lars aukrust, ceo research council norway · saudi arabia russian federation bahrain 3.0 3.5 4.0...

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SAN FRANCISCO SÃO PAULO SEOUL SINGAPORE TOKYO TORONTO ZURICHSHANGHAI

BEIJING CHICAGO HONG KONGCAMBRIDGE DELHI DUBAI JOHANNESBURG

PARISLOS ANGELES MADRID MUMBAI MUNICH NEW YORKMOSCOW RIYADHLONDON

CASABLANCA

STI Policy in Transition Countries

Examples in the Middle East

HSE Moscow, September 20, 2011

Developing an innovation strategy for

MoscowEach country needs to make strategic choices.Innovation policy is a probability game — you canimprove the odds of success

Lars Aukrust, CEO Research Council Norway

3ZCD-INV-STI_FOR_HSE-20092011-SG Copyright © 2011 Monitor Company Group, L.P. — Confidential

A high and rising standard of living is the proper objectiveof economic development efforts

For wages and profits to grow, workers and their firms mustcreate more value year after year

They must boost productivity, or competitiveness

Productivity(Competitiveness)

Productivity will not grow if firms keep making the samegoods and services using the same methods and processes

They must do something new and better

They must innovate

Innovation

Prosperity

Relevance of STI Policy for Transition Countries

Point-of-View: Innovation is Needed to Drive Prosperity


56%

80%

0%

25%

50%

75%

100%

My region is a goodplace to innovate in

my business

Innovation is critical to thesuccess of my company

50%

82%

0%

25%

50%

75%

100%

I am well informedabout my firm's

environment, and how toimprove it I am well

informed about my firm’senvironment, and how

The external environmenthas great impact on my

firm's success

Note: n > 800 for all questionsSource: Monitor’s Executive Insight Survey

InnovationGap ~ 24%

Percentin

Agreement

Does the external environmentmeet your innovation needs?

InformationGap ~ 32%

Are you well informed abouthow to improve your

external environment?


Most Executives are NOT Satisfied with their STI Environment



Be Aware of Stages of Economic Development

Transition Countries aim towards an innovation-driven economy

Role ofInnovation

Innovation is Imported andLicensed

Innovation is Created andExported

Limited Rolefor Innovation

Input Cost Efficiency Unique Value(e.g., Nigeria) (e.g., China) (e.g., Singapore,

Germany, USA)

Innovation-DrivenEconomy

Investment-DrivenEconomy

Factor-DrivenEconomy

Mode ofCompetition


0

20,000

40,000

60,000

80,000

100,000

120,000

2.50.0

United States

Switzerland

Belgium

Luxembourg

IcelandFrance

AustriaAustralia

Ireland

Qatar

New Zealand

Kuwait

China

United Arab Emirates

Hong Kong

Spain

Oman

Italy

Saudi Arabia

Russian FederationBahrain

6.05.55.04.54.03.53.0

Finland

Japan

Sweden

Israel

Taiwan, China

Norway

Singapore

Denmark

Canada

Korea

Netherlands

United Kingdom

Germany


Russia Lags Behind on Innovation and Prosperity

Source: World Economic Forum, Global Competitiveness Index 2010, IMF 2009, Monitor Analysis

Average of130economies

Average of 130 Economies

GDP per Capita vs. Innovation Index

GDP perCapita(USD$;2009)

Innovation Index

Innovation-DrivenEconomiesInvestment-Driven

Economies

Factor-DrivenEconomies


Souped-up laptops, PDAs

Totally new computerparadigms

Medical tools

All optical computing

Extreme bandwidthcommunication

New forms of semiconductor /magnetic storage

New architecture for computerstorage / logic combined “O”latency

Write nanoscale lithographiclines

Sense single molecules

All Optical transistor

Megamode fibers — 1010

increase in bandwidth

Nanophotonics

Low loss propagation oflight on silicon chip — newdielectric waveguides

Plasmonics — Opticalfrequencies with X-raywavelengths — matchwavelength to device sizeon silicon

Scaling magnetic bits to dimensionsless than 30 nanometers

Use magnetic domain walls for veryhigh density magnetic storage

Utilizing novel properties of spinmomentum transfer to generatemicrowave sources ofelectromagnetic radiation10’s to 100’s of GHz

