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Mixing Policies in Support of

Evolutionary and Radical Innovation

Jean-Luc Dormoy On Behalf of: EU IEEE Working Group on ICT

Six Countries Programme Fourty Years of Innovation Policy: What‘s Next?

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Overview

!  The Big Picture !  How and why Innovation Happens… or does not happen? !  Using existing public Instruments

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The Big Picture on Innovation

!  We live in a time where we are facing fundamental questions

!  Innovation is felt by most players and opinion leaders – though not all - as an essential ingredient to get out of a number of “traps” we feel we are in

!  Most states, which have the resources, intend to put in place an innovation policy

!  However, before asking the question of how to organize this, we must revisit a number of side issues on why, what?

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The Big Picture on Innovation !  Is this a “Europe vs. the rest of the World” issue?

! Yes, the US has managed to be the main powerhouse of innovation in IT. However Silicon Valley resources are not sufficient to tackle the issues we are facing at full scale

-  No, there is plenty of room for innovation everywhere

! China, India, Africa are catching up. This is great news for humanity, and incidentally for export-based economies. However this does not give us the way forward.

-  We need both evolutionary (today’s products and services) and radical innovation (today’s non existing products and services) to find the path forward

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The Big Picture on Innovation

!  Innovation is good for jobs and growth ! Globalization meant jobs being offshored from

developed to emerging countries, with a decrease in median wages

! Ok, isn’t the next step automation, for example manufacturing with no or very few jobs?

! Some say that up to 50% of current jobs could be obsolete within 15 or 20 years. What about today’s major companies?

-  Innovation is also about creating new enterprises, while finding new, socially sustainable relationships

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The Big Picture on Innovation

!  Finally, are we leaving in a time of innovation? ! Growth is today low in developed countries ! R&D expenses are high in IT, however stagnant or not

so productive in other domains, or even low in others -  The model of R&D in intensive R&D industries like

pharmaceuticals is at stake: expenses too high for proper ROI through “good” blockbusters. -> Translational research

-  R&D expenses in energy worldwide (public + industry) are about 5% of R&D spending in IT, with a comparable share in GNP

!  On all these questions, there is a fierce debate on

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The Big Picture on Innovation !  Two opposing visions: 1/ The future is bright, if…

! Brynjolfsson’s and McAfee’s vision of huge disruption in economy thanks or because of IT, in all domains. “Race Against the Machine”.

-  Value is going to be in bytes, not atoms -  Knowledge is key to future jobs

! Jaron Lanier’s “Who Owns The Future?” -  Mainly on IT, finance, risk is spread over the

whole economy by the small winning groups -  Model of value in IT must be changed

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The Big Picture on Innovation !  Two opposing visions: The future is murky,

except if… ! Tyler Cowen, ‘The Great Stagnation”,

“Average is Over” -  We have exploited all the “low hanging

fruit”, e.g. free land, technological breakthroughs (1st & 2nd Industrial Revolutions), smart, uneducated kids. Except in IT, innovation has stagnated since the 1970s; and the scientific principles date back from the 1870s.

-  The future of Society is 15% high wage people who know how to deal with machines, and 85% low wage people.

-  Raise the social status of scientists

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The Big Picture on Innovation !  Two opposing visions: The future is murky, except if…

! Robert Gordon, “Is US Innovation Over? Faltering Innovation Confronts the Six Headwinds”.

-  The 1st & 2nd Industrial Revolutions are a once-in-history event. Productivity growth stalled after 1970. There is no 3rd Industrial Revolution in sight, in particular not IT. Six headwinds now: end of the demographic dividend, raising inequality, factor price equalization, inflation in higher education & poor secondary ed. performance, cost of environmental and other constraints, debt.

-  Unlimited immigration (high and low skills).

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Overview

!  The Big Picture !  How and why Innovation Happens… or does not

happen? !  Using existing public Instruments

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Cars !  Uber is solving the old “Traveling Salesman” problem,

in real time, for all major cities ! Uber Pool can move around passengers ! While “Uber cars” are best used (full most of the time)

!  Then the driver is useless ! Uber has cut a deal with CMU for designing a driverless

car !  In any case, this means that the autonomy issue for electric

vehicles is solved. ! Uber can manage recharging as part of service

!  This is disruptive for the automotive industry ! The service operator dominates the infrastructure and

equipment providers !  It is not just the taxi business!

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Smart Grid: Demand Response Requires more Complex Energy Devices

Enhancing Upstream - Downstream

Relationship

Energy (Grid) Bytes (CPS -> Aggregator)

€, $ (Markets) Smart Meter

Heat Pump

To add DR on top of a heat pump, you need: - Local energy storage (hot water tank) - More complex regulation / intelligence - More complex, more expensive, heavier, bigger; more efficient - Higher Cost => Different ROI Model - Different Go-to-Market, Different Funding Instruments

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Energy and Climate Change

!  Google’s Ross Koningstein and David Fork paper in IEEE Spectrum, Dec. 2014 Energy Creative Destruction

!  From 2007 to 2011, Google had a RE<C project. It failed. !  From 2011 to 2014, the authors tried to understand why? !  Their answer: Even under the most optimistic hypotheses,

renewables will not be sufficient to solve the climate issue !  So what will? !  Their answer: R&D must be revolutionized !  They compare this to the 70-20-10 model in Google

! 70% of the resources are for core business ! 20% are for evolutionary new business ! 10% are for disruptive new business

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Two mixes of innovation

Google’s use of engineering task force

US Energy use of R&D task force

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Aligning rhythms, funding and kinds of Innovation

!  The beat of innovation in IT is still given by Moore’s law: it is fast, and mobilizes huge resources

!  The beat of innovation in other domains can be “desynchronized”

!  Whereas innovation must co-occur in IT and other domains ! “Bytes of top of some existing object is not sufficient”

!  Both evolutionary and radical innovation are necessary

!  The path to successful global innovation cannot be planned, however we know it mixes up both

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Overview

!  The Big Picture !  How and why Innovation Happens… or does not happen? !  Using existing public Instruments

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How to Make It? Technology Creation, and Technology Adoption

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!  Technology creation is the role of a small group of creators and users

!  Adoption is the way for downstream players to understand new technology, and so discover innovative usage ! Downstream players must be confronted to the

technology, and allowed to play with it. ! Feedback loop towards creators: knowledge ! “Sociological” issues must also be faced, e.g. for a

startup to become an “official provider” of a large group, especially if they are not from the same European countries!

!  If possible, go down the value chain up to the final customer

!  In radical innovation, cycles must be very short

How to Make It? Technology Creation, and Technology Adoption

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Using and Adapting the Available Public Instruments to Disruptive Startups or Spinoffs !  The main resource is the team of Smart Creatives !  Cycles New product or service -> Market -> Feedback must

be short !  Fail fast !  Promote a 70-20-10 approach to the project !  If publicly funded, projects must be selected more on a

vision and a team than on a plan !  This can also be used by large, existing companies, to

search for viable spinoffs

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