Innovation policy 2.0 (part1) : The grand solution to everything (even though grand designs don’t work in reality)

Most people think that my largest hobby is food and health, and food technology. But it is not ;-). My real interest is innovation policy and innovation management. What is good entrepreneurial behavior. How do you stimulate good entrepreneurial spirit, what is the role of the government. In the care sector for example we in the Netherlands have a debate about ‘private’ vs ‘governmental’. What do these subjects have in common? It’s about daring to break down and build again, and it’s about fear of innovation (and sometimes lack of trust in the future) and it’s about power concentrations (oligopolies). In two parts I share some thought for a good innovation framework.

Grand designs and grand solutions to social problems don’t work anymore. In 1953 we could still make a Delta Plan to protect Holland to the violent Northsea, but our society has become too complex (think of care, traffic jams, ageing, bank crisis, etc. etc.). Yet I believe there are a few generic solutions to social challenges that are always successful. The ten solutions to create a good innovative society are:

  1. Our society is very complex. That’s why too firm governmental intervention are inadvisable. The safe fail method – in which you pursue small DO-experiments in practice – is the recommended route to proceed. Governments determine only the social playing rules and politics indicate the social determination of will. Entrepreneurs however need to manage themselves.
  2. Accept that in a grownup market (red ocean) due to scale-ups and mergers a mature market only leave room for a few players. This results in just three questions – or rather determinations of will – that need to be answered:
    1. When do we believe a market to have become ‘too large, with too few suppliers’, hence too g to fail? What’s the minimum amount of players to remain in order to maintain sufficient balance of powers, to prevent cartel formation?
    2. When is an organization or company in a grownup market ‘too big’ to fail? Obviously this also has to do with cartel laws in the EU as well.
    3. In case of a global market: which companies/sectors are of national interest to preserve them at any cost? And if so, what will we do to preserve these sectors?Examples: the retail market has now only four purchasing organizations left and Albert Heijn is (locally) often monopolist.
  3. Grownup markets are called mature because the organization are grownups, and we shouldn’t give pocket money (subsidies) to grownup companies. In my opinion grownup companies and mature sectors can look after themselves. And we should never let grownup companies and sectors take us as society hostage (this situation happened during the bank crisis in 2008-2009 and in the USA with the car industry). Example: the ING bank really is too big for our Dutch society. We can’t cover the risks if problems occur at this bank.
  4. Society should maintain clear and strict (additional) playing rules for all players in every mature market. These rules must be about environment, social aspects or for instance about animal welfare. In short, beside straight financial factors, also ‘soft’ and ‘quality’ requirements should be imposed within any mature market. Imposing these rules upon the players should be stricter in a mature market than in an immature market. Example: having permits for larger pig stalls are allowed in The Netherlands, providing they at least comply to 1 welfare star.
  5. Mature markets always tend to ‘bulk’ (low opex, low quality, limited amount of SKU’s) and to camouflage it with marketing. However, innovation almost always develops from the bottom from small starting initiatives, since that’s where the urge for change (stress) is the largest. That’s why we as society should continue to stimulate this innovation initiatives. Examples: the pig farming sector, the dominance of Microsoft in computers (and of Apple in smartphones).
  6. Society – read: government – has the duty to promote diversity together with all entrepreneurs. Diversity creates (a) more competition, (b) necessary innovation, (c) a thus more stable society. These three aspects are crucial to secure a comfortable and prosperous future. Knowledge institutions and universities provide good education of young talent (no more and no less). Example: 15 years ago Apple was on its last legs. Now their stock value exceeds Microsoft’s. The Dutch TomTom is only 15 years old.
  7. A young or upcoming sector (still busy to create a blue ocean) can temporarily be helped by society. This can be done through subsidies or loans, but you can also help a young sector ‘in kind’ by temporarily easing the current playing rules. However help can never be structural. Help is only given during start-up stage. The goal is to become a grownup as soon as possible. Example: the market for meat substitutes; in The Netherlands there are about twenty producers and their turnover is less than a hundred million.
  8. Diversity is created by (allowing) the start of many small initiatives. New initiatives are best placed outside existing organizations or institutes. Besides that, realizing an innovation is something you do with professionals. Starting a new initiative should never result in falsely compete with an ‘other’ new initiative (although disruptive competing with a large mature organization is allowed).
  9. As a government you can sow diversity through open innovation programs. These programs may define central or general themes, but should never define the exact definition of the project. The assessment committee should judge based on (a) innovation and the possibility to create more diversity, (b) partnership (is there synergy amongst them), (c) sustainability and health and social improvements possibility, (d) the business case (does the project have growth potential), and in fact also on (e) experience and motivation of the team. Innovation programs should not be mixed up with fundamental science programs. Science is not the same as innovation!
  10. To sow successfully you need, besides a good idea, especially intrinsic motivation of the team, lots creativity and strong leadership. Without perseverance a little idea will never become reality. Without real products or services no turnover. Without turnover no new jobs for people in the new sector. In short: Innovating is DOING in practice. And DOING is something for entrepreneurs NOT for universities or governments.

Use this mindset as a blueprint for all social challenges and together we will make our society more sustainable and eventually prettier and more pleasant.

P.S.: Let’s hope politicians and policy officials read along…

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