Informal Competitiveness Council of Research and Innovation Ministers
How to optimize the benefits of research investment for European jobs, growth and society
- the SME perspective Thursday, May 2nd, 2013
Dublin
Dr. Kai Engel, Partner and MD DACH
A.T. Kearney, Global Lead of Innovation and R&D Management Competence Team
+ 49 175 2659 496
Key factors to optimize the benefits of research investment for
European jobs, growth, and society – the SME perspective
Executive Summary
■ SMEs are the backbone of Europe‘s economy: they account for 68% of employment, 58% of valueadded and need to take a key part in investigating potential to optimize research investment
■ R&D investment is a key lever to develop sustainable growth – in recent years, however, SMEs in EU27 were struggling to reach or even exceed the 2008 level of value-added and of employment
■ A.T. Kearney has conducted a survey with the IMP³rove network to identify barriers for benefits of
research investment and actions to move forward:
• The EU and many member states have launched ambitious strategic projects in order to make
R&D more efficient – and the improve network is aware of national strategies
• EU-27 states need to further develop their strategies to ensure result-orientation and transparency of
available support to SMEs – e.g.: ca. 50% of IMP³rove participants state that the national innovation/
research strategy is not transparent to the majority of their SME clients
• These findings are not only valid for a small subgroup of countries: even top performing countries
with growth in value-added and employment of SMEs since 2008 yield similar results
• Required actions by EU-27 member further include:
– Improvement of the interface between research programs and SMEs (reduction of administrative
burden and acceleration of decision process for funding)
– Improvement of the conditions for SMEs (improvement of cooperation between academia and
SMEs, improvement of marketing for available funds and offerings for SMEs, optimization of
transparency and availability of resources to support SMEs)
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SMEs are the backbone of Europe’s economy
Contribution of SMEs to Employment and Value-added1 in EU-27
100%
100%
42%
Large
enterprises
(250+ employees)
18%
Medium
enterprises
(50-249 employees)
19%
Small
enterprises
(10-49 employees)
21%
Micro
enterprises
(<9 employees)
33%
17%
21%
67%
58%
30%
Employment
Value-added
EU-27 countries
1. (Gross) Value-added remains when the intermediate costs are deducted from sales or turnover.
Source: ECORYS “EU SMEs in 2012: at the crossroads”
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In recent years, SMEs were struggling to reach or even exceed
the 2008 level of employment and value-added
Value-added and employment in SMEs compared to 2008 level
115
Increase in employment and value-added
Increase in employment or value-added
Decrease in both dimensions
110
D
BE
NL
Bubble-size: R&D expenditure
in % of GDP
105
SE
AT
LU
BG
Value- 100
added
(relative to
95
2008 level)
PT
DK
EE
EL
90
SI
Growers
FR
FI
CY
HU
CZ
SK
UK
IT
ES
85
MT
PL
IE
80
LT
LV
50
RO
45
70
75
80
85
90
95
100
105
Employment (relative to 2008 level)
110
115
Correlation in between amount of R&D investment and growth questionable!
Source: ECORYS “EU SMEs in 2012: at the crossroads”; Eurostat
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Also for corporates R&D spending does not automatically lead
to competitiveness and profitable growth
R&D Spending and EBIT
Examples
(FY 2011, in US$ bn and % of revenue)
14.5%
2.2%
7.3
Apple
Nokia
2.4
-0.6% EBIT1
31.2% EBIT
Company A
Company B
To bring the right ideas successfully to market, there is more required than R&D spend
1. Adjusted for other expenses including one-off restructuring costs, related and share impairments and outsourcing of Symbian to Accenture; also
adjusted for other income such as a beneficial cartel ruling; revenues of both companies comparable in between $ 60-70 bn
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Source: A.T. Kearney
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Innovation leaders, or profitable growth champions, benefit from
superior innovation management capabilities
Types of innovation
Product
innovation
e.g. Apple’s
iPhone
Process
innovation
e.g. RFID and bar
codes in logistics
Service
innovation
e.g. realtime flexible
packaging in travel
EBAY
Source: A.T. Kearney
Business model
innovation
Definition of innovation management
The capability to manage an invention
or an idea for
new products, new processes, or new
services,
or
a new or a fundamental improvement
to a business model
up to its successful realization in the
market driving profitable growth
e.g. reverse
auctions at EBay
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Superior Innovation management capabilities are built in 4
dimensions leading to the targeted innovation success
Overview
House of Innovation Management
