INNOVATING INNOVATION
The state needs to make savings - but we must not scrimp on the future.
RAFAEL LAGUNA DE LA VERA AND THOMAS RAMGE EXPLAIN HOW MORE CAN BE ACHIEVED WITH LESS IN INNOVATION (TOO):
It is a phenomenon that innovation research knows only too well from case studies of large companies in crisis mode: When budgets get tight, new projects are the first to go. The reason for this is obvious – the money for future products or services has not yet been firmly allocated. There are no path dependencies on the business model yet. No manager ever has to admit they have blown money on old projects if they know how to sugarcoat the figures. New initiatives are then quietly shelved, disappearing first from the corporate strategy, then from the budget planning. Only the R&D team feels the blow directly. US aircraft manufacturer Boeing serves as a real-time case study of the downward spiral of cost-cutting pressures, declining innovation and competitiveness. Unfortunately, it is also impossible to ignore the parallels to the status quo, innovative strength and future prospects of the German state and economy.
The 2024 federal budget amounts to just under EUR 500 billion. According to a report by the Federal Court of Audit, around 90 percent of this is firmly allocated or blocked by statutory benefits. As a result, budget holders can only cut one tenth of their expenditure. Unfortunately, investments in innovation are particularly affected by this.
In an ideal world, funding for the research and development of quantum computers and nuclear fusion, broad-spectrum antiviral agents and dementia therapies would require very little discussion at all. It would simply be there. In times of tight funding budgets, we must subject government innovation to an innovation process itself. The ideal scenario in this case is also obvious: achieving more with less money. This is not only necessary, but is also actually possible. Five years of SPRIND have left us in no doubt that if German politics shifts four levers, the social return on innovation
increases.
Four lessons learned from five years of SPRIND
- COMPETITION AS A FUNDING PRINCIPLE
At the risk of sounding hyperbolical, research funding today generally proceeds as follows: Smart researchers put their heart and soul into applying for funding from a large pot. If their application is successful amongst all the competition from other researchers, they usually receive comfortable funds for three to five years. Despite having to jump through various evaluation hoops, the chances of receiving a funding extension for another few years are also very good. Meanwhile, however, the competition is left empty-handed – after all, taxpayers shouldn’t have to shoulder the costs of research several times over.
As far as basic research is concerned, this approach is probably still more or less effective. But it immediately runs into problems when it comes to so-called translational research – in other words, applied research in technical disciplines. Competition invigorates things here, too. Through initiatives such as our sparks
and challenges
innovation competitions, our experience at SPRIND has shown that when several teams work in parallel, the speed of development and the quality of the (interim) results increase. A key reason for this is not only that the innovators feel the pressure of time from other teams – time is money in innovation, after all. The teams also cross-fertilize each other as knowledge diffuses from team to team. This notion of coopetition
, where teams cooperate and compete with each other at the same time, stimulates business even more than simple competition.
As part of this, however, it is important to define clear success criteria that must be achieved in comparatively short time intervals. Rather than offering one group a lot of money for five years, such challenges distribute a sufficient amount of funding amongst several groups. Only those who can demonstrate initial success based on the defined criteria will receive further funding – in a simple, non-bureaucratic process that will help them to achieve success in the next stage of development. No proof of means, no evaluation, only results must be delivered. A focus on a competition model and shorter funding terms could easily be extended to a large part of state innovation funding. But for this to happen, funding bodies would have to learn to let go a little here and there.
- COMPETITION AS A FUNDING PRINCIPLE
State bureaucracy is riddled with the spirit of mistrust. This is not a negative trait found in bureaucrats; it is literally systemic. In its historical context, the system also made sense. The mother of modern administration, the Prussian state bureaucracy, succeeded in standardizing recurring processes in the 19th century. This not only meant that they could be carried out efficiently, but also finally enabled the well-organized authoritarian state to exercise comprehensive control. That was very innovative. Unfortunately, however, the dialectic of progress has struck with an iron fist when it comes to promoting research and innovation – too much control prevents innovation. Research bureaucrats are forced to carry out assessments according to a set of rules that even those who drew it up can hardly understand. Otherwise, they violate the rules they themselves are governed by.
The crazy thing about the whole process is that the assessors do not look at the results of projects, but rather the process. Has the application been submitted correctly according to all criteria? Were all funds spent correctly? And just to be on the safe side, do the auditors’ auditors do another check to verify that funds have been approved correctly in accordance with all the allocation guidelines? Whether or not an R&D project has yielded results in the end becomes a footnote amidst all this formal madness.
A little control is good, trust is a prerequisite, results are better.
This formula also sums up our experience throughout the five years that we have collaborated with the Nerds with a Mission. It is not the job of innovation managers to make sure that three quotes have been obtained before purchasing printing paper. They need to be looking at whether an agreed development milestone has been reached after six or twelve months of funding and what this then means for market maturity, further funding requirements, collaboration with potential partners, and so on.
- DON’T TRUST THE CAT TO GUARD THE CREAM
It’s the ever-present elephant in the room: When it comes to the allocation of state research and development funding, the boundaries between advice and vested interests are blurred. Usually, there is no malicious intention. Political decision-makers naturally seek specialist advice on the main innovation topics from subject experts. However, these are often the very people who then apply for funding once their advice has been taken and funds are allocated to a specific field of research. All of us, including researchers, consider our own work and actions to be of particular importance. The current funding system really is like asking the cat to guard the cream.
Of course, it is essential that clever minds and institutions with special interests continue to be heard in politics. What is ultimately required is neutral expert advice based on extensive expertise in deep technologies that does not make recommendations to political decision-makers according to its own interests, but instead places bets on the future to the best of its knowledge and belief based on the data available today. Such a (neutral) consulting assignment must then also include consideration of the most important of all technology issues: What technological bets does society want to make and with what goal?
- MISSION POSSIBLE
Rebuilding a European chip industry with the help of substantial tax-payers’ money is a well-founded mission. It makes Europe resilient to supply crises. It gives researchers access to knowledge and test environments that will enable Europe to regain its position as a world leader in chip design and development. Without state anchor investments, however, no European start-up ecosystem for chips and computer hardware will emerge. After just a few months, we can already see that the mission of the EU Chips Act is beginning to bear fruit and can very quickly become an investment that pays off economically. What were the success factors?
The goal was clearly described. The EU and German governments did not get tangled up in the minutiae of funding. Germany allowed the global giants of the chip industry to compete for funding. The local administration was unusually non-bureaucratic in the necessary approval procedures.
Even if Intel did put its plans for a chip plant on hold, it still serves as a prime example that high-tech missions with economic and social benefits are possible. Now that the Taiwanese chip manufacturer TSMC has joined forces with the German companies Bosch and Infinedo and the Dutch NXP Group to form ESMC (European Semiconductor Manufacturing Company), the new semiconductor plant in Dresden will significantly improve semiconductor supply assurance for German and European industry in the long term. Of course, which missions we want to tackle and when, and with how much money, must ultimately be decided by parliament and politicians according to democratic rules. But before it even gets that far, the most important homework has to be done. State innovation funding must undergo a thorough innovation process – and tight budgets are a good reason for this. We also know this from case studies in innovation research. Often, an abundance of resources is not at all conducive to innovation.
Necessity is the mother of invention.
