the state of innovation and entrepreneurship in sri … state of innovation and entrepreneurship in...
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1 Ahmed irfan January 2014
The state of innovation and entrepreneurship in Sri Lanka- A discussion note
1.0 Purpose
This document attempts to outline the state of innovation along with observations on innovation
centered entrepreneurship in Sri Lanka.
2.0 Background
Innovation is rapidly moving from the realm of the scientist trying to make an impossible idea a
reality, to one that has “emerged to be “the” buzz word amongst Corporates. It promises better
products, improved process, and overall corporate glory, and is now rapidly becoming a rallying
symbol for corporates and government worldwide. More than a decade ago, Economist Jeffrey
Sachs talked about a global ‘innovation divide’, where high-income countries outpaced developing
countries by a wide margin. Since then, some emerging economies have used product and process
innovation to outperform others in economic growth.
A look at the Global Innovation Index (GII) will reveal useful insights on Sri Lanka’s current state of
innovation. For the sake of this discussion, it will also be used to form a framework in which to
present key topics.
3.0 Sri Lanka and the Global Innovation Index (GII)
3.1 Key points on Sri Lanka’s performance in the GII 2013 (www.globalinnovationindex.org)
Sri Lanka was ranked at No 98 among 142 countries, while its rank in 2012 was 94.
In the first ever GII (2007/8), Sri Lanka was placed 71st among 107 nations. Subsequent
positions had been 58th among 130 (the best positioning so far), 79th among 132, 82nd
among 125t and 94th among 144.
Sri Lanka’s research and development (R&D) expenditure as a percentage of GDP is even
below that of a low-income country’s average expenditure of the same. The Sri Lankan
gross expenditure on R&D is 0.1% of GDP.
In GII 2013’s human capital and research cluster, Sri Lanka’s overall rank was 110 out of 142
countries. We are held down by the low current expenditure on education as a percentage
of gross national income, and low public expenditure per pupil (% GDP/cap).
Nevertheless the country has been recognized for being among the “top 3 performers” in
the Central and Southern Asia region.
The country leading this region is India, which is placed 66th in the GII ranking. The second
placed is Kazakhstan, which is in the 84th place. The rest of the countries are Tajikistan,
Islamic Republic of Iran, Kyrgyzstan, Nepal, Bangladesh, Uzbekistan and Pakistan.
Sri Lanka has scored relatively well in GII 2013’s Innovation Output Sub-Index (score of 30.3
and ranked 76) while we have a lower rank in the Innovation Input Sub-Index (score of 30.6
and ranked 118).
GII 2013’s Innovation Efficiency Ratio, ranks Sri Lanka 13 among 142 countries.
On the whole, Sri Lanka has scored better in GII 2013’s clusters on infrastructure,
knowledge and technology outputs; as well as in creative outputs. But these strengths are
undermined by weak fundamentals – such as business sophistication, human capital and
research, and institutions.
GII 2013 has also highlighted Sri Lanka’s relatively impressive performance in a few
indicators. These include: ICT and business model creation; ICT and organizational model
creation; knowledge diffusion and communication, computer and information services
exports.
The recent positioning of Sri Lanka in the World Economic Forum’s Global Network
Readiness Index is important and ICT in Sri Lanka is visible. In the 2013 listing, Sri Lanka is
placed 69th among 144 nations, and is just behind India.
3.2 Insights and observations from Sri Lanka’s performance in the GII
The country’s inherent capability for sustainable economic growth is in question. Science
and technology is not at the forefront as reflected in the low percentage of GDP spend in
Research and Design(R&D).The reality however is
that innovation is not about science and technology
alone. It is driven by advancements in science and
technology but must also adopt a broader
definition. The GRI specifies this definition as per
the Oslo Manual.
Lack of partnership amongst the public sector and
private sector signals the lack of a collaborative
culture within the local economy. Even within the
private sector, it would be the service-based
industries which have adopted innovation the most.
At present very few knowledge intensive companies exist and very little R&D is required
for the innovation that is taking place in the private sector. On the other hand, most of the
R&D undertaken by Sri Lankan scientists end up as mere publications in scientific journals
with very few research outputs yielding commercial value. The most prominent one is the
Sri Lanka Nanotechnology Center (SLINTEC). In its first full year of operations alone, SLINTEC
was able to secure five international patents on nanotechnology products which have not
progressed beyond this step.
The non-existence of a ‘data discipline’ in the economy hampers not just the rankings on
the GRI, but also hampers the availability of published information and statistics which
entrepreneurs can convert to knowledge in the formulation of their ideas.
