The Chain to Create new Value in the Economy and Society

Leopoldo Rodríguez

Innovation has undoubtedly been a fundamental factor in countries that have been able to grow and reach a higher level of development. China and India stand out, especially in recent decades, with an average GDP growth of 75 yearly, that exceed the average ranging from 1.5 to 2.0 recorded in developed countries.

TECHNOLOGICAL DEVELOPMENT AND INNOVATION

In Mexico, innovation-based growth has had to do mainly with the development of technologies, as in the past, while in countries with more dynamic growth, this drive has increasingly come from the creation of value through the generation of new profitable businesses—known as business development—that can, or not, be based on technological development. It is worth mentioning that the dynamic associated to business development radically speeds up technological development.

Historically, one of the most significant programs in Mexico was the Nafin-Conacyt Entrepreneur Fund, that supported the development of scientific-technological projects. This goal is now uncertain given the changes in economic policies in the National Institute of the Entrepreneur (Inadem), its main support. In general, Mexico does not give the due importance to promoting new businesses or to technological development, both of which are allocated resources equivalent to less than 0.5% of the GDP.

As a general rule, it is correct to say that innovation, be it technological or not, materializes as soon as a good, service or new commercial or organizational model enters the market. The indicator par excellence of effective market entry is the economic impact of innovation (or the corresponding impact on innovations of predominantly social or environmental interest). This is so important that the OECD only uses the term disruptive innovations for those whose high economic (or of another kind) impact has a global scope.

In its previous meaning, technological innovation was seen only as a result: the last element or link in a sequential system that had its origin in basic research and went through applied research and technological development. It was seen as innovation only when it entered the market.

The main reason why this vision has been questioned for years is that it induces participants at all stages of the system to establish contact with the development user or entity that applies it, only when it reaches enough robustness. This practice slows down and significantly reduces the effectiveness and efficiency of efforts as a whole, and translates into a low percentage of successful innovations.

The result of the systematic application of scientific, technological or practical knowledge which leads to prototypes of substantial improvements of existing goods, regardless of its implementation or immediate commercialization, is defined as technological development. This includes technical work, and business and social model, etc. that is missing to be able use technology in such a way that a business or application plan (an investment possibility) that compensates the high risk and disruptive effects of innovation can be financially justified.


INNOVATION MATERIALIZES IN THE MARKET.

 

Technological development involves numerous tasks: IN TERMS OF THE RESEARCH GOAL

  • Identifying product requirements and specifications;
  • Defining a production process;
  • Outlining the value creation process;
  • Integrating the new technology with existing technologies and enabling technologies.
  • Result: a prototype integrated in a system (for example, a platform)

IN TERMS OF ECONOMIC VALUE PROPOSAL (SOCIAL, ENVIRONMENTAL, ETC.)

  • Estimating the revenue stream and identifying possible product costs;
  • Showing specific value creation;
  • Defining precise operating mechanisms.
  • Result: business (or system) model

IN TERMS OF REQUIRED SKILLS

  • Recruiting and/or naming personnel (entrepreneur, engineers)

IN TERMS OF BUSINESS RISK

  • Calculating the investment amount and the recovery uncertainty

IN TERMS OF TECHNICAL RISK

  • Measuring the difficulties that could result from integration;
  • Protecting the good (and its components, if applicable) in industrial and intellectual property agencies.

The following tasks are also required in order to consolidate the product or process development:

  • Evaluating market opportunities;
  • Defining the logistics and infrastructure (facilities) required;
  • Defining the final specifications based on pilot productions;
  • Evaluating results with respect to established criteria and goals in order to decide on R&D funding.

Without undermining the aforementioned, other useful terminological definitions can be found in the Mexican Standard nmx-gt-001-imnc-2007. The definition of engineering as such does not appear, as it is not exclusive of innovation, but common to other fields of action and professions.

