The art and craft of running an innovation agency

Last month, 'The Angry Birds Movie' launched to mixed reviews but big box office revenue, raking in nearly $230 million worldwide (more than triple the size of its budget) in just ten days. If you’ve lost hours of your life shooting a variety of small aggressive birds at equally belligerent pigs, chances are you’ll be familiar with Rovio Entertainment – the Finnish startup that developed the popular mobile game that the movie is based on. But you may not have heard of Tekes, Finland’s government funding agency for innovation, despite the part it has played in helping Rovio to turn a quirky idea for a video game into a global phenomenon.

Around the world, there are many other examples of government ‘innovation agencies’ that give funding and other forms of support to businesses and their partners to help them develop new products, processes or services. Over the past half-century, these public investments have played a critical role in the development of many well-known commercial innovations, including GPS technologies, the CT scanners used for medical imaging, and predictive keyboards for mobile phones. Yet we still know relatively little about the institutions tasked with delivering this support, and even less about what best practice looks like in terms of designing and running them, or deciding what mix of policies and programmes will be most appropriate in different national contexts.

Efforts to find practical and applicable lessons have been complicated by three main things:

  • A lack of knowledge about the variety of possible innovation agency models, and a tendency to emulate organisations that are not necessarily a good match for the ambitions, resources and context of the country in question.
  • The difficulties involved in working out how to attribute impact to the interventions made by these agencies, which are often complex, high risk and long term.
  • A poor understanding of the ways in which innovation agencies can be encouraged to adapt, experiment and evolve over time, without losing sight of their core mission.

Over the past year, Nesta has sought to address some of these gaps by looking at the approaches of ten innovation agencies around the world. Our in-depth case studies and interviews gathered information about why these agencies were set up, how they have evolved over time, the instruments and programmes that they use and how effective they have been.

This comparative study – the most comprehensive we know of to date – turned up some fascinating stories about individual agencies and the successes and failures they have had. Building on this, we identified a number of key choices, options and challenges that face governments thinking about setting up or redesigning an organisation of this kind:

  • There is no single model for a ‘successful’ innovation agency. Although there is much to learn from other countries about best practice in terms of institutional and programme design, attempts to directly replicate organisational models that operate in very different contexts are likely to fail.
  • There are a variety of roles that an innovation agency can play. From our case studies, we have identified a number of different approaches that an innovation agency might take, depending on the specific nature of a country’s innovation system, the priorities of policymakers, and available resources.
  • Innovation agencies need a clear mission, but an ability to adapt and experiment. Working towards many different objectives at once or constantly changing strategic direction can make it difficult for an innovation agency to deliver impactful innovation support for businesses. However, a long-term vision of what success looks like should not prevent innovation agencies from experimenting with a range of approaches, and being able to respond to new needs and opportunities.
  • Innovation agencies should be assessed both quantitatively and qualitatively. To date, evaluations have tended to focus on the financial returns generated by an innovation agency's portfolio. Our research suggests that equal effort needs to be put into assessing the more qualitative aspects of their role, including the quality of their management, their ability to take (and learn from) strategic risks, and the skill with which they design and implement their programmes.
  • Governments should be both ambitious and realistic about what they expect an innovation agency to achieve. An innovation agency’s role will inevitably be affected by shifts in government priorities. Understanding how innovation agencies shape (and are shaped by) the broader political environment around innovation is a necessary part of ensuring that they are able to deliver on their potential.

At a time when government support for innovation is becoming increasingly salient – but increasingly hard to fund – we believe that there is both an appetite and a need for a more open-ended and constructive debate about the role that these agencies can play in delivering innovation and economic growth. Alongside this, there is more work to be done to develop a practical ‘playbook’ of options that will help governments understand the range of innovation policy strategies and tools available to them, and which of these are likely to be more effective in different circumstances. 

Our new report, 'How Innovation Agencies Work', aims to jumpstart this process.  In partnership with others, we look forward to continuing and deepening this conversation in the months and years ahead.

Please do get in touch with your views and suggestions at [email protected].

Image credit: CC image by geralt at pixabay


Alex Glennie

Alex Glennie

Alex Glennie

Senior Policy Manager

Alex is a Senior Policy Manager in the Innovation Growth Lab (IGL).

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