafael Advanced
Defense Systems Ltd., Elbit
Systems Ltd. Ormat Industries
Ltd. ProSeed Venture Capital
Fund, Consensus Business
Group (UK), and Ben Gurion
University of the Negev.
Modular, Challenge Driven Cleantech
Platform
Climate
Change
Mitigation
Challenge
Level
Cluster
Level
Solar Cluster
Firm
Level
Solar C
Solar A
Solar B
Agro-food &
Water Cluster
Agrofood B
Water A
Agrofood A
Water
B
Less Benign but Non-Lethal IDF
Applications: Unit 8200
• Unit 8200 is IDF’s Surveillance and Big Data
Information Gathering Agency (NSA; GCHQ)
• Encourages most talented Info-engineers to
become Tech-entrepreneurs
• Past successes: Check Point (world-leading IT
Firewalls security firm); Metacafe (worldleading video site); Comverse (“Logger”
telecom software, 4,000 employees)
Unit 8200 (continued)
• Other successes: NICE (data security) 3,600
employees); NASDAQ value $5 billion.
• New Dimension Software (enterprise software) –
sold (1999) for $675 million to BMC Software
(Houston, TX). Reinvestments by Roni Einav in
dozens of Israeli tech start-ups.
• Palo Alto Networks (cyber-security) NASDAQ
valued at $10bn
• ICQ (instant messaging) sold in 2010 to Digital Sky
Technologies (Private Equity: HQ Moscow) for
$200 million
Evolution of Unit 8200 Entrepreneurship
• Until 2003, Unit 8200 was a secret. Then, it starred in the
book Start-Up Nation: The Story of Israel’s High Tech Miracle
(2009) by Dan Senor & Saul Singer (Twelve Publishers, NYC)
• Book showed Israel had more venture capital investment per
person than anywhere in the world and the largest number of
NASDAQ-listed companies (63) after the US and China.
• So, in 2010, Unit 8200 alumni decided formally to offer their
expertise to other young Israeli entrepreneurs.
• The result was the 8200 entrepreneurship and innovation
support program (EISP), a five-month high-tech incubator in
which Unit 8200 alumni volunteer to mentor early-stage
startups.
• Between 2010 and 2013, 22 received funding totalling $21m
(£13.5m/135 m NOK) and employ 200 people, joining the
230,000 employees of Israel's 5,000 tech companies that earn
$25bn a year – a quarter of Israel's total exports.
Global Venture Capital Series
Comparison
$billion
2009
2011
2013
USA
24.5
36.2
33.1
Europe
5.7
7.3
7.4
Israel
0.9
1.9
1.7
Canada
0.5
1.2
1,0
China
2.8
7.3
3.5
India
0.8
1.5
1.8
NORWAY
0.2
0.1
0.4
Historic UK Public Medical Innovation Model: Niche>Regime>Landscape
for Regenerative Joint Therapy
(Source: Author; Background after Geels, 2006)
Dominant Design
STS 1
T
E
F
L
O
N
Competing Prosthetics
1961 Charnley Team @ Manchester
(Wrightington Hospital Hip Surgery
Centre)
STS
2
P
O
L
Y
E
T
H
Y
L
E
N
E
STS 3
Limited Collaboration
with Thackray Medical
Instruments of Leeds
1975
Charnley Wins Lister
Prize for Surgery
Potential New UK Public Innovation Model
(Source: Oliver Wright, The Independent, 1/1/2014 http://www.independent.co.uk/life-style/gadgets-and-tech/news/gchqsspook-first-programme-to-train-britains-most-talented-tech-entrepreneurs-9953516.html
• Influenced by Israeli Unit 8200 Experience
• Smart Young GCHQ Spies May Become Entrepreneurs.
Using GCHQ “Big Data” IPRs (e.g. Cyber Security)
• Based on UK’s “Teach First” programme success
• Bright graduates work in challenging schools for two
years on promise of commercial job if they leave
teaching
• To further this, GCHQ set up 11 university cyberresearch centres & 2 virtual-research institutes.
• In 2014 its first cryptography app released under
National Cyber Security Strategy designed gor firms
and public sector to combat cyber attacks (e.g. N.
Korea)
How, Practically, to Proceed?
• Social Learning/Entrepreneurial State (Dani
Rodrik)
• Romantic advocacy of state that “absorbs
mistakes & failures”
• Through Feedback (e.g. “whistleblowers”)
• Failure “error management”
• Learning “piloting & pathfinding”
• But it’s nearly as paranoid as Hayekian neo-liberal
“state failure” thinking.
• Better is the following practice............
Learning from your industry
• First, showcasing existing innovations from inside
or outside the region, including abroad, that may
be ‘preadapted’ modules or whole solutions for
re-use in a new problem
• Second, showing potential innovations that
explore the ‘White Spaces’ that no-one has yet
• RDA must then ‘orchestrate’ contests in which
competition for RIS3 innovation subsidies and
support occurs.
08/05/13
Strategic Niche Management
• Winners rewarded with projects (substantial
private as well as public investment funding).
(Key role for Algarve RDA)
• These may be early-stage and exploratory,
mid-stage and examinatory, and final-stage
and exploitative
• Finally RDA must establish a monitoring,
learning and public communication system.
08/05/13
Discussion & Conclusions
• Much innovation originates at public initiative (“collective” or
“demand-driven” innovation)
• But public sector has traditional conventions and rules against
exploiting taxpayer funds for risk-investments
• Where funding is strategic (and enormous) as in defence and
healthcare, this risk-fear is lower
• Or strategic (e.g. Energy) where an institutional innovation like a
Sovereign Wealth Fund also has wider commercial innovation
support potential
• The strongest source for public innovation today is from spying; i.e.
Big Surveillance Data for Cyber Security e.g. Israel, NSA & GCHQ
• Others are “Grand Challenges” like Healthcare and Climate Change
where public “demand-driven” innovation is strong and private
sector needs some kind of ECT “global controller” where it fails to
“self-organise” innovation. RIS as innovation catalyst (e.g. Skåne)
• So, private sector, when controlled, cheapens production
innovation and obsolesces public production innovation function
(e.g. as in Norway oil & gas case) but policy must persist...............