How Do You Build a National Innovation Ecosystem?

“It’s not about ideas. It’s about making ideas happen.”

Fifteen years ago, as the CEO of a center for training innovators, I fervently believed that an innovative nation is one with a multitude of creative innovators generating an enormous number of high-quality ideas. I think you’ve guessed from the quote from famous American investor Scott Belsky at the beginning of this article that I was wrong. The most innovative nation isn’t the one that produces the most innovative ideas, but rather the one that has the most innovations successfully implemented. To simplify this, if we imagine a country’s innovation-supporting environment—a national innovation ecosystem—as a factory, then the factory’s success factor isn’t merely acquiring high-quality raw materials, but producing high-quality finished goods. This, in turn, necessitates a well-calibrated production line orchestrating experienced workers and effective tools based on a well-designed blueprint. If you are interested in building a productive national innovation ecosystem in your country, then the bad news is that it takes a vast number of workers and tools, several years, and a wise national plan. The good news is that I can help you with the planning part in this article, but I’ll leave the rest to you.

I. What is a National Innovation Ecosystem?

The terms national innovation ecosystem, national innovation system, and national system of innovation have been used interchangeably in the innovation economics literature over the past four decades. In my opinion, an acceptable definition of this concept is the one by Professor Bengt-?ke Lundvall, which is the following:

The elements and relationships that interact in the production, diffusion, and use of new and economically useful knowledge are located either within or rooted inside the borders of a nation-state.

I’m not going to decode the jargon of this mysterious definition right now. Instead, I’ll take you back in time and shed light on the concept behind the word ecosystem. This term was coined in 1935 by British biologist Arthur Tansley during his studies of the relationship between organisms and their environments.

Consider the butterfly, for instance. It goes through four phases: the egg phase, the caterpillar phase, and the chrysalis phase until it becomes an adult butterfly. Although this organism has different needs in each of its phases, it will reproduce and repeat its life cycle over and over again without any problems if it lives in a suitable environment that satisfies all its needs. In other words, if it lives in an appropriate ecosystem. Thus, going back from the butterfly ecosystem to the innovation ecosystem, we can say that the latter refers to the environment that supports innovations throughout their life cycles, from intention to income, and the innovators throughout their life cycles, from idle to idol.

II. The Four Stages of Building a National Innovation Ecosystem

Imagine yourself as the leader of an imaginary country called “Innovia.” Now, take a blank piece of paper and perform the simple task of listing the actors in this country that will make it a paradise for innovators and their innovative projects. I’m sure that after a few minutes, you’ll realize that it’s not a simple task at all, even though I haven’t restricted you yet with time, budget, human resources, and geographical constraints. Perhaps the trick that makes designing an innovation ecosystem much more difficult than designing a butterfly ecosystem is that the latter produces identical butterflies, while the former can produce flying cameras, anticancer drugs, fintech mobile apps, entertainment shows, and low-carb strawberries. Thus, several scholars have tried to tackle this mysterious subject by providing general recommendations to policymakers on the right mix of actors that should exist and interact effectively in the ideal innovation ecosystem. Examples of methodologies that fall into this category include the triple-helix innovation system methodology initiated in 1995 and the quadruple, quintuple, and sextuple helix methodologies that have been developed since. A second group of scholars has recommended building the national innovation ecosystem piece by piece by building sectoral innovation ecosystems sector by sector or building technological innovation ecosystems technology by technology. Another group has insisted that a country should start by building several Silicon Valleys within its borders, or regional innovation ecosystems, and then connect them. In contrast, the methodology I’m about to introduce here will not focus on defining the right actors or the right pieces of the innovation ecosystem puzzle; it will identify the right steps or stages that take an innovation ecosystem from zero to hero in a sustainable manner. It consists of four high-level stages, namely, the foundation, communication, calibration, and orchestration stages. Although I have based my proposed methodology on solid theories, such as the theory of collective impact, and on my several years of reading and practice, I don’t claim by any means that it is the bulletproof methodology for building innovation ecosystems for all nations; however, I believe it could represent a roadmap that could greatly help decision-makers in strategic planning for enhancing national innovation capacity without wasting valuable efforts and incurring unnecessary costs.

III. Foundation Stage

As the leader of Innovia, in this stage, you need to secure the basic ingredients or components of a national innovation ecosystem, namely, an innovation-friendly regulatory framework, innovation-supporting entities, and potential innovators.

In short, an innovation-friendly regulatory framework is one that is soft on failing innovators but hard on intellectual property infringers. It is flexible in regulating new technologies and business models and serious in favoring local innovative products and services. It allows innovators to import the necessary ingredients for their experiments and provides regulatory sandboxes for the safe practice of new ideas. At this stage, it’s not practical to create this umbrella with all its laws and regulations at once. Basic regulations can initiate this umbrella, and the rest will be added and modified along the way to build the innovation ecosystem as the market matures.

