3.3
INNOVATION CAPABILITY, ACTIVITY AND IMPACT 3.3.1 INTRODUCTION TO CAPABILITY AND ACTIVITY MEASURES Capability and activity measure the outputs of Dubai’s private sector innovation, offering insight into the importance given to creating the right tools and resources for innovation and to determine whether these tools drive innovation. The microeconomic section’s survey questions cover innovation enablers, factors that contribute to developing and maintaining an environment conducive to innovation. These measures are broken into capability and activity. Capability measures a firm’s foundation for innovation, in terms of having the necessary inputs. Capability questions cover a number of sub-categories, inquiring about key determinants for innovati0n in organizations such as strategy, leadership and culture, management of innovation, collaboration and skills and talent. These are all the elements that create innovation capabilities, as without these firms will not have the required direction, vision, manpower or resources. Capability questions pertain to how much value a firm gives to innovation, how important strategy, government initiatives and other enablers presently are and how are they likely to be in the future. It also focuses on how much of an impact innovation will have on research and development, new products and services and on further developing or improving on existing offerings. Activity questions focus on how well Dubai’s companies are leveraging the resources they have available to them for present and future innovation, and the significant of new ideas in the near future.
INNOVATION ENABLERS CAPABILITY Capability Measures
ACTIVITY ACTIVITY MEASURES Activity Measures
• Leadership & Culture
• Accessing new ideas
• Management of Innovation
• Implementing new ideas
• Organisation enablers • Collaboration • Skills & talent
Figure 3.3.1: Breakdown of Enabler Sub-Categories
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3. MICROECONOMIC: PRIVATE SECTOR SURVEY ANALYSIS continued
Innovation Enablers measure innovation inputs through Capability and Activity The microeconomic section’s survey questions cover innovation enablers, factors that contribute to developing and maintaining an environment conducive to innovation. These measures are broken into capability and activity. Capability measures a firm’s foundation for innovation, in terms of having the necessary inputs. Capability questions cover a number of sub-categories, inquiring about key determinants for innovati0n in organizations such as strategy, leadership and culture, management of innovation, collaboration and skills and talent. These are all the elements that create innovation capabilities, as without these firms will not have the required direction, vision, manpower or resources. Capability questions pertain to how much value a firm gives to innovation, how important strategy, government initiatives and other enablers presently are and how are they likely to be in the future. It also focuses on how much of an impact innovation will have on research and development, new products and services and on further developing or improving on existing offerings. Activity questions focus on how well Dubai’s companies are leveraging the resources they have available to them for present and future innovation, and the significant of new ideas in the near future.
CAPABILITY
1.
1.
Strategy, Leadership & Culture questions inquired about the focus a company puts on developing the framework for innovation through spending on innovation drivers such as IT and R&D, as well as the importance given to innovation by a company’s leadership in order to create a culture conducive to innovation.
Accessing New Ideas is key part of stimulating innovation, as without developing channels for innovation to come forward, it is likely these will be lost. Questions inquired into the channels and platforms companies use in order to gather new innovations. Selecting & Developing new ideas is then the next step innovation process, as without the protocols in place to pursue promising ideas, it is likely they will fall to the wayside.
2. Management of Innovation focuses on having an innovation strategy that is well aligned with the business strategy, as well as having the correct metrics, operating model and funding in order to support innovation.
3. Organization Enablers are measures of how well a firm is able to support innovation endeavors. Questions inquired as to the amount of growth that is forecasted, as well as how much benefit is gained from government and international support and other incentivization schemes designed to encourage innovation.
4. Collaboration is a key source of innovation, as it allows multiple stakeholders to come together and generate ideas that are more broadly relevant. Question pertained to businesses’ planned collaboration with customers, external partners and academics in the near future.
5. Skills & Talent are key drivers of innovation, as without employees proficient in the technical skills required to realize and test innovative ideas, they are unlikely to translate into constructive output. Question pertained to finding and retaining talent. Figure 3.3.2: Description of Capability and Activity
110 2016 Dubai Innovation Index
ACTIVITY
2. Implementing New Ideas is the final step in the innovation process. Questions pertained to whether firms had the infrastructure and ability to take innovative ideas to the market quickly and then grow them.
