Geoff's blog

How much does innovation cost?

Geoff Mulgan - 14.09.2011

I'm spending quite a bit of my time at the moment catching up with NESTA projects around the country and talking to people about what we should do in the future.

Last week I was in Wales and met, amongst many others, the winners of the Big Green Challenge who are now branching out from community energy to a cluster of related projects.  I also talked to the government about possible collaboration on places wanting to get much more serious about innovation in public services - such as how to reshape eldercare to cut hospital readmissions.  

There's been a great deal of talk about prevention and investment approaches in the last few years but far too few examples of detailed, costed and implemented models.  Wales points to the projects it has supported through an 'invest to save' fund; a few other councils, like Westminster in London, can point to serious savings from good prevention, notably around family services; and Manchester has developed an ambitious and comprehensive approach around criminal justice (which I was involved in earlier in the year).  But practice still has some way to go to catch up with the rhetoric. There's no shortage of people who are convinced that they can save money in the future through smart prevention; but there are very few who can prove it.

In Birmingham I met the shortlisted councils for Creative Councils. They're full of ambition in fields as varied as eldercare, energy and education. Even if only a fraction of what they want to achieve actually happened we'd see a transformation of local government and a return to the confidence and leadership it showed in the 19^th century.  The presence of a strong and committed group of leaders and chief executives, as well as officials and partners, was a very positive sign. Our challenge, and theirs, is to be truly ambitious about the long-term possibilities but measured and rigorous about the early steps needed to get there. I've long argued that governments tend to overestimate what they can achieve short-term and underestimate what they can achieve long-term and this is certainly true of innovation.

This month also brought the deadline of our digital arts fund passed with nearly 500 applications, and a very high standard. Some applications are around using digital technologies to change the relationship with users; some are on new business models and some are about changing the very nature of what they do. My hope is that in the future we can grow funds of this kind, and develop a wider range of funding tools, from grants and loans to equity, or funding for accelerators as we've done in other fields.

All of these funds raise an interesting question for us as funders of innovation. We know successful innovations tend to have been through stages of radical change and even failure.  Where they end up is often very different from where they start. But funders often want applicants to spell out their idea and its potential outcomes right from the start. Once funding is agreed it tends to freeze the idea - at just the moment it needs to evolve.  The other extreme is just to fund teams, rewarding the promise of their ideas and their credibility as innovators - but the risk there is that you simply lock in a group of favoured incumbents.  

The question is, how can you know how much a team needs unless you know what they plan to do? NESTA has pioneered cutting unnecessary red tape in reporting, and giving awardees the freedom to evolve. But how should we navigate this?  And are there really good examples we can learn from? 

Some of these questions also came up at an interesting forum the OECD hosted in Paris with science and innovation ministers. I chaired a session including David Willetts, the Russian Minister Sergey Ivanets and Gordon Day, President of IEEE (whose papers I used to read avidly, and with only partial comprehension, when I was doing my PhD in telecommunications). The title was how to do innovation on a shoestring; the conclusion was that you couldn't and remarkably the OECD countries have nearly all maintained or increased spending during the crisis. But there's great interest in cheaper ways of achieving impact: cutting regulation, mobilising public purchasing or using standards to drive commercial innovation.  A controversial example discussed was feed-in tariffs in Germany. These have created a lively field, but at a cost - perhaps as much as €20billion in extra bills for consumers, and now the concern that the great majority of solar panels are being made in China. 

There wasn't much discussion of design there. But design is becoming much more integral to innovative practice.  SITRA in Finland has been one of the champions, and ahead of Helsinki Design Year next year, the Helsinki Design Lab has published a very interesting book about systemic change, for which I wrote a forward.