Challenges and opportunities brought about by value creation and the need to solve major societal problems such as climate change, an ageing population, and marginalisation are globally becoming key priorities in innovation policy.
Pirjo Kutinlahti, Ministerial Adviser, Ministry of Economic Affairs and Employment, Finland
Petra Tarjanne, Ministerial Adviser, Ministry of Economic Affairs and Employment, Finland
Instead of attempting to correct traditional market and system failures, modern innovation policy strives to identify ways in which it can support interaction between companies and end-users, identify new growth drivers, and tap into the opportunities that digitalisation and other technological advances can offer in the face of complex societal challenges (wicked problems).
The policy tools for promoting new value creation include business and entrepreneurial ecosystems, accelerators, and public-private experiments and partnerships. These will accelerate business renewal and internationalisation.
One of the key objectives of innovation policy is to encourage risk-taking and bold decisions. This requires information on new growth opportunities and growth drivers, on competence areas and other competitive advantages, as well as on the ability of companies to commit to long-term development investments.
The text box presents phenomena that we believe will guide future growth and innovation choices.
What generates high added-value business?
The transformation of work, changes in value networks and the platform economy, together with social reforms, create New opportunities for business and growth. As the buyer and organiser of services, the Public sector can play an important role in enabling new business and the opening up of markets.
Rapid technological advances such as artifcial intelligence, virtual reality or gene technology also create problems which, to be solved, require human-centred, sustainable and responsible approaches to Research and innovation, as well as creative competences. Knowledge of ethics or pedagogy, an understanding of cultural values, or innovative creativity can give a competitive advantage. Public sector institutions can be of assistance here.
It is the public sector’s task to enable growth. Besides trying to come up With ways of reinventing businesses and the innovation system, the parties engaged in innovation policy now face an additional challenge: How to create conditions for a decent standard of living and for active functional capacity in an environment where there may not be enough paid jobs for everyone. According to some estimates, as many as 40 per cent of existing jobs could be performed by computers, robots and AI applications.
Digital service platforms that enable entirely new business models and types of activities will play a crucial role. Transformation of existing products or processes into services, takes place across sectoral boundaries.
Changes in value chains and in the way companies generate revenue will intensify competition for the most productive value creation opportunities. New business ecosystems will be guided partly by new value creation logic whose dynamics and value creation principles are still unknown to us.
Winning companies respond to the needs of their clients and society
Factors affecting the success of a company in the near future include changes in personal values, an ability to understand the consumer’s needs and emotions, and the usability of the product or service. The needs and values of customers signifcantly contribute to the success or failure of a business. Consumers’ purchase decisions are increasingly based on how they believe the product or process will improve their quality of life, and give their lives purpose and meaning. This is something companies need to understand and exploit in their business activities.
Old rules no longer apply as companies move across sectors with great agility in search of new business opportunities, to the point of abandoning mature markets in the process. New competitors are constantly entering the market, and their objective is to create economic, functional and customer-relevant value, as well as wider cultural and social value. The winners of this kind of competition are Companies that build their business across sectors and use open business models.
New ways of creating value
For Finnish and other Nordic companies, business renewal has traditionally involved investment in research, Product Development and know-how. However, a signifcant amount of intangible value arises from factors outside the capital generated by these investments, such as creative skills, crowdsourcing, or the utilisation of public data, ideas and opportunities.
In other words, the sources to create value for a customer are more variable than traditional innovation policy recognizes. The challenges and opportunities of value creation vary in different sectors, business ecosystems and value chains. It is therefore impossible to defne or measure a single means to promote value creation, even though its signifcance for business success is indisputable.
In a future-driven innovation policy, the state and the public sector can play the role of facilitators and pioneers. In this role, they are tasked with identifying emerging drivers of growth and new business opportunities related to economic, social and industrial renewal.
The state does not itself decide which will be the winning ecosystems, but it can make strategic choices and implement solution-based policies whereby the best capabilities and resources are allocated effciently and sustainably. In addition to creating an operating environment conducive to business and innovation, the state can take targeted action to enhance the renewal of traditional industries and the emergence of new Growth sectors and start-ups.
New drivers of growth that can lead to high added value businesses and jobs
Transformation of work and competencies
• Value-generating companies / jobs
Global division of labour and value networks
• Geoeconomic choices
• Platform economy
• Utilisation of information and technologies produced elsewhere
• Labour mobility
• Changes in values
• Identifying emotions
• Sustainable development
• Limited resources: food, water, time
• Knowledge of wellbeing
• Sharing economy
• Phenomenon-based approach
• Social innovations
Coexistence of technology, humanism and creativity
• Artificial intelligence, robotics
• Multidisciplinarity and multiple competencies
• Utilisation of creative competencies
Partnerships and ecosystems
• Public-private partnerships
• Experiments and Development environments
• Cumulation, processing and commercialisation of skills and competence
• Radical innovations
• Bold money
• Pioneering markets, innovative Public procurement
• New competency requirements
• Brave individuals
• Separation of growth and employment
• Regional government reform
• Health and social services reform
• Transport Code
Photo: Factors affecting the success of a company in the near future include changes in personal values, an ability to understand the consumer’s needs and emotions, and the usability of the product or service (Photo XiXinXing)