Author: Xabier Irigoien is the scientific director of AZTI
In 1906 the First Sea Lord John “Jackie” Fisher launched the HMS Dreadnought, what nowadays would be called a school case of disruptive innovation. Not a new invention, but putting together the most advanced technologies at the time in engines, armour and weapons, the Dreadnought made obsolete all contemporary warships. Including those of the most powerful navy at that time, the British Navy. As a result, all navies were at level and the naval arms race with Germany started.
The EU has a recognised problem with innovation, excellent basic science is not translated to the market the way that occurs not only in the US, but also in other countries such as Korea and others. The problem is of such magnitude that the EU has included in the H2020 research projects calls the requirement to have SMEs in the consortium and the stakeholders involvement is required from the writing of the proposal itself. The proposal generally needs to include a business plan and most importantly the potential impact is as important as the science in the evaluation process.
However, because the Dreadnought effect, existing companies will not knowingly promote research conducting to disruptive innovation, as it would in fact disrupt their production structure, and more importantly put competitors at the same level. Gas companies illuminating the streets in the XIX century were not investing in Menlo Park’s research on electricity; Bayer´s profits from sulphonamides were not at the base of the antibiotics discovery and even the products of a famously innovative company are usually in a field different from their core business.
Actually, the iPhone is a good example of a Dreadnought effect: Nokia was doing excellent research to improve its mobile phones when disruptive innovation coming from a personal computer company pushed it out from the market in a single stroke. On the other hand, although Apple was the first one in the new market, the product levelled so much the field for competitors that nowadays brands you had never heard about a few years ago are at the front of the field. It has to be observed the gigantic companies that scare Europe because their global dominance such a Google and others are not issue of a company funded or oriented I&D, but young entrepreneurs jumping out of academy and putting the latest knowledge generated in the labs directly at work.
The approach taken in the H2020 projects, as well as national and regional programs, will for sure help EU enterprises to remain competitive, but only until disruptive innovation comes from somewhere else and erases them by creating a completely new market. And as indicated earlier, by having companies and stakeholder closely linked to the project from the conception of it, this approach intrinsically discourages disruptive innovation.
On the other hand, studies suggest that the highest return of the investment on science is not generated through patents or industrial secrets, but through the creation of start-ups. Instead of requesting companies to be involved in the projects, evaluating potential impact and building business plans from the proposal stage, the EU should promote the generation of start-ups from research projects. Notice that not sensible business plan can be built for a disruptive innovation that creates a completely new market, but the EU could skip the business involvement and potential impact evaluation by simply requesting the projects to set a budget aside to help launching start-ups. This would create the incentive for projects to go for disruptive research and at the same time motivate young researchers to take the risk of jumping out of the academy to go into business. Obviously the majority of the projects will not create anything disruptive, but the results will always be available for the EU companies as patents or small start-up that can be acquired, and at the same time the right incentives will be in place to seed for the disruptive companies we are missing nowadays in the EU.