1

Design driven innovation:Current measurement practice and

recommendation for future innovation surveysHugo Hollanders

UNU-MERIT (Maastricht University)h.hollanders@maastrichtuniversity.nl

Stefano TarantolaJoint Research Centre of the European Commission

stefano.tarantola@jrc.ec.europa.eu

SEE Thematic Workshop “Evaluating design and innovation policies”Florence, 10 and 11 May 2010

2

Importance of innovation

The Lisbon Strategy aimed to "make Europe, by 2010, the most competitive and the most dynamic knowledge-based economy in the world“ and emphasized the importance of innovation for improving Europe’s competitiveness

The new EUROPE 2020 Strategy for smart, sustainable and inclusive growth has singled out innovation as one of the key drivers that can get Europe out of the current crisis and also prepare its economy for the next decade

The European Innovation Scoreboard has been the main tool developed at the initiative of the European Commission, under the Lisbon Strategy, to provide a comparative assessment of the innovation performance of EU Member States

3

ENABLERS

Human resourcesS&E and SSH graduates per 1000 population aged 20-29 (first stage of tertiary education)S&E and SSH doctorate graduates per 1000 population aged 25-34 (second stage of tertiary education)Population with tertiary education per 100 population aged 25-64Participation in life-long learning per 100 population aged 25-64Youth education attainment level

Finance and supportPublic R&D expenditures (% of GDP)Venture capital (% of GDP)Private credit (relative to GDP)Broadband access by firms (% of firms)

FIRM ACTIVITIES

Firm investmentsBusiness R&D expenditures (% of GDP)IT expenditures (% of GDP)Non-R&D innovation expenditures (% of turnover)

Linkages & entrepreneurshipSMEs innovating in-house (% of SMEs)Innovative SMEs collaborating with others (% of SMEs)Firm renewal (SME entries plus exits) (% of SMEs)Public-private co-publications per million population

ThroughputsEPO patents per million populationCommunity trademarks per million populationCommunity designs per million populationTechnology Balance of Payments flows (% of GDP)

OUTPUTS

InnovatorsSMEs introducing product or process innovations (% of SMEs)SMEs introducing marketing or organisational innovations (% of SMEs)Resource efficiency innovators, calculated as the average of:Share of innovators where innovation has significantly reduced labour costs (% of firms)Share of innovators where innovation has significantly reduced the use of materials and energy (% of firms)

Economic effectsEmployment in medium-high & high-tech manufacturing (% of workforce)Employment in knowledge-intensive services (% of workforce)Medium and high-tech manufacturing exports (% of total exports)Knowledge-intensive services exports (% of total services exports)New-to-market sales (% of turnover)New-to-firm sales (% of turnover)

Firm activityEnablers Outputs

The EIS is an annual benchmark of innovation performance across EU27. It tries to capture the capacity of Member States to generate innovative goods and services by looking at 29 innovation-related indicators categorised in three groups: Enablers, Firm activities and Outputs

Only publicly available data is used, for the most recent year, in most cases 2008

What is the European Innovation Scoreboard (EIS)?

4

European Innovation Scoreboard – Approach

No theoretical model of innovation Choice of indicators

Small set of indicators (29) Balance across different aspects Only indicators which are available for EU27

Robust, time-series Analysis

Maximise policy relevance Summary headline indicator (one number)

Summary Innovation Index Analysis by country groups, dynamics, country profiles Exploratory thematic analysis

5

European Innovation Scoreboard – Methodology

Human resource

Finance and support

Firm investments

Linkages &entrepreneurship

Throughputs

Innovators

Economic effects

Enablers

Firm activities

Outputs

SummaryInnovation

Index

DIMENSIONS BLOCKS

6

EIS indicators (1) – Enablers

Human resources measures the availability of high-skilled and educated people

S&E and SSH graduates S&E and SSH doctorate graduates Population with tertiary education Participation in life-long learning Youth education attainment level

Finance and support measure the availability of finance for innovation projects and the support of governments for innovation activities

Public R&D expenditures Venture capital Private credit Broadband access by firms

7

EIS indicators (2) – Firm activities

Firm investments covers a range of different investments needed to generate new products or processes as well as for introducing “softer” marketing and organisational innovations

Business R&D expenditures IT expenditures Non-R&D innovation expenditures

Linkages & entrepreneurship captures the entrepreneurial efforts and the related collaboration efforts among innovating firms and also with the public sector

SMEs innovating in-house Innovative SMEs collaborating with others Firm renewal Public-private co-publications

Throughputs captures the IPR generated as a throughput in the innovation process and TBP flows

EPO patents Community trademarks Community designs Technology Balance of Payments flow