MRAM

Very hard problems inaccessible toconventional computer

Factoring machine image and signalprocessing

Drug design —”very large molecules”

Molecular structure~100 Qubits —condensed matter physics

Quantum strategy-coordinator games —”2bit Qubit” (1–3 Qubits)

Repeater long distance (3 Qubits)

QKD — superposition

Coherence and entanglement purification

High fidelity Qubits — 99.99% visibility

Robust Qubits

STI Perspective

Drive Progress from Science to ApplicationS

cie

nc

eTe

ch

no

log

yA

pp

lic

ati

on

s

Source: Monitor Analysis


STI Perspective

Think Broader than Product and Technology

8. Channelhow you connectyour offerings toyour customers

9. Brandhow you expressyour offeringsbenefit tocustomers

2. Networkingenterprise’s structure /value chain

1. Business modelhow the enterprise makes money

3. Enabling processassembled capabilities

4. Core processproprietary processes that add value

6. Product systemextended system that surrounds an offering

7. Servicehow you serve your customers

5. Product performancebasic features, performance and functionality

Businessmodel

Finance

NetworkingCore

process

Process.

Enablingprocess

Productperformance

Offering

Productsystem

Service Channel

Delivery

BrandCustomer

experience

10. Customer experiencehow you create an overallexperience for customers

Note: The Ten Types of InnovationTM


STI Perspective

Ensure Alignment within the Entire STI Ecosystem

Legislation

GovernmentMinistries

ResearchInstitutes /

Universities /R&D

Institutes

PrivateEnterprises /Consumers

Knowledge

FinancialInstitutions

FinancialInstitutions

Industry

ExternalKnowledge

Flows

ForeignTechnology

Flows

STI CouncilFunds Funds

STI Policy


Present Not Present

In Moscow in 2011Global Examples

Develop a clear long-term innovation vision1

Focus city innovation efforts on a limited set of high-potential industries /clusters

2

Support innovative organizations through financing, capability building(education), encouraging R&D, linking businesses with R&Dorganizations, and access to markets

3

Develop strong infrastructure for innovation and education, and use it asa platform to create knowledge economy

4

Encourage and support commercialization of innovation research byuniversities

5

Invest into innovation with long lifecycle through focusing on futuredemand

6

Adapt and introduce legislation to protect and encourage innovation7

Australia,Finland

Singapore,Slovenia

Singapore

Singapore,Austria

Singapore,Brazil

Singapore,Japan

Brazil,South Africa

Proven Success Factors

Source: Monitor analysis

STI Perspective

Factors for Successful STI Environment in Moscow


Example Kingdom of Saudi Arabia

Challenge in Saudi Arabia: How to Ensure Sustainable Growth?

KSA’s Indicators (CAGR, 1990–2008)

Innovation and Productivity IndicatorsEconomic Indicators

-2.4%-3.1%

3.3%

11.4%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

+42%

Nominal GDP

8.1% (EIU)

Scientists andEngineers in R&D2

Number ofSCIE Papers3

Overall ProductivityGrowth4

Total Exports1

7.2%(IMF)

7.2%(IMF)

1 Partially explained by increase in oil prices; 2 CAGR for ‘number of scientists and engineers in R&D’ is for the period 1994–2000;3 Scientific publications selected under Science Citation Index; 4 Productivity growth from ILO (1980–2005), Monitor Analysis


SaudiGlobalization

YoungPopulation

Boom

NextGeneration

Energy

Sh

ear

Fo

rces

Ch

an

gin

gS

au

di

Eco

no

my

an

dS

ocie

ty

Opportunity or ThreatDescription

Saudi Arabia has a young and rapidly growingpopulation demanding education and jobs

Fostered by WTO, Saudi economy is rapidly becomingglobally integrated

Oil revenue may not be sustainable due to depletion ofoil reserves or proliferation of new energy sources