An innovation is the implementation of a new or
significantly improved product (good or service), a new process, a new marketing method, or a new
organizational method in business practices, workplace
organization, or external relations.
Sri Lanka’s regional positioning is favourable. It would do well to hitch the proverbial wagon
to India and Kazakhstan and explore a collaborative innovation agenda. This makes even
more sense given the similarities of economic structure and value chain in these markets.
A further point would be to explore collaborations within the entire region within specific
economic segments. This point will be discussed further later on in this note.
A relatively good placement in GII 2013’s Innovation Efficiency Ratio (rank 13 /144) suggests
we are getting more out of less. A national innovation funnel if it exists at all seems to be
able to convert a larger portion of ideas into an output. This efficiency needs to be analyzed
for optimization. The short supply of ‘innovation ideas’ must be addressed.
As per the above observations, Sri Lanka’s current status on innovation could be illustrated
as depicted below.
4.0 Recent developments in innovation- centric enterprenuership
There has been a sudden surge in entrepreneurship that either,
Builds technology
Uses technology better
An audit conducted on Facebook in 2013, reveals over 3,000 part-time entrepreneurs running a
profitable business off Facebook. Larger technology companies are now looking to offer platforms
to these part-time entrepreneurs. An example for this initiative is ‘Get Your Business Online’ run by
Google.
The video inserted below illustrates efforts taken by the largest Sri Lankan e-commerce company
to capitalize on this trend. (CTRL +Click to watch)
.
Technology start-ups are on the rise and some of them are taking to the world stage. The table
below lists ten technology start-ups within the last two years that have now achieved significant
national or global recognition. The links are clickable and will provide you with more information
on each company.
Business Business Focus Impact
Leapset
Leapset.com
Retail point of sale Global
WSO2
Wso2.com
Enterprise middleware Global
Microimage
Microimage.com
Mobile apps and enterprise
solutions
Global
Anything.lk Online retailing National
Yamu.lk Online Foodie site National
Ikman.lk Online Classifieds National
Dawn patrol games
Dawnpatrolgames.com
Gaming and game
development
Global
Trekurious
Trekurious.com
Online Daily Deals National
Incubate Labs
Nawatan.com
Innovation lab
Online accommodation
booking
Global
Sohan Dharmaraja
sundaytimes.lk/121209/plus/coming-
back-home-with-two-wonder-apps-
at-his-fingertips-23473.html
Touch sensitive app for the
blind
Global
5.0 Emerging environment for innovation and entrepreneurship
An enabling environment for entrepreneurship and innovation is a critical national mandate, one
that has now been recognized within certain sections of private and government enterprise. Efforts
are being made to streamline innovation inputs, and expertise is being sought within and outside
the country.
A quick review of progress made to date is presented below using the GII framework.
5.1 Innovaton input
Innovation
Input
Progress to date Potential further
action
Institutions A Coordinating Secretariat for Science, Technology
and Innovation (COSTI) has now been formed and
a blueprint for a Sri Lanka Innovation Index
(SLINDEX) is being drawn up.
http://costisl.wordpress.com/tag/sri-lanka/
The Sri Lanka Nano Technology Institute (SLINTEC),
a government /private sector partnership will now
begin extending its capabilities beyond nano
technology to champion innovation within key
economic segments in the country.
The government is offering a 300% tax write-off
against investment in innovation. This focuses
particularly on export oriented industries.
A national
innovation and
entrepreneurship
audit to gauge
and document
the length and
breadth of
national capacity
for innovation.
Visit slic.gov.lk/
Business registration, legal and all associated red
tape have been eliminated. Government services
for enterpreuners is now online and within reach.
Sri Lanka hosted its first National Innovation
Summit in September 2013, largely with the
participation of the private sector. Plans are
underway to use this forum to collaborate with the
government and other regional markets.
The protection of
IP is a largely
unmet need
amongst
entrepreneurs in
SL.
Human
Capital and
Research
The National Education System began gearing itself
by declaring 2009 the year for ICT and English. This
focus continues today.
The results are visible in the standard of final year
projects that are now coming out of public and
private universities. A significant number of ideas
are moving into incubation programs.
The following institutes are now opening
themselves to external R&D projects
o SLINTEC
o The Arthur C Clarke Institute
o University of Moratuwa
o University of Peradeniya
Can Sri Lanka
develop a skill
matrix that is
innovation-
centric and start
re-designing its
primary and
tertiary
curriculum
towards this
matrix?