8

EIS indicators (3) – Outputs

Innovators captures the success of innovation by the number of firms that have introduced innovations onto the market or within their organisations. It covers both technological and non-technological innovations

Technological (product/service/process) innovators Non-technological (marketing/organisational) innovators Resource efficiency innovators

Economic effects captures the economic success of innovation in employment, exports and sales due to innovation activities

Employment in medium-high & high-tech manufacturing Employment in knowledge-intensive services Medium and high-tech exports Knowledge-intensive services exports New-to-market sales New-to-firm sales

9

Note : colour coding matches the groups of countries: green are the Innovation leaders, yellow are the Innovation followers, orange are the Moderate innovators, blue are the Catching-up countries. Average annual growth rates as calculated over a five-year period. The dotted lines show EU27 performance and growth.

SI

TR

NO

UK

SEFI

RO

P T

P L

AT

NL

HU

LU

LT

CY

IT

FR

ESGR

SK

IE EE

DE

DK

CZ

BG

BE

MT

CH

IS

LV

HR

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

0.550

0.600

0.650

0.700

0.750

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%

Average annual growth in innovation performance

Innovati

on p

erf

orm

ance (

SII

2009)

EU27 innovation performance in

2009

EU27 average growth rate in

2005-09

Innovation leaders

Denmark, Finland, Germany, Sweden, UK

Innovation followers

Austria, Belgium, Cyprus, Estonia, France, Iceland,

Ireland, Luxembourg, Netherlands, Slovenia

Moderate innovators

Czech Republic, Greece, Hungary, Italy, Lithuania, Malta, Norway, Poland,

Portugal, Slovakia, Spain

Catching up Bulgaria, Croatia, Latvia, Romania, Serbia, Turkey

Innovation performance and convergence trends in innovation in the EU27 and other countries

10

Role of design in the innovation process

“Creativity is defined … as the production of new ideas that are fit for a particular business purpose” (DTI, 2005)

“’Design is what links creativity and innovation. It shapes ideas to become practical and attractive propositions for users or customers. Design may be described as creativity deployed to a specific end” (Cox Review, 2005)

Creativity generates new ideas, design shapes ideas and innovation exploits ideas

11

Interactive model of innovationLI

NE

AR

MO

DE

L

R&D Innovation Productivity

Businessperformance

Creativity

Design

INTERACTIVE MODEL

12

EIS Thematic paper on measuring creativity, design and innovation

Exploratory Groups indicators by creative climate, creativity and

design, and innovation

What we did not try to do: Is to measure creativity and design directly due to a

lack of appropriate data What we did do:

Is measure creativity and design indirectly By using proxy indicators To measure creativity and design at the country

level, not at the individual level

13

Correlation results

ENABLERS FIRM ACTIVITIES OUTPUTS

Human

resources Finance and

support Firm

investments

Linkages & entrepre-neurship

Throughputs Innovators Economic effects

Summary Innovation

Index DESIGN ACTIVITIES

0.515 0.743 0.489 0.663 0.900 0.455 0.486 0.836

Importance of design staff for innovation

Number of designers 0.400 0.613 0.562 0.638 0.566

Community design applications

0.574 0.451 0.530 0.848 0.396 0.469 0.695

Production process sophistication

0.590 0.745 0.643 0.740 0.833 0.451 0.592 0.899

Uniqueness of product design

0.686 0.572 0.601 0.759 0.404 0.560 0.729

COMPETITIVENESS IN DESIGN

0.468 0.567 0.461 0.542 0.521 0.397 0.620

Exports design related services

0.415 0.461 0.476 0.401 0.397 0.545

Exports product design

– 0.425 – 0.365 – 0.442 – 0.449 – 0.437 – 0.523

Value chain breadth 0.600 0.705 0.566 0.654 0.782 0.374 0.539 0.825

Extent of branding 0.587 0.671 0.567 0.635 0.754 0.335 0.548 0.803

14

Creativity and design drive innovation

Creativity and design are (strongly) related with innovation Design activities correlate well with the EIS innovation

dimensions, except for the indicator on the importance of design staff for innovation. Although more designers, more design applications, a more sophisticated production process and a more unique product design seem to have a positive effect on the degree of innovativeness, the relative importance of design staff decreases with countries’ increasing innovation performance

The indicators measuring Competitiveness in design correlate well with the EIS innovation dimensions, in particular the Value chain breadth and the Extent of branding. However, exports of product design correlate negatively with five innovation dimensions

Weakness of approach: use of proxy indicators due to a lack of indicators directly measuring creativity and design

15

Innobarometer: Importance of design staff for innovation

Sources of innovation (EU27)

Q7. In the last two years, have any of the following been a major source of ideas for the innovative activities of your company?