Key local industries arereplaced by foreign playersand / or imports

Improve skills to use youngpopulation as a strong workand knowledge base

Growing population is notproductive and generatessocial problems

Main source of wealth of thecountry is significantlyreduced without replacement

Develop a new knowledge-based KSA, leveraging newsources of energy

0

150

300

2004 2005 2006

FDI Growth in Saudi

Saudi Arabia in the WTO

10.5%9.9%

7.6%

2.0%1.7%1.2%0.9%

WindSolarBiofuelsNuclearGasOilCoal

1.2%

2.1%

26.9%

31.9%

Popula

tion

Gro

wth

Rate

2005-2

010

Perc

ent

of

popula

tion

0–14

KSA World Avg KSA World Avg

Projected CAGR 2005–2030

Increase competitiveness ofmain industry sectors, makingthem global


Major Questions on Economic and Social Development



Governing InstitutionsPrograms for

Innovation Culture

Ensure thatgoverninginstitutions are inplace to coordinateand manage thevarious innovativeactivities in KSA

Promote interest in,and awareness of,the benefits ofentrepreneurshipand innovationacross all segmentsof Saudi Arabia

Funding Mechanismsand Support

Provide innovatorswith the capital, andthe business,technical andnetworking supportnecessary tosucceed

InnovationPlatforms

Ensure thatinnovation is

focused on, butnot limited to,

those areas withthe greatestpotential for

impact

EngineeredPlastics Halal LifeUpstream Oil

Water for LifeWell-being Energy Factory


Solution: National Industrial Strategy to Drive STI

Source: Saudi Arabia Ministry of Commerce Webpage


Example UAE / Abu Dhabi

Vibrant STI Landscape in Abu Dhabi

STI/TDC

Export Promotionand FDI attraction

Business, Legal andInstitutional Environment

Funding

Departments / Authorities

IndustrialCompetitiveness

SMEs andEntrepreneurship

HR, Educationand Training

Infrastructure

Ruler of AbuDhabi

Abu DhabiCulture and

HeritageAuthority

Abu DhabiDepartment of

EconomicDevelopment

MubadalaDevelopment

CompanyKhalifa Fund

Abu DhabiTourismAuthority

Abu DhabiAgriculture and

Food SafetyAuthority

HealthAuthority, Abu

Dhabi

EnvironmentAgency, Abu

Dhabi

Department ofPlanning &Economy

Department ofFinance

Department ofTransport

Department ofCivil Services

Abu Dhabi JudicialDepartment

Department ofMunicipal

Affairs

Abu DhabiWater &

ElectricityAuthority

Innovation

Khalifa FundAbu Dhabi Fund

forDevelopment

Abu Dhabi Council forEconomic Development Abu Dhabi

BusinesswomenCouncil’s

Abu Dhabi Chamber ofCommerce and Industry

Federation of UAE Chambersof Commerce & Industry

Abu Dhabi Chamber ofCommerce and Industry

Abu Dhabi Water andElectricity Authority

Department of Telecommunication,Abu Dhabi

Department Of Transport Abu Dhabi

Abu DhabiPorts

Company

Abu DhabiInvestment

Council

MasdarMubadala

Ministry of Economy

Khalifa University

Petroleum Institute

Abu DhabiUniversity

Ministry of Finance &Industry

Abu Dhabi EconomicResearch Agency

Minister ofEnergy

Abu Dhabi Department ofEconomic Development

Ministry of Economyand Commerce

Abu DhabiEducational

Council

Emirates Center forStrategic Studies and

Research

Centre of Excellencefor Applied Research

and Training

Generalheadquarters of

Abu DhabiPolice

ExecutiveCouncil




Private Sector is Aware of Key Challenges

Source: Abu Dhabi Department of Development Webpage

Competitiveness Issues as Identified byAbu Dhabi Private Companies

Lack of Private Sector Sophistication

Lack of Level Playing Field

Government Effectiveness

Lack of Company Legal Framework

Direct Competition from GovernmentCompanies

Lack of Institutions for Collaboration

Underdeveloped Private Sector

Administrative Barriers

Work Force Supply Constraints

Capital Market Fragility

Weak Innovation Infrastructure

1

2

3

4

5

6

A

B

9

10

11

Ma

inIs

su

es

Se

co

nd

ary

Iss

ue

sO

the

rIs

su

es

“We see many companies wanting to invest in AbuDhabi but are put off by the difficulties of obtainingnecessary approvals in a reasonable time period.”

