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Industrial Innovation in Transition

Periodic Reporting for period 2 - IIT (Industrial Innovation in Transition)

Reporting period: 2015-11-01 to 2017-07-31

Industrial innovation has changed fundamentally over the last ten years. Companies have widely adopted new tools such as open innovation, innovation networks and ecosystems, systemic innovations, public/private partnerships, crowd sourcing, social media, and demand based innovations. These new practices have improved the innovation capabilities of companies and brought new challenges to the traditional innovation policy instruments.

The overall objective of the IIT project is to improve the innovation performance of European companies and the effectiveness of innovation policy instruments in order to generate new growth and high quality jobs in Europe. The way in which this overall objective is furthered is by improving the innovation processes of European companies: the project widely examines companies’ current innovation practices around Europe in order to identify the best innovation practices. The best practices will be disseminated widely both to the European business community and governments to improve Europe’s innovation potential.

The IIT project also evaluated existing innovation policy portfolios at national and European levels, and analyzed the differences between innovation processes and management practices in different industrial sectors. The project produced a methodological toolbox which will allow other European countries to conduct similar studies.
• The project created a comprehensive understanding how the innovation processes are organised and managed in European companies. The sample covered eleven countries, five industry sectors and all sizes of companies excluding, however, the start-ups. From this perspective, the IIT study is the largest and most comprehensive study of these issues conducted in Europe.
• The innovation processes have changed during the last five years. Innovation happens in ecosystems where key partners and stakeholders work together. Customers are the most important partners but it was most interesting to notice that the second important partners were public research institutions. The key conclusion is that innovation is dependent on the companies’ ability to find and collaborate with the key ecosystem partners. It also requires that companies have enough competence to agree upon the rules of the game in such a way that every partners in the ecosystem can benefit from the collaboration. This raises also a very important policy challenge. Policy must ensure that the innovation environment can provide all the required elements. In particular, it is important to identify who can take the role of the systems integrator, what is the emerging value chain and its control points and that all the critical elements are made available in advance.
• Ecosystems play critical role both in the implementation of the innovation process and the analysis of the future business environment.
• Open innovation has become a standards tool for companies’ innovation toolbox. It was, however, interesting to notice that there are almost as many interpretations of open innovation as there were interviewed companies. Collaboration is a standard tool, but how it is organized and what are rules to manage the Intellectual property varied. It is clear that more definitions and ‘good practice’ solutions should be made available to reduce the existing confusion.
• New innovation tools such as social media, web enabled tools and big date are widely utilized by companies, but again there is much development needed to make the use of these instruments useful for companies.
• Innovation process is in many cases still dominated by the traditional stage-gate model. At the same time, companies are actively looking for possibilities to make the process more flexible. New independent business units for innovation, innovation boards, customer involvement right from the beginning of the process are practical tools to improve the flexibility as well as the speed-up the process. The web tools are also used in this context.
• The project has produced a review of the innovation policy performance in all countries covered. This will provide an opportunity for countries to compare their performance and identify which are the most critical challenges they need to address to improve their innovation performance. The project produced also a list of the most critical barriers to innovation and preliminary list of recommendation how to eliminate these barriers. The discussions with governments and industry will produce a more detailed list of recommendations, which will address the required reforms in innovation policy both at the national and at the international levels in Europe.
• The IIT project has opened entirely new ways to understand how companies manage and organize innovation processes in practice. These new ideas have increased understanding of what are the key challenges both in industry and in public policy. Ecosystem game, open innovation, business environment analysis, big data, public/private partnerships and new ways to reform the innovation policy portfolio are important learnings when companies improve their innovative performance and governments reform the innovation policy.
• The discussion of the reforms has been launched both at the national level and at European level. National events have stimulated a great deal of new insight of the policy reforms and the discussion with the European Parliament and Commission and the European industry associations (ERT, Digitaleurope among others) have confirmed that the IIT results are of great interest both for European industry and public institutions.
• Interest around the world to launch a replicative study is a clear indication of value of the IIT project results. During the autumn 2017, this opportunity will be demonstrated in many events such as the European Innovation Summit and the OECD conference in December 2017. In the same context discussions will be continued how to improve the usage of public STI indicators to make them more relevant to industrial use.
• The project has clearly shown that innovation is a continuously changing process and there needs to be mechanisms to follow these changes and adapt the innovation policy instruments to reflect the changing patterns of industrial innovation. The IIT study is an attempt to create a model how this continuous follow-up could be organized. It should become a standard practice both at the national and European levels to replicate a similar study at least in every three years to be able to follow what kind of changes take place in industrial innovation. If these issues are not fully understood, the competitiveness of industry may decline and thereby the economic growth and employment would suffer.
• The project has produced a ‘good practice guideline’ for companies, which will help European industries learn how to improve their innovation practice. This is again a critical issue in the context of rapid change. Only those companies, who can use effectively innovation tools and organize their innovation process in the way that really creates an environment where creativity and innovativeness can flourish, can have a sustainable economic growth in the long term.