Base: those who performed any innovative activities in the last two years% of ”Yes”

40

39

27

76

25

Your company's production engineers ortechnicians

Your company's marketing department

Your company's design staff

Your company's management

Your company's research department

N=4117!!!

16

Innobarometer: Importance of design for innovation

17

Results from UK innovation survey

Bruce S. Tether (2009), “Design in Innovation, Coming out from the Shadow of R&D”, DIUS Research Report 09-12

“[D]esign is a complementary asset to R&D and marketing in the innovation activities of firms”

“About a quarter of the innovation active firms in the UK … had engaged in design”

“About 40% of … ‘novel innovators’ had engaged in design”

“Firms that engaged in combinations of R&D, marketing and/or design were much more likely … to introduce product and/or process innovations”

“The median firm … spent … an average of 5% … on design, a proportion considerably lower than that spent on R&D (Intra-mural R&D = 18%; acquired R&D = 3%), on marketing (12%) on training (15%) or on acquired machinery, equipment or software (44%)”

18

Current practice of measuring innovation:Community Innovation Survey (CIS)

The CIS is a survey on innovation activity in European enterprises

The CIS is designed to obtain information on innovation activities within enterprises, as well as various aspects of the process such as the effects of innovation, sources of information used, costs etc.

The CIS is based on the Oslo Manual – 3rd edition from 2005 - which gives methodological guidelines and defines the innovation concept

19

Structure of CIS questionnaire

I. Questions to determine if a firm is an innovator: Product innovation Process innovation

II. If the firm is an innovator (has answered ‘yes’ to at least of the questions under I.) then it has to answer questions on:

Different types of innovation activities and expenditures for process and product innovations

Innovation objectivesIII. To be answered by all firms:

Organisational innovation Marketing innovation

20

Design in the Oslo Manual

The CIS does not distinguish design from R&D or marketing activities:

“All design activities for the development and implementation of product innovations (including work on form and appearance) and of process innovations should be included either in R&D or in Other preparations for product and process innovations”

“Work related to changes in product design that are marketing innovations (and not product innovations, i.e. where the functional characteristics or intended uses of the product in question are not significantly improved) should be included in Preparations for marketing innovations”

21

Measuring design activities: discussion of recent developments

“When developing the CIS 2008, design was in the discussions but in the end dropped from the final version of the questionnaire”

Renewed discussions in 2009 to include questions on design in the 2010 CIS

Which questions to include?

22

UK innovation survey: questions on design

23

Company spending on design - Exploratory survey of UK firms 2008: recommended questions on design

Y N

Q6 During the period 200X to 200X, did this business engage in any of the following forms of design activity to support innovation?

a. Technical design activity in the creation of new products and servicesThis might include the design of mechanical, electronic or software based items in physical goods, or the design of technology to enable services such as IT systems. This should not include scientific research.

b. User focused design activity in the creation of new products and servicesThis might include the design of the appearance, interface and ergonomics of physical products or software systems, or the design of the physical materials necessary to deliver a service not based on technology, including printed materials, user interfaces and documentation.

c. Promotional, communication, branding and identity design in the commercialisation of products, services and the firm

This might include the design of all promotional materials, advertisements, brochures, showrooms, exhibition stands, retail environments and point of sale materials. It also might include the design of logos, corporate identity, uniforms and business websites.

Presentation by Dr. James Moultrie for CIS Task Force meeting 23/10/09

24

Company spending on design - Exploratory survey of UK firms 2008: recommended questions on design

Q7 For each of the design related activities in question 6, please ESTIMATE the amount of expenditure for the year 200X. Where precise figures are not available, best estimates are acceptable.

a. Technical design activity in the creation of new products and services ……………………………...Include: cost of staff employed (e.g. mechanical engineers, electronic engineers, software engineers), cost of bought in design services from professional agencies.Exclude: cost of scientific research (part of R&D expenditure) and capital expenditure

b. User focused design activity in the creation of new products and services ……………………………....Include: cost of staff employed (e.g. industrial designers, interface designers, experience designers), cost of bought in design services from professional agenciesExclude: capital expenditure

c. Promotional, communication, branding and identity design in the commercialisation of products, services and the firm …………………….Include: cost of staff employed (e.g. graphic designers, branding designers, identity designers), cost of bought in design services from professional agenciesExclude: capital expenditure

Presentation by Dr. James Moultrie for CIS Task Force meeting 23/10/09

25

Conclusions

Design is important for innovation

Innovation is well measured in the Community Innovation Survey

Design however is not well captured in the CIS

More detailed questions on design are needed in future versions of the CIS