Innovation
Strategy
Innovation Success
Innovation
Organization
and Culture
Innovation Life Cycle Management
Idea
Funnel
Management
Innovation
Development
Continuous
Improvement
-
Profitable growth
Value-add growth
Employment growth
Enabling Factors
(e.g. KPIs, IP/Knowledge Management,
HR-Management, Controlling)
Source: A.T. Kearney
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The SME perspective in EU-27 in this context has been
developed leveraging the IMP3rove platform and network
The IMP³rove platform and network
Assessment
tool
> 3,500 SMEs
assessed
globally
Fills white
spots in innovation
research
IMP³rove
Research
IMP³rove
Education
1)
Complements
SME access to
public programs
Supports
standard
development
(CWA 15899)
Training &
certification
IMP³rove
Partner Services
> 500 trained
SME consulting
professionals
European IMP3rove Platform and Network developed since 2006
IMP³rove: IMProving Innovation Management Performance with sustainable IMPact – a project set-up by the European Commission to
address the needs of SMEs across and beyond EU-27 –
1) IMP3rove Academy: a Non-For-Profit Legal Entity in foundation
Source: A.T. Kearney/IMP³rove
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To optimize benefits of research investments SMEs see two
major levers and related action clusters
Innovation policy levers to turn investment1) even better
into employment and value- added growth
A
Define the
right innovation/research
strategy
B
Optimize services for SMEs to master barriers for growth
Cumulative Revenues
Macro
and market
trends
Employment
Idea
Cumulative
Value-added
Idea
Idea
Idea
Idea
Idea
Idea
Idea
Idea
Societal
needs and
segments
Idea
Idea
Idea
Idea
Idea
T0
T Launch
TProfit
Time
Time-toMarket
Time-to-Profit
1) Target of Europe 2020: 3% of the EU’s GDP to be invested in R&D
Source: A.T. Kearney
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There is high awareness for innovation/research strategies in
EU-27 SMEs, but also significant room for improvement
SME View
A
Does your country have an
innovation strategy/research
strategy?
B
Does the strategy explicitly
formulate economic growth
and employment targets in
the SME sector?
82%
64%
41%
36%
14%
Yes
Not Sure
62%
32%
30%
Not Sure
No
4%
No
Yes
Not Sure
No
Yes
75%
54%
46%
13%
Not Sure
No
Yes
70%
46%
0%
Strategic framework
communicated well
Growers
38%
23%
87%
Yes
Is the strategy transparent to
the majority of SME
entrepreneurs?
Not Sure
8%
15%
15%
No
Yes
Not Sure
No
Commercialization orientation of strategies and
support for SMEs to realize potential can be improved
EU-27 excluding Growers
Source: A.T. Kearney based on survey within IMP³rove network in EU-27
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6 action clusters were derived from the network to overcome
barriers and optimize benefits of R&D investment in EU-27
SME View
Selection
A Strategy
B Services for SMEs
Barrier: National research/innovation strategy not aligned to the needs of SMEs
1
Action: Stronger focus of differentiated regional strategies on regional SME ecosystems
Barrier: The strategy is not result oriented/clearly operationalized
2
Action: Incorporate market potential and commercialization into innovation strategies
Barrier: Strategy is implemented unequally across the country
3
Action: Ensure adequate regional interfaces to SMEs
Barrier: Cooperation between academia/researchers and SMEs is weak
4
Action: Foster improved cooperation between academia and SMEs
Barrier: Lack of knowledge in SMEs about research investment programs
5
Action: Improve marketing and accessibility of available offerings for SMEs
6
Barrier: Lack of qualified support for SMEs
Action: Optimize transparency and availability of services to support SMEs growth
Source: A.T. Kearney based on survey within IMP³rove network in EU-27
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Plans to develop the EU 27 Innovation Union needs to consider
building better SME innovation management capabilities
Summary
Accelerating change …
… while building on the specific
strengths
Develop European innovation strategy
beyond national thinking which addresses
barriers for SMEs:
A• Build national/regional strengths, leverage
strengths of regions while tailoring
strategies to market success (incl.
commercialization)
B• Specifically support SMEs to overcome
growth barriers
• Aim at strengthening SMEs
innovation management capabilities
(help in market access, transformation
to next size segment)
• Build an optimized service
infrastructure, offer a simplified and
pragmatic support aiming at sales
growth and employment growth
Source: European Commission, “State of the Innovation Union 2012”; A.T. Kearney
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One final statement ...
Leading Innovation Management
is
NOT an art, ...
Source: A.T. Kearney
... it is a capability,
which need to be and can be built
among EU 27 SMEs!
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