Input score across Innovation Elements measured for Dubai’s Private Sector (0-100)
2016 Top 33%
Enabler (Inputs)
Element
Score
Strategy, Leadership & Culture
59.24
Management of Innovation
63.01
Organisation Enablers
63.06
Collaboration
74.26
Skills & Talent
51.77
Activity
Accessing New Ideas
69.19
61.38
Implementing New Ideas
53.56
Capability 62.27
61.82
Figure 3.3.3: Breakdown of Dubai’s 2016 Enabler Scores
3.3.2 COMPARISON OF TOP AND BOTTOM CAPABILITY AND ACTIVITY PERFORMERS The following section explores the differences in capability and activity scores between top and bottom innovation performers. Respondents were ranked by average innovation impact (output) scores, and then divided into terciles (33rd and 67th percentile) based on their scores.
Strategy, Leadership & Culture
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
Present importance of innovation
93.39
79.75
79.04
69.25
Future importance of innovation
94.17
86.75
83.82
69.00
R&D budget
50.67
37.50
25.79
14.25
IT budget
55.72
45.50
28.88
27.50
Importance of defining innovation
37.44
53.50
31.97
44.50
Figure 3.3.4: Breakdown of Strategy, Leadership & Culture Scores
Notably, the top 33% of firms (as ranked by average impact score) made significant investments toward research & development and IT in contrast to the bottom 33% of firms which valued these dimensions the least. In 2016, the top 33% of firms made greater investments towards research & development (an increase by 35% from 2015) and IT (an increase by 22% from 2015). These firms are likely to have a more technology and innovation-oriented culture, staying abreast of latest trends and are constantly exposed to new ideas and developments. However, the bottom 33% of firms significantly improved their research & development budgets from 2015, by 81%. In 2016, the top 33% of firm’s least valued defining innovation, indicating their innovative capabilities are now more established from 2015 and are less of a priority in 2016.
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Management of Innovation
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
Our company has an innovation strategy
81.33
79.75
58.76
60.25
Innovation strategy being well- aligned to the business strategy
82.57
84.75
63.76
64.25
Developing the right business strategy
86.72
81.75
72.98
72.75
Developing the right innovation strategy and operating model to achieve growth ambitions
86.94
79.00
74.10
63.50
Having the right metrics to measure innovation progress and track ROI
37.67
48.50
31.29
44.25
Lack of funds/finance for innovation from org/external
35.87
48.50
26.85
43.25
Figure 3.3.5: Breakdown of Management of Innovation Scores
The top 33% of firms (as ranked by average impact score) placed great emphasis on developing an innovation strategy that was aligned with their business strategy and had operating models that were conducive to innovation, experiencing marginal shifts in scores from 2015. Both the top and bottom 33% of firms (as ranked by average impact score) experienced decline in their ability to measure innovative performance in terms of Return on Investment (RoI) in addition to a shortage in funding to sustain innovation initiatives from 2015.
Organisation Enablers
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
Positive growth forecast for the near future 42.99
30.75
27.30
20.00
Benefits from government funding for innovation
67.60
41.50
47.92
31.75
Benefits from tax incentives/government service fee waivers for innovation
62.16
43.50
25.00
35.25
Benefits from co-funding with other collaboration partners for innovation
67.32
49.75
48.65
43.00
Benefits from international funding for innovation
62.22
48.75
44.33
38.75
Benefits from some other innovation-based 67.15 incentive scheme
46.00
48.82
37.25
Supports formal laws and regulations for protection of intellectual property
86.38
78.00
75.28
68.75
Agree that Dubai Government assistance (e.g. innovation awards, business incubators or technology transfers) is boosting innovation output
88.06
79.50
76.08
65.25
Agree general tax relief (financing or tax credits ) / government fee waiver or lower corporate tax rates is more helpful than incentives targeted at certain types of investments
76.46
72.50
67.47
61.00
Financing or funding (government- backed 78.76 innovation funds)
30.75
66.40
20.00
Figure 3.3.6: Breakdown of Organization Enabler Innovation Scores
112 2016 Dubai Innovation Index
Organizational enablers are financial resources and incentives, which drive organizations to innovate. The top 33% (as ranked by average impact scores) were more optimistic in terms of growth forecasts and government support primarily in the form of regulatory change and initiatives from the Dubai Government to support innovation, experiencing an increase in scores from 2015 in contrast to the bottom 33% of firms. Notably, the bottom 33% of firms were less optimistic in receiving tax incentives and innovation service fee waivers from the Dubai Government in contrast from 2015, with scores declining by 29% in relation to their other organization enabler scores, which have generally increased since 2015.