“[There are] Issues with lack of transparency andperceived direct competition from governmentrelated companies getting involved in typically privatesector business (property development, propertyleasing, car leasing, logistics, etc.)”

“The lack of people [from educational and traininginstitutions as well as workers with prior on-the —job experience] leads to increase in cost. Also, thelow quality of scientific research causes a drop inexperienced people, and we need to offset that byimporting them from outside.”

“More influence of central bank on banks. Besides therules in general, [banks should be] litigated inadvance in order to avoid crisis, regulate sectors,balance competition, and quality of business.”

Quotes from Private Companies


20

17

Potential Position

9

Long-Term ReformsShort-Term ReformsCurrent Position

46


First Solutions are Identified — Results can be Measured

1

40

50

20

10

30

IllustrativePotential ‘Starting a Business’ Ranking Increase from Reforms

Decrease 3procedures and

5 days

Decrease 1procedure, 3

days and 25%of costs

Note: Current data available only for UAE; Abu Dhabi specific analysis will be possible shortly. For the UAE, Doing Business studies business proceduresin Dubai, therefore any changes would have to take place in that Emirate to be recognizedSource: Doing Business Report 2011, Monitor Analysis

Currently 8procedures, 15

days and~10,000 AED

Potentially 3proceduresand 7days

Current Position

Increase from Reform

Potential Future Position

PillarGlobalRank


Note: 1Due to the financial crisis in 2008 FDI inflows declined by 7%, but declined less than in other countries (e.g., FDI in US declined ~60%)

Abu Dhabi

Successfully developed a PerformanceManagement Framework

Saudi Arabia

Initiated Business Reform to increaseRankings and Foreign Direct Investment

3638

2418

12

20

30

60

200920082007200620052004

0

40

8016

23

3838

67

15

Ease of Doing Business Rank

FDI inflows into Saudi Arabia1

CAGR79%

Examples

Initial Positive Impact is Already Visible


Prosperity

(Creation of high-paying jobs)

Productivity

(High value creation by workers)

Education andVocationalTraining

WorkforceMotivation

Quality of Lifeand TalentAttraction

Transportation andCommunicationInfrastructure

Tax andRegulatoryEnvironment

BusinessRecruitment andRetention

Responsivenessof Government

Culture ofCompetition

TechnologicalProgress

EntrepreneurshipCollaborationand Networks

UniversityResearch andTech Transfer

Innovation

(New finance, processes, business models, etc.)

BusinessModel

Finance

Networking CoreProcess

Process.

EnablingProcess

ProductPerformance

Offering

ProductSystem

Service Channel

Delivery

Brand CustomerExperience

Conclusion

Long Way to Prosperity — But the Ingredients are Clear


Monitor’s Contact Information

Tel.: +7 495 777 78 87Fax: +7 495 733 95 35

Komsomolsky Prospect., 19AMoscow, 119146, Russia

www.monitorgroup.ru

If you require additional information

or have any questions, we will be

glad to answer you:

Monitor Innovation Director EMEA,

Dr. Steffen Gackstatter

[email protected]

Monitor Group Senior Partner,

Alexander Tolkachev

[email protected]

Monitor Group Senior Advisor,

Fred Ledbetter

[email protected]


Introduction to Monitor

Our Origins

Monitor Group is a strategy consultancy andwas established in 1983

Michael Porter, Mark Fuller and Joe Fullerconceived the idea for the firm while facultymembers at the Harvard Business School. . .. . . and the three founders continue to beinvolved with the firm today

Monitor Group was founded with the purposeof offering a different style of consulting,differentiated from other consulting firms, inboth the range of services offered and the stylein which we offer themMichael Porter Mark Fuller Joe Fuller

“Competitive strategy is about being different.It means deliberately choosing a different setof activities to deliver a unique mix of value.A company can outperform rivals only if it canestablish a difference that it can preserve.”

– Michael Porter

1983



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– We work around the globe with executives of corporations, governments, andnonprofits who aspire to world-class leadership and who seek to harness the powerof new ideas

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Our goal is positive impact

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lars aukrust, ceo research council norway · saudi arabia russian federation bahrain 3.0 3.5 4.0...

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