Interview with EurActiv

Governments can play a role in innovation by formulating problems and linking people up so that innovators can come up with solutions, Richard Miller told EurActiv Slovakia.

Richard Miller is Deputy Director for innovation at Innovate UK, a government agency in Britain.

Miller spoke to EurActiv.sk’s Pavol Szalai at the Transition to the Green Economy (T2gE) conference in Bratislava.

You spoke a lot about incremental and systemic innovation today. What is the difference?

Incremental innovation fits into existing business models and economy. It’s a better way to do something. It may be a totally new and disruptive product, but it fits the existing system.

It can be done without government intervention…

It can, but small companies may need help. They may need money, or access to facilities to test an idea. The point is it assumes the main economic system and market continue.

Then there are big societal changes – like climate change, aging population, access to resources and the global middle class growing. Those kinds of big challenges cannot be fixed by a single innovation. They require lots of innovations to come together.

There, government plays a role in announcing the problem and using various mechanisms to try to bring out the new innovations required, the new ideas and products. But it’s always a conversation. It’s not the government saying “This is what is needed” and everybody piles and innovates. It says “This is the problem.” And people say “Here is some new technology that may help fix the problem.”

Can you give examples of incremental and systemic innovations?

Let’s take freight. An incremental innovation is a company called Dearman that makes liquid nitrogen-powered refrigeration systems for chilled distribution. This is much lower carbon emission than using a takeoff from the main engine. And it’s very efficient and successful. It says “People are moving refrigerating trucks around, they need better refrigeration, here is a solution”. It’s actually completely new, but it fits in the system. It’s a straightforward replacement.

On the other hand, containerisation was a complete system change. It took 50 years to happen. Because you needed to have the idea of containers, to develop trucks that could carry the containers, you needed the loading and offloading cranes that could move quickly. You needed to change the way you use the rail network and boats needed to be built. And they built bigger and bigger container ships, which are now enormous.

And hundreds of innovations came together to make that systemic change, which improved the efficiency of transport. And because you improved efficiency and freight with containerisation, you changed the global supply chain logistics.

China and Asia became major manufacturing centers. Trade changed. A lot of systemic innovations you end up with are not planned. They emerge from innovative ideas people have.

Are you saying the government cannot plan ahead systemic innovation?

It’s very difficult for the government to do that. It’s important that government articulates the problem and the desired outcome. It says “We have an aging population, too many of them end up in the hospital, we need ways for them to live an active life in their home”. But it doesn’t say what the answer is. People come in at a problem from all kinds of directions. Out of that emerges a new system of offering healthcare to older people, but it’s not a designed system.

Here in Central and Eastern Europe, we have a big problem with waste. Slovakia, for example, recycles only 6% municipal waste. In four years, it has to reach 50%. What circular economy projects do you consider most successful from those supported by Innovate UK?

Domestic waste is very difficult to handle. It’s largely a political and regulatory problem. The projects we have supported have mostly been about industry wanting to recycle in order to get better control of resources they use. So, we supported a Jaguar Landrover project with recycled aluminum. That started off with using the waste within the Jaguar Landrover Group, because they knew where it came from, had control of it and could bring it together. That has been highly successful. They are now looking into using consumer waste like drinking cans and foil dishes. But it turns around a very clear individual business need.

Recycling domestic waste is much more complicated and tends to be more sticks and less carrots. As a consumer, I have to sort out my glass from my plastic and food waste. Basically, I am told that if I don’t do it, they won’t collect my waste. If I keep on not doing it, they will fine me. And it’s the local authority who does that. Because if they don’t reach their recycling targets, they get fined. So, it builds up.

The challenge is how to make best economic use of waste, which is being recycled. And there are still problems with domestic waste. Because people put things in the wrong container, put contaminated things in. We see a lot of work in improving sorting technologies, particularly for plastic waste.

Regarding the car industry, Slovakia is a big car producer. Jaguar will build a factory here. What is the potential for closing the loop in this industry?

The automotive industry is quite advanced because it is in its interest. They have the End of life Vehicles Directive that says they must ensure material is reused. And in some cases, they are very worried about access to key raw materials.

A good example is electric motors. As we move towards electric vehicles, we see more use of rare earth magnets in various motors in the vehicles. There is a shortage of some of the raw materials that go into rare earth magnets. So the price is fluctuating and can be very high. The automotive industry is really interested in recycling rare earth magnets, aluminum, and copper from the wire, and from cooling systems and heat exchangers.

What we haven’t seen yet – that we have seen in other sectors – is remanufacturing. Off-road vehicle companies like Caterpillar have a good ongoing relationship with the people they sell the vehicles to, who can bring the vehicles back so that many of the parts can be remanufactured. Hydraulic systems, engine components, things like that. It happened there because there is a lot of leasing and long-term relationships between the user and the supplier. I believe car companies, too, will see the value in maintaining a lifelong relationship with the user of their car. Then they can control the impact and retrieve the end-of-life materials.

Here, in Central Europe, we sometimes tend to think the government’s role in innovation is to reduce taxes. Of course, Innovate UK funds research. But if you had to pick one more task for a government agency, what would it be?

It’s something we are just beginning to do – extending the range of financial support we can provide. Traditionally, we have provided grants, we are now looking at loans.

This has been successful for some other European innovation agencies, in particular with TEKES in Finland. There is always more need. If you only have one way of helping people, you can run out of capacity.

The challenge is how to bring the private sector much more aggressively into it. We are trying to forge relationships where we can take companies we have worked with to venture capital funds, angel funds, local funds. And we can tell them, “We worked with these guys for two, three years; they have a good management team, good ideas and good products; we would recommend them to you.”

So, the mission is to connect innovators and investors.

Yes. People will always make their own decisions, but at least we can say with some authority, “We know these guys”. Because the transition from grant, which is about creating the product, to market success involves a different way of looking at a company.

With our grants, we are looking at the project. But the investors will look at the whole business in a way which we cannot. We are trying to help companies to make that transition.

We are already taking groups of companies that have been through our schemes in a particular area, for example biomedical, and we arrange a panel of investors to meet them. The investors will come, because there are 12 good companies in their target sector.

You offer them information.

Information and validation. That encourages the investors to come in. That is starting now and it already looks like it’s going to work very well. That means we can have much more impact than the grant money available. In the end, we only have a tiny amount of money compared to all the private investors out there.

The British people decided they wanted to quit the EU. Researchers in the UK have already expressed worries. Are you worried?

Yes. There is a great deal of uncertainty. We do not know what the outcome will be, and much depends on the outcome. At the moment, we use EU tools like Horizon 2020 or the SME instrument for companies we work with. Will it exist in the future or will it not? We don’t yet know.

Non-EU members can participate in Horizon 2020.

Yes, but they have to pay in to do so. Much depends on the final deal that is agreed. But it so uncertain at the moment that we will carry on, until we are told differently.

Are you worried about research funding in the UK, which may be impacted by the overall economic situation?

No. Clearly, if the UK economy has a big downturn it is harder to make the argument for investment and innovation.

However, that is precisely the time you need to make the argument. You have to keep innovating to move forward. All through the difficult period after the crash of 2008, the UK continued to fund innovation. Because it matters for the future. I would hope that would continue, but of course, it depends on how the economy develops.