The systemic analysis indicates that the abilities or skills needed for technological development connect with business skills to materialize innovation. In many projects, technological development and engineering are a virtual functional unit. Engineering tends to be the specialty that most participates in technological development. Its use in applied research generally requires graduate academic levels, but the demand of engineers with operational or operational-related experience is important.

Today, innovation is thought to be able to encompass all elements of a system; not necessarily sequential in nature and may result from any element or set of elements or participants in the process (for example, from basic research alone or from the detection of unmet market needs); and the innovation process constitutes in itself the systemic framework or environment in which such elements can be combined to (1) face contradictions, (2) produce a change or (3) induce balance, among other actions.

What is most important, this approach requires that from the beginning and with regards to each and every element of the process, a close relationship with the end user or applicator be maintained. This relationship allows identifying and considering factors that will determine the functionality and robustness of innovation. Likewise, it allows defining how institutional participants or individuals should interact at any given time.

Detecting new or unmet needs in the market is the most frequent and dynamic cause behind innovation projects. Given the interest in this cause, this approach has allowed innovation to originate where need is discovered, whether regionally or locally.

NEW OR UNMET NEEDS AS THE ORIGIN OF INNOVATIONS

The question for Mexico is if ultimately the creation of new businesses will be strongly driven in the public or private arena.

Knowledge generated in universities, and private engineering and research centers will continue contributing to development, this under any circumstances. This activity currently has a global dimension, which forces the promotion of different forms of interaction with institutions from other countries, mainly the most advanced ones, starting with the

education of nationals abroad, mainly at graduate level, and their reincorporation in some way—physically or contractually—to the national effort. This interaction demands—increasingly more—research and technological development alliances between universities, and engineering and research centers, both national and international. With the proper focus, it will help meet our market needs.

The business sector supporting these efforts is no less important. It ranges from economic support to create highly-specialized graduate degrees in centers abroad, to the appreciation of those graduates who return to work in Mexico without applying to them the short-term productivity criteria that tends to be used to lower local payrolls when economic circumstances are not at their best. That, of course, means that companies must acknowledge the value of industrial and intellectual property, and see the reincorporation of people who have received high-level training, from companies or universities, as strategic elements that are essential to create value.

However, the role of companies in the development of new businesses goes well beyond that recognition. Their active and direct participation in the innovation process is crucial and they have a primary role in the conception of business opportunities. Universities and companies must understand how they can cooperate in innovation and exploit it. This link and efficiency are essential.

The typical tasks that need to be carried out to identify new or unmet market needs are the same as those carried out daily by companies as part of their commercialization efforts, and they include:

  • Using information, materials and strategies from commercial areas;
  • Investigating how competitors market and identifying possible strategic advantages over them;
  • Conducting market research to outline client profiles;
  • Defining the essence of target clients;
  • Creating the “brand” (name, logo and other branding elements);
  • Considering if existing printed advertising works to sell innovation;
  • Evaluating the electronic image (website, email and social media);
  • Looking for ways to leverage the company’s commercialization calendar;
  • Studying the company’s previous commercial campaigns, and
  • Creating commercial strategies that innovation needs.

All this should help specify the characteristics of the new product or service.

RELATIONS AND INNOVATION

Efficient relations between both types of institution—universities and industry—is fundamental. It is not the result a mere casual contact. What must be established is a formal interaction scheme that commits and obliges parties to share information on innovation opportunities; to evaluate the information received; to define and notify if they will participate organizationally and economically, in developing an opportunity, and in negotiating a contractual instrument that establishes indicators, cost and time expectations, guidelines for the allocation of efforts, expenses and resulting benefits, including who is the holder of the industrial and intellectual property generated and the assets used for the development.

Numerous recent experiences, like that of the Liaison Department of the Faculty of Chemistry at UNAM, show that effective relations are not possible without an effective specialized organ. Everything indicates that what is most convenient is that the university itself establishes this “liaison unit” and that it be part of its organization, regardless of the figure chosen (from a department of the institution itself to a corporation that depends on it).

