How we can create a virtuous innovation cycle [Opinion]

Innovation is a key element of all national transformation agendas in GCC countries, with no less than Vice President and Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum calling it a necessity for progress.

MENA countries have identified innovation and becoming knowledge-based economies as critical components of sustainable growth.

The question then is how do we accelerate the virtuous circle of innovation using entrepreneurship ecosystems?

We believe that, to create a virtuous innovation cycle, we need an integrated action framework with policy supporting ecosystem activities.

How do we build this framework?

To put it very simply, if we are not rowing in sync we will waste energy and move slowly, so all parts of the startup ecosystem need to be working together. To do this, we need data.

Researchers examining entrepreneurial ecosystems need to focus on:

• Funding (number of active funds, number and value of deals/unicorns/exits)
• Availability of talent
• Infrastructure (co-working spaces, incubators/accelerators)
• Cost (human capital, setting up and running a business)
• Interconnections (in the ecosystem and across ones)
• Culture of collaboration, support, meritocracy and tolerance of failure

Studies conducted by the Wamda Research Lab on access to finance, access to talent as well as on removing obstacles to entrepreneurship provide a comprehensive picture of the multi-faceted challenges for entrepreneurs in the MENA region.

At the same time, government-led policies and initiatives cannot have any impact if they don’t consider the needs of entrepreneurs and companies in the innovation ecosystem.

This is where our ‘3i Model’ comes in, to analyze, measure and propose actions to advance innovativeness and integrating both macro (policy) and meso (entrepreneur ecosystem) levels.

Breaking down the data

Our approach is first to create a conceptual model, then analyze and measure progress using key performance indicators (KPIs). Finally, we benchmark those against other countries to work out where countries’ innovation focus should be.

The UAE has pioneered the use of macro-level key performance indicators in monitoring progress towards its Vision 2021 agenda, using both internationally defined metrics as well as local ones.

But to benchmark progress generally versus economies, we need to use metrics that are measured globally.

In our previous research we adopted the World Bank’s ‘Knowledge Economy Index’ (KEI) as a model.

The KEI is based on a country’s economic and institutional regime, the education system, innovation, and information and communication technologies (ICT).

We benchmarked the UAE and Qatar with three countries in the same population bracket: Singapore, Norway and Switzerland:

• Singapore provides a relevant a role model of government-led, innovation-driven development
• Norway is a wealthy, resource-rich economy
• Switzerland is an innovation driven, wealthy and resource-poor economy

The benchmarking shows that while the UAE is very advanced in ICT, it is lacking in the other three areas, while Qatar’s key challenges are education and innovation.

Our findings were consistent with those of a recent survey by the Abu Dhabi Department of Economic Development and INSEAD, which shows two significant gaps for Abu Dhabi and the UAE on:

• Knowledge creation: the ability to generate and bring in new knowledge in the form of ideas, discoveries, designs and inventions to the world
• Knowledge anchoring:  the capacity of an economy to attract sources of knowledge such as international talent, foreign investment and foreign firms into relocating to its region; this capacity is related to the institutional environment for innovation

Putting this into a framework

The 3i Innovation Framework is based on the engine made up of three key ingredients: people, ideas and funding. It is supported by the underlying infrastructure (legal, physical, digital), and complemented by culture and strategy.

Our framework extends existing as well as introduces new concepts.

It places special emphasis on the economic and financial dimensions.

It expands the scope of infrastructure beyond ICT by including elements such as physical infrastructure and attractive and affordable living and working environments where innovative individuals would like to settle.

It incorporates two vital, but often overlooked, elements, culture and strategy. Culture is recognized as a key ingredient in the success of clusters, such as Silicon Valley, Berlin and Bangalore, while strategy reflects the idea that progress can only be achieved by synchronizing efforts of multiple stakeholders and the active role of government.

It adds a second dimension by introducing stakeholder-specific issues and actions, related to government, entrepreneurs, academia, support ecosystem (such as accelerators and hubs, venture capitalists) and corporates (such as for collaborative entrepreneurship).

Finally, it prioritizes stakeholder-specific actions based on their short-term and longer-term impact. For example, the UAE has recognized the importance of education in shaping an impactful ecosystem and is introducing educational reforms. Such reforms will need many years to come to fruition, while in the meantime they should be complemented by short-term actions.

No parallel play

To realize the innovation vision for the GCC countries, governments, startup ecosystems and academia need to work together and not independently.

They need to agree on a solid vision, a common framework and a path on how individual indicators should evolve to reach goals. The 3i Innovation Framework aspires to provide this integrated model.

Feature image via Inclusive Growth