VTT as an Innovation PartnerOECD Business Symposium on Open Innovation in Global Networks

Copenhagen, 25th Feb 2008Prof. Erkki KM Leppävuori, President & CEO

THE NEED TO INNOVATE

Knowledge and intellectual capital intensity increases especially in Western societies.Societies with high knowledge and intellectual capital intensity typically offer demanding markets.

Demanding market means competition.Competition makes innovation possible and, at the same time, necessary.

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THE ORIGINS OF INNOVATIONS

Innovation is mainly driven by researchBasic research on different technologies creates potential for applications.Development in one area opens new potential in other areas.

The number of interfaces drives the innovation probability

The more interfaces, the more innovations.Cross-cultural, cross-technological, multidisciplinary.

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THE DIFFERENCE BETWEEN RESEARCH AND INNOVATION[and creativity]

Research is the transformation of moneyinto :

• Knowledge new to the offering• Knowledge new to the company• Knowledge new to the industry• Knowledge new to the world

Innovation is the transformation of knowledge into money.

• The adaptation or adoption, by the organisation, of anything new that is being transformed or incorporated into:

• Products, services, processes, systems, structures, brands, IP, etc.

• i.e. into anything that the customer and/or consumer is willing to pay for or that reduces the cost of serving the customer/consumer.

Research

Innovation

Research

Innovation

Creativity

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R&D - INNOVATION - BUSINESS TRANSFORMATION

Is there any need to shift the focus of "a country's" innovation policy from its almost exclusive emphasis on expenditure on research and science, on the commercialisation of inventions or discoveries and on investment in frontier technologies?Equating innovation with science and research is at best an incomplete picture, which misrepresents where greatest benefit from innovation can be created and captured for "a country".An alternative view is that the smart application of knowledge to transform businessess is the key to achieving innovation, both for firms and for nations.The aim should not merely be increasing the supply of science and research, but bolstering the capacity of internationally competitive private firms resident in "a country" to absorb and use all sources of knowledge in a way that transforms their capabilities and business offerings to better meet market needs.

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WHY PUBLIC RESEARCH FUNDING

Areas where markets fail in socioeconomic problem solving: … areas with socio-economic importance in which markets function imperfectly (public / common goods, e.g. health care, environmental protection, defense, education, science and research, and…

…respective infrastructure areas: … socially important infrastructures and public good areas, such as transportation, energy, but also…

…science and innovation infrastructure: … creation, maintenance and financing of education and research infrastructure or “innovation system” supporting education, basic research, (re)training…

Areas requiring long time horizon of R&D: …areas of imperfect markets such as environmental protection...

Areas requiring critical R&D mass and expenses: …critical mass and big size of R&D facilities such as aeronautical and space research (e.g. ITER, CERN, EBML, ESA)…

…and more practical arguments like…Welfare through competitiveness: Government R&D funding can be justified for boosting economic growth in order to enhance national competitiveness and consequent improvements to economic and social welfare in through income and wealth creation, improved employment, etc…

R&D schemes for SMEs: … most companies are SMEs with limited R&D resources but important for economy and employment giving legitimacy to public R&D funding schemes

…and also…related government, system and sectoral failures.

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PUBLIC DECISION MAKERS, FINANCIERS AND R&D PERFORMERS

Science and Technology

Policy Councilof Finland

UniversitiesUniversities

Ministry of Education

Ministry of Education

Ministryof Employment

and the Economy

Ministryof Employment

and the EconomyOther

ministriesOther

ministries

Parliament of FinlandParliament of Finland

Council of StateCouncil of State

Other researchinstitutes

Other researchinstitutes

TE-CentersTE-CentersCommitmentConsensus

The Finnish National Fund for Research and Development

The Finnish Funding Agencyfor Technology and Innovation

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VTT IN BRIEF 2007

7 Knowledge ClustersDigital Information SystemsTelecommunicationsMicrotechnologies and SensorsMaterials and BuildingIndustrial SystemsBiotechnologyEnergy and Pulp & Paper

46 Knowledge Centres2 740 employees 232 M€ turnover

9 Key Customer SectorsBiotechnology, pharmaceuticals and foodsElectronicsEnergyICTReal estate and constructionMachines and vehiclesTransport and logisticsPulp and paperProcess industry and environment

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TURNOVER 2007 (232,2 M€)