Can a detailed
research and
knowledge-share
network be built
linking every
area and type of
research? For
example, a
The diaspora engaged in tech R&D are also starting
to open up research and prototyping options from
top global innovation labs.
Chamath Palihapitiya.
http://en.wikipedia.org/wiki/Chamath_Palihapitiya
Punsri Abeywickrama
http://www.linkedin.com/in/punsri
National
Research Grid
that links the Tea
Research
Institute to
SLINTEC which is
in turn linked to
Forestry and
Ayurveda
research.
Infrastructure 100% mobile penetration, 47% internet
penetration, development of communication as
well as parallel platforms such as mobile payments,
mobile commerce , mobile health are all signs of an
economy with progressive infrastructure for
innovation and entrepreneurship.
Market
sophistication The cost of borrowing is unbearable for a start-up.
The options to finance a venture or fund an
innovation are still at a nascent stage
There has been a recent development in venture
capital and angel investing.
Business
sophistication The lack of a measurement discipline in most
organizations results in the lack of knowledge being
distributed. Most organizations are just sitting on
big data without the ability to convert it to
knowledge.
An example could be found in any of the 27 banks
in operation in Sri Lanka. Not one of them has a
data scientist (knowledge worker) that can dissect
and interpret data.
A significant
portion of the
market includes
multinationals
who could act as
a conduit to
disperse
innovation within
global markets
and Sri Lanka.
5.2 Innovation output
Innovation
output
Current developments Potential future
action
Knowledge and
technology
output
Probably where we are strongest. Link local
knowledge
management to
regional and
expert think tanks
to drive further
diffusion of
knowledge.
Creative output
Over 200 internet businesses have now gone live
since June 2012.
The networks are collaborating with consumers to
create new online and on-net business ideas. They
are even opening APIs which could be viewed as a
significant vote of confidence in entrepreneurship.
Visit ideamart.lk
MIT is now in the third year of its global startup
labs program and will now run a 7-month long
start-up lab every year for the next five years. The
goal is to reach 1,000 start-ups by 2021.
http://www.brandix.com/news/brandix_mit_global_star
tup_labs.php
The Lanka Angel Network has now been set up as
Sri Lanka’s premier venture capital/angel
investment option for start-ups.
.
5.4 Current actors in the innovation and entrepreneurship eco system
The table below lists a macro view of the type of “actors” currently in the eco-system. An exhaustive
list can be developed as a follow up.
6.0 Initial ideas on way forward
The momentum is gathering and it is vital that all actors in the eco-system start opening up to each
other and not run a ‘closeted innovation program’. Collaboration will add impetus and efficiency
and must be part of the agenda. Listed below are thoughts on how innovation and
entrepreneurship could be further enhanced.
6.1 Conduct a national innovation audit
Identify in every nook and corner any potential innovation and entrepreunership activity to create
a national innovation and entrepreneurship register. This register will over time record the national
capacity for innovation which will also highlight gaps that need to be fixed as well as the potential
for collaboration by the actors in the innovation eco-system.
6.2 Build a national research grid
Bring an ‘R&D on demand’ feature to the economy and all actors by linking and instilling knowledge
share among every type of research and academic function in the country. The conversion of
knowledge to entrepreneurship and innovation will be that much more potent within the endless
combinations that may exist.
6.3 Drive a national economic agenda for innovation and entrepreneurship
Can innovation improve the value chain for domestic consumption? Below would be the top focus
areas. This would be ideal proving ground for driving export value through innovation and
entrepreneurship.
6.4 Eliminate tolerance for incremental improvement in the private sector
Most private sector companies need to start seeking their fortunes beyond investing in incremental
improvements which is often touted as innovation. Business today must think about moving on to
disruption and possibly a blue ocean. The future will most probably belong to innovation rich and
not cash rich companies and the change must happen now. The image below illustrates a proposed
approach.
IP credit: analogypartners.com
Incremental improvement will continue to occur since businesses persist in placing importance on
the ‘atoms’ or physical state of its product or service. More focus on technology and business
model innovation is needed to create disruption and capture a blue ocean.
Business Model innovation = much higher ROI
Atoms innovation alone
= less value
IT
Web
7.0. Conclusion
It is hoped that this note will incite a larger discussion on innovation and entrepreneurship.
The observations and corresponding suggestions are not meant to be conclusive but more
to trigger further thought, and to initiate early action. To start somewhere would be more
important.
The basis for innovation and entrepreneurship exists. It is largely dependent on the
collaboration within the government and private sector.