Collaboration
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
Plans to collaborate with customers for innovation in the near future
88.00
81.00
73.43
63.25
Plans to collaborate with external partners (competitors, partners, suppliers) for innovation in the near future
82.12
70.50
66.97
55.75
Plans to collaborate with academics (universities/research labs) for innovation in the near future
78.46
66.75
56.40
45.25
Figure 3.3.7: Breakdown of Collaboration Innovation Scores
The top 33% of firms (as ranked by average impact score) scored higher in collaboration in contrast to bottom 33%. These were more likely to have plans to collaborate with academic institutions, external stakeholders and customers. Businesses which engage in collaboration have access to the latest technologies ideas and innovation perspectives, allowing to differentiate and achieve a competitive advantage relative to competitors. However, scores for both groups have increased from 2015.
Skills & Talent
Finding and retaining the best talent to make innovation happen is a challenge
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
35.09
45.75
27.58
42.00
Figure 3.3.8: Breakdown of Skills & Talent Scores
The technical skills of employees is one of the most significant contributors to firm’s innovative capabilities. The innovative ideas generated by people and the innovative culture of an organization is dependent on the employees that make up the organization. Therefore, attracting and retaining talent is necessary for firms innovate. Notably in 2016, both the top 33% and bottom 33% (as ranked by average impact score) experienced a decline in their skills and talent score by 23% and 34% respectively. This indicates that both groups were less optimistic in their ability to recruit the top talent to innovate.
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3. MICROECONOMIC: PRIVATE SECTOR SURVEY ANALYSIS continued
Organisation Enablers
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
Leverages internal suggestions from employees to support innovation
85.82
76.00
71.52
55.50
Leverages open forums with partners, suppliers and customers to support innovation
84.19
84.75
71.01
70.25
Customers have contributed strongly to learning about new innovations
86.21
76.50
72.08
58.00
External partners (competitors, partners, suppliers) have contributed strongly to learning about new innovations
81.89
77.00
66.52
59.25
Exhibitions have contributed strongly to learning about new innovations
82.79
73.25
68.10
58.25
News & media (e.g. newspapers, magazines, TV etc.) has contributed strongly to learning about new innovations
79.60
66.25
62.75
52.50
Social media has contributed strongly to learning about new innovations
81.56
66.00
63.88
52.75
Figure 3.3.9: Breakdown of Accessing New Ideas Scores
Without the necessary platforms and channels, it will be difficult for potential new ideas to come into fruition. The top 33% of firms (as ranked by average impact score) were more likely to leverage a variety of platforms to learn about new innovations than the bottom 33%. The top 33% of firms primarily relied on internal suggestions from customers (an increase by 13% from 2015) followed closely by internal employee suggestions (which increased by 13% from 2015). In contrast, the bottom 33%, primarily leveraged employee suggestions (an increase by 29% from 2015) followed closely by forums with external partners to learn about the latest innovations.