There are two ways to categorize the types of innovation-supporting entities from my humble point of view. In the simple way, I have categorized them based on the type of the support they provide as knowledge providers, such as universities, training institutes, and information centers; services providers, such as licensing authorities, prototyping shops, and business incubators; and money providers, such as buyers, investors, and grant makers. Note that innovation-enthusiastic universities, for example, provide all three types of support and thus fall under all of these categories.

In a more sophisticated way, I have categorized the entities based on the needs of the innovator along the innovator journey. In a previous article, I remodeled some of the published models of the innovator’s journey into five phases with four steps in between, which I called the I x 9 innovator’s funnel. The focus here is on the entities that directly or indirectly support innovators through the following four steps:

1. Inquiring: This includes all providers of knowledge, services, and money that help the person or enterprise understand and be attracted to the world of innovation.

2. Ideating: This step consists of the entities that provide knowledge, services, or money to support the innovator, be it a person or an enterprise, in creating an innovative idea or selecting a suitable existing one to adopt in a new context.

3. Implementing: This includes all the providers that support the innovator in transforming the innovative idea from a theoretical design into a project that generates commercial benefits.

4. Inspiring: This step includes those providers that support successful innovators in inspiring other people and enterprises to leave the idle phase and pursue the innovation journey.

Diving deep into the above categories and their subcategories, taking into account various sectors and industries, one could list hundreds of support elements that the national ecosystem should provide to innovators. However, it’s unreasonable for a national innovation ecosystem at this early stage to create an entity for each of these support elements. Therefore, it will start by establishing a few governmental entities that provide a good enough portion of these elements and grow in coverage and capacity over time, driven by demand and national strategic directions.

Last but not least, the engine of the ecosystem can’t work without fueling it with potential innovators. Since innovation is a skill that can be learned by almost anyone, Innovia’s population doesn’t have to be an army of high-IQ people. At the very least, the majority of them must have a minimum level of food, water, shelter, safety, health, and education. I believe that a nation facing instability or existential crises has more important goals than building an innovation ecosystem.

IV. Communication Stage

Even the most profitable product will fail miserably in the market if no one knows what it is, why anyone should use it, and how it should be used. Likewise, in this stage of building Innovia’s national innovation ecosystem, it is crucial to ensure that the three components discussed in the foundation stage know about themselves effectively, understand each other thoroughly, and stay updated on any developments among them over time. Furthermore, at this stage, you must ensure that the larger Innovia community is informed about and convinced of innovation, innovators, and the financial and social benefits associated with them.

You might think that I’m wasting your time by emphasizing the need for communication within innovation-supporting legislators, as well as within innovation-supporting entities and innovators. After all, they communicate already, right? Unfortunately, that’s not always the case. I’ve witnessed two governmental entities create pro-innovation regulations that ended up contradicting each other; two pro-innovation entities buy the same super-expensive equipment to serve innovators and existed in the same neighborhood; and innovators tackling the same problem, using the same solution, and targeting the same investors. Fortunately, enhancing communication within each of these components is not rocket science. This can be achieved using classical tools, such as initiating committees that include everyone, conducting regular meetings and exhibitions, and creating virtual communities to keep everyone in touch with relevant updates. However, improving communication between the members of each component and the members of the other two is a bit tricky. In my view, an internet platform that can host all the members of the three components and manage the interactions among them would do a good job of addressing this challenge. This platform won’t live long if it isn’t marketed well to all stakeholders and if they aren’t convinced that interacting within this platform has far more benefits than interacting outside it.

Finally, raising awareness in the wider community about the benefits of innovators and innovation may require both traditional techniques, such as creating and disseminating local success stories and launching massive media campaigns, and nontraditional techniques, such as distributing paid shopping vouchers to all households in each neighborhood or to members of each family that includes a successful innovator. And as the saying goes, “It takes a village to raise a child,” it takes a supportive community to raise a successful innovator.

V. Calibration Stage

After ensuring that Innovia has the required regulations, support entities, potential innovators, and supportive communities and that they have a good level of communication among them, it’s time to turn Innovia’s national innovation ecosystem into an effective production line of acing innovations. This can be achieved by calibrating the numbers related to the ecosystem’s journeys, just as engineers calibrate the specifications of a production line to achieve its optimal productivity. In short, you should do the following for Innovia’s ecosystem:

1. Record all relevant numbers: For each sector in Innovia’s innovator journeys, periodically record the number of innovators who enter the inquiring, ideating, implementing, and inspiring steps; how much time it took them to move from one step to another in their journeys; and how much time it took each innovation support entity to provide them with the requested support elements. The more detailed this data is, the more useful it will be for upcoming calibrations.

