Catalysing innovation for missions outside government
www.nesta.org.uk/project-updates/catalysing-innovation-for-missions-outside-government/
www.nesta.org.uk/project-updates/catalysing-innovation-for-missions-outside-government/
The government’s five missions need to stretch beyond the public sector. They can only succeed by marshalling ingenuity from across industry and civil society, for example, to unlock a breakthrough technology or to commercialise and scale a new product.
The state can play a critical role to help this innovation happen in the direction that’s needed, and at pace and scale. However, within public services, innovations are often slow to diffuse. And even in private markets, diffusion can be sluggish. This is where missions come in.
Yet those beyond government are unlikely to spontaneously rally around missions without some sort of help. A mission-driven government therefore needs a suite of mechanisms to bring about mission-driven innovations in other parts of society and the economy. Many of these are now well-proven, and in the context of the Department for Science, Innovation and Technology (DSIT), four stand out:
Between them, these four methods provide both supply-side and demand-side support (see figure 1).
Figure 1. Orientation of mission-driven innovations methods. Venture studios are more on the supply side as they supply businesses and challenge prizes are more on the demand side as they create demand for innovation.
These tools can be effectively used in combination. For example, the 2017 Open Up Challenge run by Challenge Works for the Competition and Market Authority (CMA) included a £5 million challenge prize that was timed to coincide with the opening up of banking data and included a sandbox of synthetic data.
Deploying alternative tools to manage innovation systematically should form part of a wider strategy to harness innovation to achieve missions that includes creating the conditions for public sector innovation and investing in R&D.
This article draws on Nesta’s work on innovation methods such as the Innovation Methods Compendium and 20 tools for Innovating in Government.
Traditionally, the UK government has relied on a narrow range of methods, such as grants, to stimulate innovation. From the 1980s, the state's focus shifted to supporting basic research, with applied innovation left largely to the private sector. Investment in R&D by most government departments declined, becoming concentrated in the research councils (now UKRI). Policies to support innovation in industry, such as R&D tax credits, were often sector-neutral.
Over the last 20 years, new innovation methods such as challenge prizes and venture studios have gained traction. The UK government has also more actively encouraged collaboration between the private and public sectors and adopted a more active industrial strategy, choosing specific sectors to focus on rather than remaining neutral.
A mission-driven government approach offers the chance to build on this shift and would involve redirecting a modest fraction of the UK's £12.8 billion public sector R&D spend towards mission-driven innovation through these newer methods. While the current government has not committed to concrete research investment targets in its manifesto, it has committed to sustained ten-year budgets for certain research institutions and subsequently to sectors that form part of its industrial strategy.
A challenge prize is a “competition that offers a reward to whoever can solve a problem first or most effectively”. Pre-defined criteria describe success, without indicating how exactly it should be achieved. Prizes “go beyond the usual suspects to reach innovators that other funding mechanisms miss.”
A similar method is the use of pre-procurement instruments such as Innovate UK’s Contracts for Innovation (previously known as SBRI) where organisations compete for funding to deliver innovative services or products around a particular challenge. Funding is awarded across the programme rather than through a prize at the end.
Challenge prizes are best suited for problems such as missions, which are defined well enough that a clear and unambiguous goal for innovators can be set. They can help unlock progress against measurable milestones, unleash creative ways of seizing promising opportunities and attack known bottlenecks.
Challenge prizes raise the profile of innovators and bring them together with other experts, investors and new customers. They often result in the creation of many commercially successful ventures beyond the prize winner. In addition to the cash prize, challenge prizes often include other support too, such as help with networking, mentoring or access to legal advice.
Pre-procurement can be used to solve problems in a way that aligns with missions. It can be used to support the prototyping and development of new mission-relevant solutions, often in small and medium businesses.
Venture studios build new purpose-driven, venture-backable companies and put them on a path to delivering both meaningful social impact and attractive financial returns. Rather than supporting existing companies, venture studios create new companies from scratch that can be directed towards a specific social purpose. They work closely with entrepreneurs to develop each business and put it on an accelerated growth trajectory, drawing on the studio’s institutional support.
Venture studios can steer companies towards a predefined mission in a way that other social investment methods cannot. The initial ideas are generated by the studio in line with defined goals, and a founding team is then recruited to further test and refine the idea. This allows solutions to be directed sharply towards critical social problems and opportunities.
Instead of a light-touch, one-to-many approach to supporting entrepreneurs found in other mechanisms such as traditional cohort-based accelerators, studios act as active co-founders. They provide intensive one-to-one support and capital to build the business and ensure each solution is properly validated. Similar to some other forms of state business support, venture studios might be run at arm’s length from the government.
Due to the high-intensity support model, which draws on the experience of successful entrepreneurs, venture studios can help bridge gaps where IP and human capital are getting stuck en route to successful commercial deployment.
Regulatory sandboxes “provide regulators and innovators with a controlled and, usually, time-limited opportunity to test ideas under live conditions, often with real customers”. They allow managed waivers to regulation that allow both companies and regulators to learn about new technologies.
Real-world testbeds are a “structured way of testing technologies or services in a real-world setting, to better understand what works. They’re widely used in business and are beginning to be used more in the public sector, particularly for testing out uses of technologies like drones or artificial intelligence.”
While the two methods overlap, sandboxes tend to be closer to idea generation rather than implementation stage of innovation and often use more controlled environments.
Regulatory sandboxes and real-world testbeds could facilitate innovation by allowing ideas to be tried in lower-risk environments before being scaled. They can be particularly helpful for exploring fast moving, often digital technologies, for which consequences are uncertain or the current regulatory environment may not be fully appropriate.
Sandboxes and testbeds can “strengthen collaboration and shared learning between the public and private sectors”. They can also focus attention on and attract investment for innovation relevant to missions and improve the government's understanding of what works, under what circumstances. The current Government has committed to creating a new Regulatory Innovation Office to help regulators update regulation, speed up approval and coordinate issues that span existing boundaries.
Open data is “the raw data that is gathered by people or organisations, published in an electronic format that machines can read; it is then shared online and allowed to be re-used by others instead of keeping it private”.
Opening government data relevant to the missions could catalyse innovation around them in industry and civil society. A joined-up and intentional strategy is needed where multiple levers are used in concert to open up data in service of each mission. This includes establishing a keystone institution as the data holder, legislation to require data to be open and funding to facilitate that process. Data could be opened up strategically using a combination of regulatory requirements and supporting institutions such as data trusts to govern access.
If you are interested in discussing this further then please e-mail [email protected].
Thanks to James Plunkett, Celia Hannon, Oli Usher, Matt Seden, Siobhan Chan and all the Nesta staff involved in codifying innovations methods. Large Language Models were used in the research and drafting of this article.
