The economic outlook and operating environment are in global turmoil, and companies are facing unprecedented uncertainty. Although it is always difficult to predict the future, one thing is certain: bold investments in innovation, research and development (R&D) are absolutely necessary to enable future growth. Now, more than ever, it is time for companies to look ahead and take advantage of the opportunities offered by recovering market conditions.
At the macroeconomic level, there are now signs that interest rates will continue falling, albeit more slowly than had been expected earlier this year. However, this provides opportunities for companies to increase investments and take advantage of more favourable lending conditions when the situation permits. Even though there are uncertainties in the world, it is critical to see the long-term potential: an upturn in economic growth comes from decisions that are being made now.
Investments in research and innovation are one of the key ways a company can ensure it will be competitive in the future. Competitive advantage is not only achieved by responding to the current situation, but by actively developing new solutions shaping the market. One example is our development work on lignin generated as a pulp production side stream together with ANDRITZ, Metsä Fibre and Dow. The innovation, that got its start from a doctoral thesis, has progressed to construction work on a demo plant in Äänekoski and aims to replace fossil raw materials with a biobased side-stream material. On the way from concept to final product, ambitious development work has been done not only at VTT and in companies, but also in a joint EU-funded research project.
Innovation in companies: independently or in cooperation?
Growth requires long-term thinking and working over different time horizons. Short-term solutions might bring in much needed quick cash, but investments in medium and long-term development are essential to sustainable growth, adapting to market changes and creating completely new markets, for the future.
Companies occasionally think about when they should do something on their own, when they should partner up and when they should participate in co-financed projects with several actors. All of these approaches are needed. When planning new innovations and project undertakings, it is important to ensure that it is clear from the very beginning, what is the core technology the company wants to safeguard by developing its own intellectual property rights. IPR protection is a valuable competitive advantage when a company starts taking on a market. The new IPR developed in bilateral projects between VTT and a company typically remains the property of the customer, which provides a direct competitive advantage.
Innovations are rarely created in a vacuum, and companies should consider what kind of value network best supports the development of new innovations. Successful solutions are often created in partner networks, in which each company in different stages of the value chain plays its own role. The development and scaling of technology requires active partners in different stages. These partnerships can play a key role in creating and implementing groundbreaking solutions, as in my example of lignin productisation above.
Speed is an asset: cooperation can help in development and scaling technology – otherwise the competitor might get there first.
The direction of innovation policy needs to be decided now
Companies, national governments and the European Union are all in the same boat: innovation policy must be planned carefully and sustainably. It is vital that we make strategic choices on how, and at what level, investments are made in innovations. Investments in R&D provide long-term benefits, but without the right support, many good ideas remain or die in the “Valley of Death” phase, where promising technologies do not reach the market due to lack of sufficient resources or partners. Government and EU level funding programmes play a critical role in helping companies cope with this transition and bring innovative products and services to the market.
Finland has set a national target to increase our R&D investment to
4% of GDP by 2030. Of this target, 2/3 should be covered by private investments and 1/3 by the public sector. The best way for the public sector to spur on the private sector is to target funding wisely. In order to promote these choices, innovation and technology programmes are needed. They should effectively enable collaboration between actors, as well as encourage more cooperation between research-organisations and companies.
Businesses and society must take bold steps and invest in future growth. Innovations and R&D investments are used to build a competitive advantage and market position for the future. Companies that are bold enough to invest now will be the winners of tomorrow.
We are now laying the groundwork for the coming upturn in growth - what we sow today we reap tomorrow.