2. Identify obstacles and bottlenecks: If the average time it takes innovators in a sector to move from one step to another is too long, or if the average success rate is too low, some problems need to be discovered. The causes of these problems are so varied that it is not easy to list all of them, but they usually fall into one of the following categories:

a- Innovators face legal or legislative obstacles.

b- Innovators face social obstacles.

c- Innovators face financial obstacles.

d- Innovation support entities are unable to meet the demand for their support elements.

3. Apply the necessary interventions: Without going into detail, problem categories a and b require dealing with the regulatory umbrella (mentioned in the Foundation Stage section) or with the community (mentioned in the Communication Stage section). On the other hand, fixing problems in categories c and d usually involves injecting money into the market, which could harm the ecosystem in the distant future if not done properly, with economic factors in mind. The sources of financial injections are public, nonprofit, or private, with the first two sources usually dominating in the early years of the ecosystem and the latter appearing as the ecosystem matures. A simple solution to these problems would be for the government or nonprofit organizations to create innovation support entities that provide the required support elements for free or at a lower price than the market price. As I have shown in my previously published article, this intervention will have a positive impact in the short term but will hinder the sustainability of the ecosystem in the long term. In my humble opinion, the best intervention to solve the problems in categories c and d is to motivate the private sector to establish commercial innovation support entities and to promote the business relationship between innovators and these entities through paid vouchers. This strategy will solve the targeted problems sustainably if four conditions are met. First, vouchers should focus on support elements that are in short supply in the market to motivate new commercial suppliers to emerge to meet the excess demand and stabilize market prices. Second, only promising innovators who have what it takes to complete the innovation journey should receive these vouchers to ensure that water is not wasted on dead seeds. Third, the voucher holder innovator should be allowed to choose any commercial innovation support entities from the local market to purchase the necessary support elements. This will maintain fair competition among commercial entities, such as when private hospitals compete to attract health insurance card holders. Finally, these paid vouchers should gradually disappear from the market once the private sector is willing to cover all support costs on behalf of innovators in exchange for receiving percentages of ownership of their innovations.

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VI. Orchestration Stage

A national innovation ecosystem with components calibrated to function as an effective production line is undoubtedly a successful ecosystem. However, if you want Innovia’s ecosystem to be not only successful but also the best ecosystem, then an additional set of interventions is required. I call this stage the orchestration stage, because if you want to create the best symphony orchestra in the world, it’s not enough to put 100 musicians with the right mix of instruments in a room. You have to do much more. You need to take a second look at your musicians—or in our case, your support entities—and aim for the following upgrades:

1. Upgrade their capabilities. If you improve the skills of each musician, then the whole orchestra will naturally jump to the next level. Similarly, you can take the whole Innovia ecosystem to higher levels if you help each support entity and improve its capabilities to provide more world-class support elements with less time, waste, and cost.

2. Upgrade their harmony. The next step to achieve excellence with your orchestra is to select a challenging musical work that brings out the best of your musicians, divide its parts among them based on the instruments played, and train them to play this piece by complementing each other with the help of the maestro, as if they share one brain. Similarly, you could develop an ambitious mega-plan for Innovia with goals and numerical targets driven by the country’s competitive advantages and future opportunities and threats. Then you break down this plan into individual plans for each support entity, which will ensure a win-win relationship between them and the country as a whole. You should also ensure that these individual plans together unify goals, success factors, measurement metrics, communication channels and frequency, and data sources along the ecosystem. Finally, you appoint a backbone entity to coordinate all of this and to have the power to persuade all the support entities to stick to their individual plans. Among the various types of power this entity can wield, I always prefer the power of paid vouchers, as discussed earlier.

3. Upgrade their agility. To ensure that your orchestra remains unbeatable, guide your musicians to be flexible enough to switch to playing a completely new musical score quickly. In today’s fast-changing global economic trends, it’s not the big that eat the small anymore; it’s the fast that eat the slow. As the leader of Innovia, you should have the ability to change the direction of your mega-plan (see above), and these changes should affect the entire ecosystem immediately without it collapsing. This isn’t as easy as it looks in theory; it requires a super agile and transparent government that has its eyes wide open to any emerging trends, flexible support entities that have real and well-trained leaders, and a frictionless innovation ecosystem that plays in harmony. Only then will your great Innovia become an unmatched innovation nation!

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VII. Final Thoughts

If you think that my article is oversimplifying the building of a national innovation ecosystem, I totally agree with you. For example, I know countries where one sector of their ecosystem has reached the calibration stage, while other sectors are still in the communication stage or even in the foundation stage. That said, I still believe that a high-level roadmap is better than marching in the dark.

Before closing, here’s the incomprehensible definition of a national innovation ecosystem I mentioned earlier:

The elements and relationships that interact in the production, diffusion, and use of new, and economically useful knowledge are either located within or rooted inside the borders of a nation-state.

Really! Do you need any more explanation now?