Remove the Fire Blanket

This blog was first published in Bits&Chips on 12 April 2023.

In more rural parts of our country, innovation and development is less oriented around larger and dominant players. As a result, it’s less visible to the larger public, including policymakers. Rural economies are largely based on SMEs, which jump as high as their pole allows them. At the same time, technology-driven SMEs in particular are often hidden gems, trying to find their way in a global economy and dealing with the same challenges as multinationals, such as attracting good and skilled staff.

While paying lip service to SMEs, European, national as well as regional governments come up with large sets of programs. These large innovation funds, such as the recently launched national NXTGEN Hightech program, are more suited for organizations with fully equipped R&D and public-private collaboration departments.

Don’t forget about the ‘long tail’ of SMEs.

Of course, such large companies are important pillars of our economy, but we shouldn’t forget about the ‘long tail’ of SMEs. I was told a mere 4 percent of the small and medium-sized enterprises benefit from public research infrastructure and work with knowledge institutes, for example. So, all the programs suffocate the innovation for SMEs and take the oxygen away that’s needed to embark on innovation projects.

The Netherlands isn’t alone in this. The Commission on Innovation and Funding Programs of the German Association for SMEs (BVMW)published a document posing one hundred theses addressing the lack of innovation support for SMEs. The head of the commission, Matthias Brucke , advocates shifting the focus of innovation projects from a traditional technology push to a market or society-pull approach.

The document suggests ten reforms that will benefit SMEs in staying the economic engine in a society that’s in full transition. They can be grouped into three main topics:

• First of all, innovation projects must primarily be approached from a market perspective and evaluated and supported based on whether they generate exploitable results that can flow back to society since they’re funded by public money. Therefore, applicants must be encouraged to define measurable criteria by which the social impact of project results can be assessed. These must be verified at the end of the project.
• Secondly, SMEs must be involved in the design of funding programs. Only the involvement of the target group of these programs offers the guarantee for a simple and transparent design. This can be achieved by introducing reliable, low-threshold and small-scale programs at the federal and state levels, allowing SMEs to receive support for their own transformation. And, if needed, resources must be provided for clusters and networks of SMEs that want to self-organize and come together in industries or along value chains.
• And finally, more agile projects are required to increase the speed of transformation programs to respond to current challenges and serve market needs. Instead of long-lasting perfectionism in the preparation and implementation of funding programs, pragmatic steps with shorter durations must be taken.

Of course, it will take time to effectuate these demands. In the meantime, I see an important role for the universities of applied science. They can be a bridge when participating in large funding programs, while working in smaller ‘sprints’ (or should I call them work packages) with the SMEs. At the same time, these institutes are part of this ‘big boys network’ and often think and operate like them. So, they have homework to do themselves on how to be part of the solution and not the problem.

• NXT GEN high tech: https://nxtgenhightech.nl/
• BVMW paper: https://www.bvmw.de/de/steuern-und-finanzen/news/mittelstand-bei-zukunftsstrategie-forschung-und-innovation-nicht-vergessen