AN INNOVATION STRATEGY FOR WALES - LESSONS FROM FINLAND

Last week, I attended a conference organised by the Massachusetts Institute of Technology (MIT) to examine the future of manufacturing.

It was a timely event, as I am currently undertaking research into the development of advanced manufacturing in Finland during the last thirty lessons and the lessons that other small economies can take from this experience.

We heard from a range of experts in the field, including Professor Martin Schmidt of MIT, who has been advising President Obama on a new emphasis on manufacturing within the US economy.

The report from his review is fascinating, mainly because of the differences in the philosophy regarding economic development as compared to most parts of Europe. In fact, the conclusions to the report to ensure American leadership in advanced manufacturing comprehensively rejected a picking winners policy, either in terms of individual companies or specific sectors. Instead, it proposed pursuing an innovation policy for advanced manufacturing that would provide the best environment in which to do business, ensure that the most powerful new technologies are developed in the USA and that technology-based enterprises have the infrastructure required to flourish.

Given the way that manufacturing in the USA and many other advanced countries has been ignored in the last decade as financial services became the favoured sector and there has been rush to move production to low cost countries such as China, this report is long overdue.

Yet, during the two days in Brussels discussing the future of advanced manufacturing, there seems to be little appreciation of an example within Europe that could also act as a model for developing more innovative and competitive economy.

During the last fifty years, Finland has changed itself from an economy that was based largely on primary production and an unskilled agrarian workforce to one that is recognized as one of the most competitive in the World, particularly in the field of high technology manufacturing within key sectors such as information communications and telecommunications (ICT).

Most of this change took place during the early 1990s when the Finnish economy endured a major economic recession that included a major banking crisis, unemployment rates of 15 percent and high levels of government debt.

In response to these issues, the Finnish Government took a bold long-term view to focus its strategy on innovation and promoting, in particular, facilitating the development of high technology sectors such as ICT. Since 1995, the Finnish economy has been one of the fastest growing in the developed world, with an average growth rate of 3.5 per cent. Unlike other rapidly growing economies, most of the growth within Finland has been generated by the development of domestic companies.

Therefore, through indigenous growth in a number of key sectors, Finland has become recognised as one of the most innovative and competitive nations in the World and the World Economic Forum’s Global Competitiveness Report 2012-2013, which assesses the competitiveness landscape of 144 economies, ranked Finland third in the World in terms of a range of different factors driving productivity and prosperity.

And one of the main driving forces behind this success has been a specific government body that has driven and developed innovation throughout the Finnish economy.

Established in 1983, TEKES is responsible for administering public support for private and public sector R&D and innovation in Finland. Its mission is to promote the development of industry and services by means of technology and innovations. Its impact has been tremendous, being responsible for supporting more than half of Finnish innovations during the last thirty years. The latest report on its impact on innovation is shown below.


Whilst its programmes have been focused very much on supporting technology within companies and public institutions, there have been additional positive effects such as increased networking between companies and R&D organisations in targeted clusters and increased collaboration between researchers across different disciplines. Simply put, the focus on the innovation policy that the US Government now recognises as being critical to its own manufacturing sector has been one of the key successes in turning a small peripheral nation into one of the most competitive economies in the World.

And there are certainly lessons for Wales from this experience.

Indeed, whilst there are those who still hanker for the return of the Welsh Development Agency, it is clear that during its existence, its focus on attracting large foreign direct investment did little to support the long-term innovation performance of our nation. Its subsequent integration into the Welsh Government has also had a minimal impact on ensuring that Wales becomes the “small clever nation” which politicians have been calling for since the advent of the National Assembly.

As the Minister for Business is currently examining the development of an innovation strategy for Wales, one option in creating a more competitive Welsh economy would be to consider establishing a Welsh TEKES that would be an arms length organisation that would focus on developing the innovative potential that exists within this nation.

If we were to get only a fraction of the success that the Finnish economy has enjoyed during the last three decades, then it would be one of the more astute policy decisions that the Welsh Government will have made in developing the economy.

MAKING THE PUBLIC SECTOR INNOVATIVE AND COST EFFECTIVE

Since the current UK Government assumed power in 2011, much of the effort of Whitehall departments has been on reducing public expenditure to deal with the financial deficit.

Yet, focusing simply on saving money in public services is alone not sufficient as it simply fails to take into account the overriding problem with much of the public sector in the UK, namely that it is not only inefficient but is generally unwilling to participate in any meaningful innovation. As a result, the public sector is caricatured as being risk-averse, unentrepreneurial and focused more on managing processes than outcomes.

And yet according to the Kennedy School of Government at Harvard University, there are plenty of examples of the public sector adopting a more enterprising approach to delivering services. Last week, its Ash Centre for Democratic Governance and Innovation recognised 111 innovative government initiatives under the Bright Ideas initiative.

Taking examples from all levels of government - from school districts to the US Government itself - it recognised public innovation in a wide range of areas including rural regeneration, environmental problems and, topically, the academic achievement of students.

In crime, a bright idea from Baltimore collects and analyses data to determine hot spots in high crime and traffic incidents to deploy high visibility officers in those areas and curb future crime. Similarly, Pennsylvania uses new technology to analyse data and identify non-custodial parents not likely to pay child support and offer them increased support. In dealing with the legacy of the economic downturn, several public bodies have developed new approaches that are making a real difference to the regeneration of their local areas.

In New Orleans, the Mayor’s office has developed a tool that measures and tracks the city’s performance towards reducing the number of decaying and abandoned properties whilst a Michigan initiative known as Project Green House recycles upwards of 95 percent of abandoned home building materials. The City of Newtown in North Carolina has developed a free, outdoor Wi-Fi network to attract more customers to the downtown business district, city facilities, and parks whilst the e2 Business Programme in Salt Lake City provides local businesses with the knowledge and support necessary to implement sustainable business models.

There are also several projects that focus on reinvigorating school curricula and encouraging interest in science and mathematics. For example, NASA’s Explorer Schools provides teachers with interactive lesson plans and classroom activities around mathematics, science, technology, and engineering. Ohio’s Science and Math Moving On program provides its seventeen school districts with the latest in 21st century, high-technology learning tools to invigorate traditional lesson plans and enhance learning among students.

With regard to environmental protection and conservation, the MassGrown and Fresher initiative in Massachusetts connects consumers to local agriculture, whilst Hawaii’s Maui Nui Seabird Colony Champions engages the local community in the protection of endangered seabird colonies.

And there are many more examples of how the public sector in America, through its ingenuity and inventiveness, is making a real difference to local communities. In fact, what really hits home when you read through the list of projects is the clear evidence that direct intervention from all levels of government does not require endless resources and large budgets.

Most important of all, the innovations recognised by the 2012 Bright Idea list demonstrates that there can be a reduction in the size of the public sector whilst serving citizens more efficiently and effectively. Surely, it is this philosophy that should be at the heart of government in Wales where nearly two thirds of the economic output of this nation is dependent on the public sector.

Rather than complaining that higher quality in health, education and economic development can no longer be afforded, those working in the public sector should take heart from the experiences of other bodies globally to ensure that there is greater innovation within their organisations to deliver services more efficiently and effectively.

This will, inevitable, require a more entrepreneurial approach that, even with the best will in the world, is anathema to many civil servants. That has to change and if we are going to deliver the best level of public services with a reduced budget, then the Welsh Government and other public bodies need to encourage and support their own employees to come up with their own bright ideas to ensure that we have can not only have the best public sector in the World, but also the most innovative and cost-efficient.