Enterprise and Skills Review report on Phase 2: Innovation

Section 1: Introduction and background

Our vision is for Scotland to be a place where innovation is an intrinsic part of our culture, our society and our economy. Where businesses across the country are ambitious and open to collaborations and partnerships with one another, with colleges and universities and with other organisations within and beyond Scotland; are open to new ways of working and improving their work practices; and have high levels of innovation and growth as a result.

Innovation is a driver of productivity and growth. It encompasses the development and application of new processes, products, services, workforce configurations and business models. More innovative economies can respond better to changing economic circumstances and compete in international markets. We are therefore committed to spreading innovation more widely across the business base in all places and sectors, to building on recent improvements in our innovation performance, such as the increase in the percentage of innovation-active businesses in Scotland, and to reducing the gap in Gross Expenditure on Research and Development ( GERD) between Scotland and the EU, with a specific focus on improving our Business Enterprise Research and Development ( BERD) performance year on year.

Enterprise and Skills Review Phase 1 Report

The Enterprise and Skills Review Phase 1 Report tasked us with two actions to help improve innovation performance across Scotland:

"We will review, streamline and simplify the innovation support ecosystem, connecting programmes, funding and delivery mechanisms. We will ensure that more businesses in Scotland increase their level of innovation to realise their major growth ambitions by implementing an innovation action plan that will be published by the end of November."

The Scotland CAN DO Innovation Action Plan ^[1] was published ^[2] in January of this year. This report builds on the Action Plan, setting out findings from the evidence we have gathered over the past few months and our recommendations not only for streamlining and simplifying innovation support, but also for boosting Scotland's overall innovation performance.

Scotland Can Do Innovation Action Plan

The Action Plan sets out the steps we can take now to improve Scotland's innovation performance. Its aim is to create a culture in Scotland that supports ambitious businesses to use innovation to grow, all underpinned by a clear, easy to navigate, well connected system of information, advice and support. It was developed with the support of the Scotland CAN DO Innovation Forum, and identifies three clear themes for action:

Ambition - Our long term ambition is to boost Scotland's innovation performance to match the levels of the best performing countries in the OECD. We want Scotland to be a place where innovation is an intrinsic part of our culture, our society and our economy - where businesses across the country are ambitious and open to collaborations and partnerships with one another, with academia and with other organisations, and have high levels of innovation and growth as a result.

Culture - We must establish a culture of innovation across the board in Scotland; a culture that involves everyone, raises awareness and embeds innovation into everything from policy making to business development.

Connections - We need to make the best use of not only our own expertise but also look outward to establish links with the right partners across the world.

These themes are supported by specific actions grouped under four supporting key priorities:

Priority 1: Directly encourage more business innovation

Priority 2: Use public sector needs and spend to catalyse innovation

Priority 3: Support innovation across sectors and places

Priority 4: Make best use of university and college research, knowledge and talent to drive growth and equip Scotland's people with the tools and skills needed to innovate.

The implementation of the Action Plan will be overseen by the CAN DO Innovation Forum with its role and remit refreshed to provide support and challenge on each priority and to consider key long term trends and issues related to innovation.

Innovation Ecosystem Review

Using the evidence we have gathered, the key purpose of this report is to set out our longer term strategic approach to innovation, including recommendations about how we will:

• Simplify the innovation landscape and align better our innovation approach to maximise the impact of public sector support for innovation.
• Ensure that we have the right range and mix of accessible innovation advice and products, tailored to the right customers and meeting their needs.
• Increase awareness of sources of innovation support and the benefits it can provide for businesses across Scotland. This should include access to academic expertise and facilities across Scotland, such as our universities, research institutes, innovation centres and colleges.

The report is therefore more focused than that of the Innovation Action Plan and does not seek to replicate it, nor represent all of the existing or planned activity. Nevertheless, where useful ideas have emerged that supplement that existing or planned Innovation Action Plan activity, those recommendations have been grouped here under the Priority Themes set out above.

The main challenge for the review was to examine if the organisation and delivery of innovation support in Scotland as effective as it could be in maximising business innovation performance.

The nature of innovation support and the way it is currently provided by the public sector to businesses in Scotland was raised as an issue in consultation responses to Phase 1 of the Enterprise and Skills Review. In particular, the innovation support landscape was perceived by some businesses as complex and difficult to navigate. This was borne out by research undertaken as part of this review where businesses reported that: "accessing [business] support is overly complicated. ^[3] This finding is not unique to Scotland: the OECD reports that streamlining access to innovation policy programmes has become a key issue for OECD countries in recent years.

However, what comes across clearly in the evidence gathered directly from Scottish businesses and stakeholders as well as in wider innovation policy research is that streamlining access to and delivery of innovation support is necessary but not sufficient to accelerate improvements in Scotland's innovation performance to the desired extent. This is because the core challenges in the innovation ecosystem cannot be addressed solely through the public sector supply of innovation support and associated products and services to Scottish businesses. Additional action, by the public and private sectors, focused on driving up levels of business demand for innovation should be taken in order to make improvements across a broad front, for example using public procurement to spur innovation or to build entrepreneurial spirit or creativity in the workplace. Section 4 provides more detail on this.