Monday, November 15, 2010

Attractive Incubation Environment - What Does it Look Like?

Kevin Thompstone organised his contribution at The Long Debate on innovation around three  key questions:

·         Where Do We Want to Go?
·         How Are We Going to Get There?
·         What Can We Do to Accelerate Progress?

Where Do We Want to Go?

The objective of Ireland’s Smart Economy Strategy is to make Ireland an innovation and commercialisation hub in Europe.     In practical terms, and paraphrasing the authors, this means we want:

·         a country that combines the features of an attractive home for innovative R&D intensive multinationals while also being
·         a highly-attractive incubation environment for the best entrepreneurs in Europe and beyond.

In the words of The Innovation Task Force:

·         By 2020 Ireland will have a significant number of large, world leading, innovation-intensive companies
·         Each having a global footprint, many of which are Irish headquartered and owned

How Are We Going to Get There?

The Innovation Eco System is critical if this vision is to be achieved.   I am going to focus on the incubation environment because that is where I have worked for many years.    The focus here is on generating high growth Irish owned businesses.

What does a highly attractive incubation environment look like?

·         It starts with inputs - graduates, academics,  researchers, experienced workers, motivated or driven individuals, existing or aspiring entrepreneurs who have a desire to build a business
·         It ends with outputs in the form of new profitable and sustainable business ventures
·         But in between the inputs and outputs are a series of interventions that work together to add value through the various stages
·         The transition from input to output takes effort, energy and time - and lots of it.

So let's paint a picture of the engine room of the incubation system.     Imagine a funnel:

·         Fuel is poured into the funnel to power the engine.    
·         The supply of fuel comes from years of sustained investment in education, R&D, internationally trading businesses, regional, national and global networks
·         This investment provides the key element in the fuel  which is people - people with knowledge, imagination, technology, know how, experience, get up and go, ...  
·         The fuel, sparked by people, ignites and generates new business ideas
·         As the fuel works through the funnel these ideas go through different stages of development: feasibility; proof of concept; R&D; sales and finally profit or more importantly cash flow
·         So the final output, at the narrow end of the funnel, comes in the form of new, globally trading, profitable, cash generating business ventures

What Can We Do to Accelerate Progress?

We have the ingredients for this equation and they are already active.  But if we want systemic innovation we need to constantly improve and create new ways of delivering the fuel to the innovation funnel and accelerating its impact on the end goal - the delivery of profitable, cash generating businesses.     So we can add a series of catalysts, venture catalysts, to the mix at different stages in order to get better results:

·         Catalyst No 1 INVESTMENT: in education, research and export oriented mobile investment to create technologies with commercial potential and skilled people with experience of the demands of international markets.    Ireland has a strong foundation in this arena with high participation rates in education, increased investment over the last decade in R&D and a leading position in the attraction of foreign direct investment.   
·         Catalyst No 2 DEAL FLOW:  interventions to accelerate deal flow - the supply of potential entrepreneurs and business ventures.   In Shannon, at the early incubation stages this has included campus enterprise programmes or clinics, start your own business or venture start I programmes taking up a few hours or a few nights.    The inputs intensify as the idea becomes a more serious proposition and we move into the 12 month, couple of nights and every weekend commitment of a venture start 2 programme.    This is followed by intensive technical and commercial evaluations as well as business mentoring and opening doors to export markets through Enterprise Ireland.  There are lots of examples of these programmes being run around the country, by public and private sector:  Shannon Development; Enterprise Ireland; County & City Enterprise Boards, NDRC, Boot camps, Bolton Trust, to name but a few.  
·         Catalyst No 3 SPACE:  In the early stages, apart from research laboratories, this can be as simple as providing meeting points or rooms for networking or brainstorming.   Then come hot desks with access to a phone and a network followed later by dedicated workspace or incubation units from 20 to 200 m2 with access to shared infrastructure and services to match needs through the feasibility, proof of concept, R&D, and early trading stages.     The objective is to remove routine start up headaches (e.g. securing utilities, telecoms, equipment, … ) so that the entrepreneur can concentrate on the business.   Finally multi-tenant buildings, own door units, stand alone buildings and development sites.    Again there are lots of examples of this in Ireland  - Shannon Development Knowledge Network, Higher Education incubators supported under EI’s incubation programme, the Business Innovation Centres (BIC's) such as the Dublin BIC, the Ryan Academy, Docklands Innovation Park,  NDRC ...
·         Catalyst No 4 CASH: Early on in the process this can be as simple as a small amount of money to encourage a researcher or someone in industry to test out an idea they have in the back of their head.    Later it takes the form of feasibility support, R&D funding, training, employment and asset grants.    This comes through combinations of financial incentives, loan capital and equity including angel, seed and venture capital not to mention bootstrapping.   Again, there are lots of initiatives on this front.   

These catalysts work best when delivered within a positive enabling environment - policies, infrastructure and services that facilitate fastest possible movement of people, goods, services and information and a culture that recognises and encourages a can do attitude.

In cultural terms the High Kings of Ireland have a lot to answer for!    They spent so much time all of those centuries ago building boundaries and fighting over territories.   There must be some of this imbedded deep in our national consciousness as we don’t yet do the open systems approach, which is crucial to innovation, well.

What practical things can be done to build towards systemic innovation?    Investment in R&D has increased significantly in the last decade, we have invested in research and business incubators, cash grants are available for businesses with a focus on high growth internationally trading ventures.     These are the most visible elements.   But the hard work is in Catalyst No 2 - Deal Flow.     An incubator is much more than a building.    Real incubation happens when a dedicated team is based in the building and is available through all stages of the venture development process to prompt, to encourage, to advise, to steer, to network, to remove obstacles and smooth the path for entrepreneurs and venture teams.     So that is message number one - locate business development and advisory teams in the incubators.    Proximity facilitates interaction, understanding and opportunity.

Message number two is keep investing in state of the art telecommunications infrastructure.   But invest up front, don't wait for demand, create it.    Next generation networks (NGN) require big bucks but if we lose our nerve we risk having a red cow roundabout solution for broadband.    The internet brought the death of distance which is a big advantage to peripheral places like Ireland.    Let’s not be complacent and allow the barrier of distance to resurrect itself.     Five to ten years ago there was no You Tube, Twitter, Facebook, etc., and Google was a search engine not an advertising channel.   Investment in NGN is not about responding to demand today but about being ready for the next wave, the business opportunities that will emerge in the next five to ten years that we can’t even imagine today.   

The Innovation Task Force’s focus on a highly attractive incubation environment is correct.   We have the vision, many of the elements are in place and investment is underway in others.  Success requires much more than “build it and they will come”.    For systemic incubation and innovation it is a case of Invest (in the fuel), Build it (the incubation engine), Drive it, Connect it and then they, world leading innovative ventures, will come.

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