Public sector, domestic23 %

Income from abroad14 %

Private sector, domestic30 %Basic

governmental funding33 %

76,6 M€ 69,3 M€

53,8 M€

32,5 M€

COMPETITIVE INCOME

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VTT KNOWLEDGE CLUSTERS

Microtechnologies and sensors

7 knowledge centres

Materials and building

6 knowledge centres

Biotechnology6 knowledge centres

Energy and pulp & paper

7 knowledge centres

Digital information systems

6 knowledge centres

Telecommunications6 knowledge centres

Industrial systems8 knowledge centres

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EXPERT SERVICES PROVIDES PROBLEM SOLVING AND PERFORMANCE ASSESSMENT

CUSTOMER

Consultation Expert opinionsFailure analyses

Certification and product approval

Conformity assessment

CHARACTERISTICS

Customised services

Operational excellence

Experience based applications

Delivery on time

Good laboratory resources

AREAS OF ACTIVITY

• Buildings• Building materials• Building structures• Fire safety• Chemical analytics• Medical devices • Electronical products• Machines, boats,

vehicle equipments

Services offeredCopyright © VTT

VTT VENTURES - SPIN OFFS AND OTHERPORTFOLIO COMPANIES

Networking and risk management solutionsVergo Oy

Digital content protection software solutionsSplitstreem Oy

Networking solutions for smart environmentsElectrical coding technologyTechnology enabling high-throughput gene expression analysis

Mittadata OyNicanti OyPlexPress Oy

RFID technology solutionsFennoID Oy

Boron Neutron Capture Therapy for cancer treatmentThin-film electro responsive sensors and related electronics Energy and environmental analyses

Boneca OyEmfit OyEnas Oy

Biomagnetic sensorsAivon Oy

Metabolomics, bioinformatics, biomarkersZora Biosciences Oy

Ethanol production from waste *)ST1 Biofuels Oy

Discovery and production of plant based small molecules SoluCel Oy

*) Exit Nov 2007

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VTT’S MISSION

VTT produces research services that enhance the international competitiveness of companies, society and

other customers at the most important stages of their innovation process, and thereby creates the prerequisites

for growth, employment and wellbeing.

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VALUES GUIDING VTT’S ACTIVITIES

ETHICAL NORMS

impartiality reliabilityintegrityresponsibility

Science-based innovationGenuine collaboration

Customer and demand orientationEncouraging peak performance

14Copyright © VTT

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VISION 2012

VTT as the technology leader brings

success to its customers.

Internationally recognized, synergistic and flexible partner

An engine of technological development in Finland

Best investment option in the innovation environment

The preferred employer for experts who want to improve their knowledge and succeed

Customers Owner and finance providers Employees

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VTT IN TRANSFORMATION DURING THE STRATEGY PERIOD

20122005Technical research centre Technology-intensive

innovation organisation

Internationally recognized and desirable collaboration partner

Domestic market oriented

Focus on enhancing the competitiveness of customers through technology-driven development

Focus on technologies

Diverse offering of combined competencies

Numerous separate offerings

Networked organisationProfit-centre organisation

Broad technology-based competence

Multidisciplinary and internationally competitive competence

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IMPACT ASSESSMENT MODEL OF RTOs Beneficiaries

Impacts on competence and management

Impact on customer innovation process

Societal impacts

Enabling factors

Enabling factors

StrategicBusiness areas Political

decisionmakers

Public sector

Citizens

Industrialassociations

International corporations

National largecompanies

SMEs

RTOStrategic Actions

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CHALLENGES FOR RTOs IN THE FUTURE

GLOBAL -orientation

EU-orientation

National-orientation

?

?

DEVELOPMENT OF AN INVOLVING INTERACTION CULTURE• Researcher networks of knowledge portals• Technology themes• Key technology actions• Key partners and strategic allies• Official and unofficial multidisciplinary peer

groups and networks• Prediction of technology and market development

trends

• Core processes, support processes• Projects and teams• Sharing and combining expertise and the creation

of new knowledge in projects and processes

• VTT's operating units (line organisation)• Allocation of financial resources• Predicting, acquiring and developing expertise• Strategic planning and reporting structureI level

III level

II level

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CUSTOMERS AND OTHER INTEREST GROUPS