The close contact that liaison demands gives way to benefits that are not binding, but that are necessary in order to make innovation happen:

  1. Serendipity; based on the principle that “in order to find something, you need to be looking for something,” (Serendip in Arabic is Sri Lanka) and the attitude that allows to find something that was not necessarily sought:
  2. Trust and conviction from company and university heads;
  3. The application of project management knowledge in the field of innovation; and
  4. More self-esteem in participants.

In a comprehensive liaison process, technological development facilitates the realization of projects that are congruent with the university’s research lines of excellence; systematically reinforces the strategic skills of the institution, thanks to the contributions of core areas of the company(ies) involved, and makes the growth of fields or industries that are critical for the country more flexible, since it allows to connect the requirements of the projects with the capacity areas of the different regions.

The aforementioned is fundamental given the global evolution of technologies based on sustainable competitive advantages namely, (1) highly specialized activities, for example, creating computer technology applications; (2) those associated to the effectiveness of human resources; and (3) those linked to environmental, safety and hygiene disciplines.

The typical tasks of a liaison unit include:

  • Evaluating and designing technologies;
  • Commercializing them;
  • Acting like a technology transfer office;
  • Scheduling communication and broadcast;
  • Reporting to the academic entity it is part of;
  • Defining innovation projects to be carried out, specifying tasks for the academic unit and the participating company;
  • Negotiating required contracts;
  • Subscribing to and managing a general agreement and specific agreements with the university; and
  • Determining how to fund projects and maintain financial and administrative control.

 

This list of tasks demonstrates that relations cannot be an informal process.

 

LEYDESDORFF AND ETZKOWITZ’S TRIPLE HELIX MODEL

The three helices are the government, the productive structure (industry), and the scientific-technological infrastructure (universities).

This model proposes that innovation occurs when the different elements of the helix interact successfully, i.e. they establish multiple reciprocal relations. The model includes different human, organizational and management components:

  • Human: researchers, entrepreneurs and civil servants;
  • Organizational: hybrid innovation agents (spin-off) and university-industry interfaces (for example, technological development centers, innovation heads and liaison units, such as that of the Faculty of Chemistry of the UNAM), and
  • Management: incentives, industrial and intellectual property records, university autonomy.

 

The triple helix model proposes that the integration of academia, government and industry favor the territorial transfer of knowledge, thus promoting local, regional and national economic development through competitive advantages.

Companies are tasked to propose business opportunities, carry out strategic planning, implement best practices and cooperate to compete. It is in academia’s hands to conduct research, innovate in the regional sphere, train, generate knowledge and develop human capital. The government in turn, manages policies, creates regulatory frameworks, generates growth environments, provides economic infrastructure and provides a significant part of the funds, deemed here necessary to detect, size and respond to the most relevant needs.

At the overlap of the helices, each actor assumes the functions of the others. Thus, they create new companies, develop technologies and train entrepreneurs, agents of administrative change and investment promoters, among other types.

As a way to promote innovation, the triple helix model is not essentially different from simple relations, although it implies a greater involvement of actors, the creation of environments for growth and the removal of institutional and social obstacles.

The participation of governments is vital to trigger innovation in sectors with strong social content, such as pharma, health in general and the environment. In Mexico, initiatives such as that of the Mexican Agency for International Development Cooperation (Amexcid) have sought to apply the triple helix model, but have not yet achieved visible results, despite showcasing such relevant actions like the meeting held in Japan at the end of 2017, in which a large group of Mexican and Japanese university deans participated with the specific purpose of finding ways to implement the triple helix in Mexico.

 

CONCLUSION

The fundamental strategy to promote innovation in Mexico is the determined and essential application of relations models that maximize in the sort and medium term the emergence of regional and local initiatives, regardless of whether or not high-technology sectors join in. One must remember that there are surely many business opportunities with regional or national approaches even in medium to low technology areas.