Four factors hindering innovation

Esko Aho, the former prime-minister of Finland, spoke to the students of the new master’s programme “Governance of Science, Technology and Innovation”. The politician who has led his nation into the European Union told the future managers what could hinder successful development of a country, or a particular company.

Reactivity as opposed to proactivity. Professor Aho started his presentation with a football question. “Which game of the last World Cup tournament do you remember best?” “Germany — Brazil”, answered a chorus of voices.

“And to me, the most interesting game was the one between Ghana and Germany at the group stage”. The game (which ended with 2:2 score) was decided by Miroslav Klose’s goal. He scored it two minutes after appearing on the field, and it broke Ghana’s team’s game which had started unexpectedly briskly. This star player demonstrated that, unlike just good ones, he didn’t follow the ball but anticipated where it’s going to be at the next moment. And the coach who decided to change players (probably to the spectators’ surprise) has proved that he managed the game, and knew which forces can lead to victory. The same goes for business: entrepreneurs must feel the mood of the market, anticipate consumers’ wishes one step ahead, and be able to act quickly enough to come up with an innovative product.

Fear of change. There are lots of examples in modern history when an invention never resulted in innovation products. The main reason for that is the inventors’ inability to receive the signals of change. Esko Aho reminded how Kodak — which invented digital cameras — never sold it on the market because at the time — the best time in the company’s history — its profits came mainly from selling film, so the company was afraid to lose a good revenue source. Another example is the multitouch technology. The Finnish Nokia at the height of its success followed conservative approaches to development of touchscreen technologies (and also kept in mind such client group as pensioners), so its phones came with a stylus for a long time. Nokia developers believed it was a more handy way to operate a touchscreen than fingers. But people have ten styluses on their hands at all times — why not use them all? Nokia didn’t go for it, but Apple did –they were the first to implement multitouch technology in their device, the iPhone.

Esko Aho is the former prime-minister of Finland (1991–1995), the youngest in the country’s history. Currently he’s chairman of the board of East Office of Finnish Industries, member of the board of Terveystalo (the largest Finnish provider of medical services), and senior researcher at the Harvard University. He’s also a member of the Club of Madrid (an independent organisation of former heads of state created to promote democracy).

As president of the Finnish Innovation Fund Sitra (2004–2008) he promoted active cooperation with Russia, and initiated the Finnish-Russian Economic Strategy. In 2009–2012 was executive vice-president of Nokia for corporate relations and development of social responsibility, responsible for relations with public authorities, general public, international organisations, and the company’s sustainable development.

Member of the Academic Council of the HSE master’s  programme “Governance of Science, Technology and Innovation”. Participants of the HSE XV April International Academic Conference on Economic and Social Development might remember Esko Aho’s bright presentation at the first plenary session.

Several conclusions can be made from these case studies:

• Not all inventions become innovations, but only those which have practical applications. Invention is accumulating knowledge, while innovation is converting that knowledge into revenues.
• Risk is an inherent aspect of innovation. Without making risky decisions, having the guts to offer something radically new or even make a mistake, you will never have a right idea.
• The opposite of innovation is imitation. The latter is tempting because it doesn’t involve any risk. It’s hard to move on towards new horizons, propose new standards, when the current situation is so nice and comfortable you don’t want to change anything.
• What seems to be rock-solid may radically shift, and change the whole structure of consumption. E.g. premium products after a while become commonplace. The first mobile phones were very heavy and very expensive. Nokia Mobira Cityman — the first mobile phone Esko Aho had — weighed 750 grams and cost several thousand marks (about 10,000 euros in today’s prices). That was the model the general secretary of the central committee of the CPSU Mikhail Gorbachev had used to make a call from Helsinki’s Kalastajatorppa hotel to the USSR Ministry of Communications in 1987. Today mobile phones easily fit into a shirt pocket, and practically anybody can afford to have one.

Lack of trust between the state and society. Success of a business significantly depends on the role the state plays in its development: the state is the main driving force of innovation, it designs the innovation ecosystem. Efficient public-private partnership requires mutual trust. On the one hand the state’s functions shouldn’t be limited to just control and planning, and on the other, companies shouldn’t have complete freedom. The perfect format for their interaction is a sensible compromise between top-down and bottom-up approaches.

Finding a special way (surprising as it may sound). At the end of his presentation, the speaker made a few suggestions for our country. Esko Aho said people ask him about that so often, he decided to write a book about why Russia was less successful in developing its innovation system than Finland, despite the countries’ similar climate. The main advice was to diversify the economy and overcome the overdependence on oil and gas prices. Also, Russia shouldn’t try to invent its own regulation systems but adopt quite efficient European models.

By Maxim Kotsemir, for HSE news service