RESEARCH AND DEVELOPMENT

ProjectsCompetence management

VENTURESCommercialisation of

research output,venture activities

and spin-offs

EXPERTSERVICES

Consulting services, testing, certification

MANAGEMENT,SUPPORT PROCESSES

QUALITY MANAGEMENT, INFROMATION SERVICE

STR

ATE

GIC

RES

EAR

CH

Man

agem

ent o

f the

self-

finan

ced

and

join

tly-fu

nded

rese

arch

BUSINESS SOLUTIONSManagement of the contract research

Advisory boards

THE OPERATIONS MODEL AND THE STRUCTURE

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International Research Netw

orks

VTT’S INNOVATION PARTNERSHIP MODEL

VTTIndustrial Innovation

Management

Business and HTI competence

Technologycompetence

Global markets and Business environment

Integration of different R&D competencies

(Partnerships)

Management and fostering of technology-based innovations

Integration of competencies

VTT’scustomers

R&D financiers

Customer’scustomers

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FORESIGHTS AND BUSINESS INTELLIGENCE AS A PART OF VTT'S STRATEGY PROCESS

Foresight of business environmentChanges in different customer sectorsCompetitive situationFinancial aspects

Technology foresight and roadmappingThe development and implementation of technologies New rising technologies and their possibilitiesNew innovative combinations of different technologies and knowledges, multidisciplinarity

Business intelligenceChallenges in our customers businessesCustomers needsNew market opportunities

The knowledge management of VTT

Services and offeringStrategy and processes

Technology focusand

investments

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THE NETWORK OF GLOBAL AND LOCAL PLAYERSNew technology policy must look for global competitiveness, specialising and

networking

High level global player

Networkedlocal player

Networkedlocal player

Networkedlocal playerInternational

network

Networked local players clustered around global players

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MA

NA

GEM

ENT

SER

VIC

ES

Technology programme –concept combines academic research projects and corporate R&D

Steering groupenterprises

TekesGrants

Company R&D projects

preparationcoordinationdecisionmaking

Research projects of research institutes and universities

SynergyNetworking

Part financing

GrantsLoans

Capital loans

Pictures: © ESA, Okmetic, Stora EnsoSource: Tekes

Strategic Centres for Science, Technology and Innovation

Internationalpartner

Cluster Ltd.CompaniesUniversities

Researchinstitutes

Cluster Ltd.CompaniesUniversities

Researchinstitutes

Virtualresearch organisation

Virtualresearch organisation

Technologytransfer

Technologytransfer

R&D andinnovation

program 1, 2of centreCentre A, B

CooperatingcompaniesUniversitiesResearchorganisations

CooperatingcompaniesUniversitiesResearchorganisations

StrategicpartnersStrategicpartners

DM 24983412-2006 Copyright © Tekes

CompanyCompany CompanyCompany

Researchinstitute

Researchinstitute

INTERNATIONAL RESEARCH COLLABORATION

European research collaboration is vital: EU’s 7 Framework Programme and Technology Platforms, Eureka, ERANET and COST. Active and selective participation in EU research programmes on the basis of VTT's Technology Focus.

VTT is active in developing European research and innovation structures.

Active networking with the leading technology countries, such as the United States and Japan.

The activities of business enterprises will be supported in emerging economies, particularly in China, South Korea and India.

VTT will make its research collaboration more intensive with selected strategic research partners.

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GLOBAL RESEARCH ALLIANCE GRA: PARTNERS

CSIR / South Africa

DTI / Denmark

Battelle / the US

Fraunhofer / GermanyCSIR / India

CSIRO / Australia

TNO / the Netherlands

SIRIM / Malesia

VTT / Finland

Combined knowledge of nine

top-level innovation intensive

technology organisations

Guiding principles and focus areas for the Global Research Alliance

Undertaking large-impact projects for the benefit of society.

Creating synergy by pooling the energies, skills and facilities of participants.

Promoting projects with high innovation content.

Developing global knowledge networks for industry and industrialsectors to enhance their competitiveness.