114 2016 Dubai Innovation Index
Implementing New Ideas
2016 Top 33%
2015 Top 33%
2016 Bottom 33%
2015 Bottom 33%
Taking innovative ideas to market quickly and growing them is a challenge
35.59
46.75
28.15
44.25
Have successfully implemented an innovation strategy
83.91
76.00
68.26
55.50
Figure 3.3.10: Breakdown of Implementing New Ideas Scores
The final stage in the innovation process is implementing the ideas that have been selected and developed, as ultimately, this is the stage that converts ideas into reality and is likely to impact a firm’s bottom line. Notably in 2016, the top 33% and bottom 33% of firms (as ranked by average Impact score), were less optimistic of being able to rapidly take their innovative ideas to market, with scores declining by 28% and 36% respectively from 2015.
3.3.3 INTRODUCTION TO PERFORMANCE/IMPACT MEASURES Innovation Impact refers to the impact business leaders are seeing on their businesses and business models due to innovation and its outcomes. The previous section looked at the behavior of high performing (top 33% firms by impact scores) and relatively lower performing private sector firms, in terms of their focus on capability and activity elements. This section is focused on observing innovation impact scores and the private sector’s views on sub-categories within innovation impact, it also covers trend analysis for impact scores between 2015 and 2016. IMPACT IMPACT MEASURES TANGIBLE OUTPUT • New Products & Services • Growth & Revenue Generation • Technology Readiness
INTANGIBLE OUTPUT • Intellectual Capital • Creation of Culture • Collaboration
Figure 3.3.11: Breakdown of Impact Measures
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3. MICROECONOMIC: PRIVATE SECTOR SURVEY ANALYSIS continued
Innovation impact is the measure of private sector firms’ outputs from innovation and is broken into tangible and intangible Outputs. Tangible outputs are those that can be easily quantified and are directly measurable. In contrast, intangible outputs are benefits that firms may not be able to value numerically, but are equally valuable contributions that arise from innovation. Tangible outputs include elements such as new products and services, growth and revenue generation and technology readiness. These are all outcomes that are most cited as examples of innovation in a firm. Intangible outputs are more subtle rewards of innovation, including intellectual capital, creation of culture and collaboration. While these may not immediately contribute to a firm’s bottom line, they are important elements in driving a firm’s ability to continue to innovate and are likely to translate into or contribute to tangible outputs in the future.
TANGIBLE OUTPUT
1.
1.
New Products & Services questions delved into the sources and significance that these would have on overall revenue for a firm, as well as the types of business model innovation the firm intends to implement in the near future.
Collaboration quantities the importance a firm places on receiving insights and solutions from various stakeholder.
2.
2.
Growth & Revenue Generation measures the amount of economic output growth expected to come from innovation in the near future.
Intellectual Capital measures the importance a company gives to the retention and creation of intellectual property (IP).
3.
3.
Technology Readiness measures the impact of new technologies on a form's innovation activity, business model or operations.
Creation of Culture inquires as to the importance of and impact from innovation encouraging initiatives and programmes within a company.
Figure 3.3.12: Breakdown of Tangible and Intangible Outputs
116 2016 Dubai Innovation Index
INTANGIBLE OUTPUT
Output score across Innovation Elements measured for Dubai’s Private Sector (0-100)
2016 Top 33%
Impact
Score
Tangible Output
New Products & Services
64.17
Growth & Revenue Generation
48.82
60.05
Technology Readiness
67.16
(Outputs) 58.73
Element
Intangible Output
Intellectual Capital
29.26
Creation of Culture
79.52
57.40
Collaboration
63.42
Figure 3.3.13: Breakdown of Dubai’s 2016 Impact Scores
Tangible output questions delved into what the tangible effects of innovation had been on revenue and business models in the recent past, present and near future. Questions about new products and services inquired as to the significance that new products and services had on revenue in the recent past, as well as what the nature of these innovations had been. Questions about growth and revenue generation focused on how important innovation was expected to be on revenue growth in the near future, as well as what its role had been in the recent past. Technology readiness questions focused on the importance technology and communication tools had on improving a firm’s innovation activities, processes and product development cycle. Intangible output questions focused on the less apparent, yet not less important outputs from innovation. Collaboration questions inquired as to the extent to which firms are working with external stakeholders, such as customers, competitors, business partners, suppliers, universities, research labs and others, as well as whether they had difficulty in finding the right partners to collaborate with. Intellectual capital questions pertained to whether the firm had any IP assigned or pending, as well as whether data and knowledge management had played a part in the company’s recent innovations. Questions about creation of culture focused on what elements helped most in creating and fostering an innovation culture at their firm.
