Richard Halkett, Executive Director, NESTA Policy & Research Unit. OECD Innovation Workshop 29 th October, 2007
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1 Hidden Innovation Richard Halkett, Executive Director, NESTA Policy & Research Unit OECD Innovation Workshop 29 th October, 2007
2 NESTA is the National Endowment for Science, Technology and the Arts The largest single endowment in the UK exclusively devoted to innovation NESTA s aim is to transform the UK s capacity for innovation We invest in early stage companies, inform innovation policy and encourage a culture that helps innovation to flourish
3 The Innovation Gap Why policy needs to reflect the reality of innovation in the UK
4 Sectoral composition of national economies Finland Japan Sweden US UK Germany France Hightech Medium- high tech Low tech Source: OECD
5 Engineering consultancies The Boston Central Artery/Tunnel Project site looking eastwards towards Logan International airport. The last section of jacked tunnel can be seen on the lower right. Source: Mott MacDonald
6 Genetic testing in the NHS DNA analysis of Duchenne muscular dystrophy (DMD) Pre-implantation Genetic Diagnosis (PGD) and Pre- implantation Genetic Haplotyping (PGH) procedures can weed out genetically defective embryos before pregnancy. Initial PGD research was conducted in the UK in the late 1980s. Guy s Hospital Genetics Centre and Kings College London have recently refined PGH techniques. Source: Science Museum
7 Hidden Innovation How innovation happens in six low innovation sectors
8 Six low innovation sectors Sector Sales/revenue R&D intensity* Oil 360 billion 0.2 per cent Construction 17 billion 0.5 per cent Retail banking 82 billion 0.9 per cent Education 36 billion <0.1 per cent Legal aid services 2 billion <0.1 per cent Rehabilitation 2 billion+ <0.2 per cent * R&D intensity refers to amount spent on R&D divided by sales Source: DTI/DfES/Home Office
9 Type I hidden innovation Based on science and technology but Based on science and technology but excluded from traditional indicators
10 Hidden innovation in oil production The Integrated Subsurface Information System (ISIS) in the Valhall Field in the North Sea Life-of-Field Seismic was developed by BP, GEOSPACE and nine other contractors It uses permanent sensors planted on the seabed to create time-lapse movies of fluid and pressure changes to show how recovery processes are working in near real-time This could increase recovery from Valhall by 60 million barrels. BP estimates that its Field of the Future programme could increase recovery worldwide by one billion barrels Source: BP
11 Type II hidden innovation Innovation in processes organisational Innovation in processes, organisational forms or business models
12 Type II: Organisational innovation BAA s Heathrow Terminal 5
13 Type III hidden innovation Innovation from the novel combination of Innovation from the novel combination of existing technologies and processes
14 Type III: Exploiting technology in new services The first direct building in Stourton, Leeds. first direct launched in October 1989 as the UK's first branchless telephone bank
15 Type IV hidden innovation Innovation that takes place under the Innovation that takes place under the radar of many surveys
16 Type IV: Locally-developed small-scale innovation
17 Innovation is changing
18 Global collaborations and partnerships NUMAR s 1988 patent application lodged at the European Patent Office A drill log showing oil and water reservoirs Nuclear Magnetic Resonance (NMR) is increasingly used in oil exploration to identify and extract reserves. The application of NMR was developed in the medical field by a company called NUMAR. NUMAR then worked with service companies to develop the tools that could be employed in oil Source: EPO/Halliburton
19 Old ideas in new places Corus Living Solutions off-site manufacture of accommodation units for the Ministry of Defence. 10,700 units are being manufactured for MoD personnel near Salisbury Plain and Aldershot Corus Living Solutions fully-fitted steel-framed modules are manufactured at its Shotton works in North Wales and delivered to site as building blocks ready for assembly. Off-site manufacture is cheaper, faster, results in less faults, and reduces waste and transport costs The metals company formed a joint venture with construction contractors Mowlem and KBR to access the tacit knowledge and networks of the sector Source: Corus
20 Type Complementary I: Technology development innovations BP s Valhall Life-of-Field in the North Seismic Sea, process location of the world s first Life-of-Field Seismic system
21 Hidden innovation in traditional sectors Rolls-Royce has signed an innovative 10-year 1 billion contract with the Ministry of Defence to keep Royal Navy submarines at sea The TotalCare contract covers technical support, management of spares, and product development Rolls Royce now makes Rolls-Royce now makes 53 per cent of its revenues from aftermarket services
22 Implications for policy
23 Implications for policy Policy needs to support systems and include promotion and diffusion, not just invention Developing a full innovation strategy will depend on working closely with industry to identify the innovation that matters A sector-relevant Innovation Index would better guide policy development Innovation needs to be at the heart of and across government policy
24 Recommendation: Develop sector-specific innovation agendas with industry UK construction industry innovation agenda
25 Recommendation: Create a UK-specific Innovation Index UK construction industry benchmarking KPIs
26 The impact of wider policies and conditions es, million (mmboe) rce discoverie oil equivalent ( Total resour barrels of o 7, ,000 5,000 4,000 3,000 2,000 1,000 Oil price crash Tax changes Promote licences Explorat tion and appra aisal wells Year Source: DTI/UKOOA
27 Recommendation: Place innovation at the heart of government
28 Recent policy developments 1. Changes in machinery of government 2. Reformed Technology Strategy Board 3. Lord Sainsbury s Review of the Government s Science & Innovation Policies 4. Comprehensive Spending Review & Pre-Budget Report
29
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