WaterEnergyHealthDigital FuturesIndigenous KnowledgeInnovation Systems

Global Knowledge for Global Good

VTT- UNIVERSITY CO-OPERATION PARTNERS OUTSIDE THE EU

USAUniversity of California at Berkeley (also other campuses) Massachusetts Institute of Technology (MIT)Stanford UniversityArizona University

JAPANOsaka UniversityTokyo UniversityKeio UniversityOkayama University

CHINADalian University of TechnologySouth China University of TechnologyFuzhou University

RUSSIAPetrozavodsk State UniversityRostov State University of Civil Engineering

VTT, VTT, FINLANDFINLAND

KOREAKonkuk University, SeoulThe Seoul National UniversityKorea UniversityHanyang University

CHILEUniversity of Conception of Chile (UDEC)

AUSTRALIAQueensland University of

TechnologyCopyright © VTT

VTT IS A WELL KNOWN PARTNER IN EU RESEARCH PROGRAMMES

• Framework programmes are the EU’smain ways of funding research and development in Europe.

• Now we are working on FrameworkProgramme 6, with about 150 projects.

• The seventh framework programme (FP7) will run from 2007 to 2013.

• Mainly collaborative joint research.• Many research areas are covered.

• These include ICT, nanotechnology, transport and energy.

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VTT’S PARTICIPATION IN INTERNATIONAL PUBLIC RESEARCH PROJECTS

118125 119

139 144

7790 89

112 113

133

0

50

100

150

2001 2002 2003 2004 2005 2006

EU

R m

illion

TotalEU

Cooperation apart from EU-funding: EUREKA, ESA, COST, Nordic cooperation, OECD, IEA, IAEA, bilateral cooperation etc.

Number of projects

490317

481346

460340

439335

388287

370283

VTT’s total volume

161

TRIP™, Tekes R&D International Program - a new economic development model

Exploiting Finland’s R&D competitive advantage.Developing broader range of R&D activities.Four segments:

- attracting first time R&D activities (institutes, company activities, contracted out)- encourage local multinational subsidiaries (LMS) with existing Finnish operations to integrate- joint ventures with Finnish companies, especially SMEs- new streams of business with existing R&D partners.

Value added activities (e.g.), - clinical trials in pharma, bio,- wellness / functional food ingredients- engineering sourcing- chemical industry.

The purpose of the concept is to agree an international marketing project aimed at attracting multinational companies to establish research and development and other knowledge and technology-based activities in Finland.

Detection of international R&D projects which match the capabilities of VTT as primary national partner.

Validate the TRIP concept of encouraging local multinational subsidiaries to undertake R&D in Finland using VTT as a partner by a combination of Tekes support and tax deductions.

Funded 50 % by TEKES (National Funding Organization).

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SOME CHALLENGES FOR THE INNOVATION ECOSYSTEM (1/2)The linkage of companies to the international economy takes place not only through new markets but also through the renewal of business models. With globalisation both production and product development are being dispersed over a wider area geographically, i.e. to places where resources and expertise are best available to companies. Different nations and regions compete with their innovation ecosystems to persuade enterprises and skills globally. Underachievers will loose the game.

Networking is important not only in production factors but also in R&D and services. Networking is an essential part of the knowledge and innovation environment's development. The aims of networking are mainly the improvement of productivity and competitiveness, but also the opening up of new business opportunities through the combination of different competencies.

The success of companies, networks, clusters and other larger economic and regional entities will in future be based more on new ways of working and the ability to create and apply new knowledge in an effective way. It is evident that competition is chaninging from inter-company to inter-network competition.

The development of an innovation from idea to commercial success is a multi-staged process. Innovation management is actually network management. Most innovations are based on already existing knowledge. The introduction and exploitation of innovation are often also a social process. Technology is only one of several factors involved in innovation activity as a whole. Innovations can also be services, processes, organisational structures, business models, brands, marketing channels, and so on.

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SOME CHALLENGES FOR THE INNOVATION ECOSYSTEM (2/2)• What are the most important challenges facing the innovation ecosystem in the EU?

Ageing population, growing importance of the Pacific Rim, growing innovation gap between the EU and the US, fast digitalisation of the whole society, ecological problems, revolution in biological knowledge, productivity and quality, ….

• Research alone is not enough to ensure competitiveness. Research results must be brought to market more quickly and more efficiently - both in industry and public and private sector services.

• More DUI (Do, Use, Interact) instead of R&D???

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IT’S ALL ABOUT THIS!

Finland’s future is in innovations (open networking - global markets - services).

New competitiveness based on innovations is the key to our customers’ success.

VTT’s objective is to boost continuously the competitiveness of the customer by utilisingits expertise, innovations and networks.

Our new operating model and new structure will help us to achieve this goal!

Business from technology!Business from technology!