3.3.4 OVERALL TREND ANALYSIS 2016
2015
Enabler Score:
61.82
56.34
Capability
62.27
53.96
Organization Enabler Strategy
63.06
48.29
Strategy, Leadership & Culture
59.24
51.11
Management of Innovation
63.01
65.15
Skills & Talent
51.77
44.83
Collaboration
74.26
60.42
Activity
61.38
58.72
Accessing New Ideas
69.19
62.30
Implementing New Ideas
53.56
46.68
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3. MICROECONOMIC: PRIVATE SECTOR SURVEY ANALYSIS continued
2016
2015
Impact Score:
58.73
58.62
Impact: Tangible
60.05
57.79
Growth & Revenue Generation
48.82
43.79
New Products & Services
64.17
59.35
Technology Readiness
67.16
70.22
Impact: Intangible
57.40
59.45
Intellectual Capital
29.26
31.30
Creation of Culture
79.52
77.22
Collaboration
63.42
69.82
Figure 3.3.14: 2015 & 2016 Dubai Private Sector Enabler and Impact Score Comparison
Dubai’s overall innovation score has increased by over 6% from 2015, which was primarily driven by the improvement in its enabler score which increased by 10% from 2015. In terms of overall innovation enablers, Dubai’s improvement in score was attributed to the significant increase in collaboration score, which increased by 23% from 2015, reflecting the increased receptiveness of Dubai’s private sector to collaborate with academic institutions, customers and external stakeholders to drive innovation initiatives. Additionally, the improvement in the organizational enabler score, reflects the increased confidence in the Dubai Government by the private sector to support innovation, resulting in a 31% increase in score from 2015. Dubai’s skills & talent score (its lowest enabler score) also increased by over 15% from 2015, which reflects the increase in the private sector’s confidence in its work force having the ability to innovate. Similarly, Dubai’s score in implementing new ideas increased by 15% from 2015, indicating that firms are more confident in their abilities to take innovative ideas to market. In contrast, Dubai’s impact scores have marginally shifted from 2015. The most significant movement in score was experienced by growth and revenue generation (a tangible impact), which indicates that innovation has played a key role in driving business growth and has created additional revenue streams, experiencing an increase in score by 11% from 2015. Although Dubai’s private sector is confident that collaboration is a key driver of innovation, this has not necessarily translated into innovation outputs, as the collaboration impact score (which is an intangible output of innovation) declined by 9% in 2016. However, the significant optimism expressed by Dubai’s private sector in 2016 is indicative that the collaboration impact score will increase in the near future.
118 2016 Dubai Innovation Index
3.3.5 SUMMARY Private sector innovation enablers are measured through capability and activity. Capability measures a firm’s foundation for innovation in terms of having the necessary inputs for innovation such as direction, vision, manpower and resources. In contrast, activity measures whether these businesses’ capabilities are being translated into innovative actions and efforts leading to innovation. Results of the survey show that in terms of overall enablers, Dubai’s private sector firms scored least for skills and talent (51.77), closely followed by the implementation of new ideas (53.56) which have both declined by 14% since 2015. However, Dubai’s overall enabler score has increased by 10% from 2015, which is primarily driven by an increase in collaboration score, which increased by 66% from 2015, and organization enable score which has increased by 31% from 2015. Dubai’s impact scores have marginally changed from 2015. The significant movements were attributed to increased growth and revenue generation (a tangible impact), which increased by 11% from 2015. Dubai’s collaboration score (an intangible impact), additionally experienced a significant movement, declining by 9% from 2015. Overall, Dubai’s innovation score has increased by 6% from 2015, which was primarily driven by the increase in its enabler score which increased by 10% from 2015, indicating that Dubai is continuing to build on the innovation capabilities established in 2015.
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