EL TRIÁNGULO DEL CONOCIMIENTO Y EL MUNDO

FINANCIERO Sesión 3ª CIENCIA Y EMPRESAS

UIMP, 29 Septiembre 2010Francisco J. Jariego

TELEFÓNICA I+D

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EL TRIÁNGULO DEL CONOCIMIENTO Y EL MUNDO FINANCIEROMañana

Sesión 3ª CIENCIA Y EMPRESAS

Preguntas:• ¿Cómo conseguir que las actividades de I+D+i se incorporen de

verdad a la estrategia de las empresas y tengan representación directa en los más altos niveles de decisión corporativa?

• ¿Cómo fomentar la inserción de países y empresas en las agendas internacionales de I+D+i que configuran el futuro de muchos sectores industriales?

• ¿Cómo crear una cultura empresarial de gestión de la innovación en todos sus aspectos, incluidos los financieros?

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01The CEO

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The importance of being… CEO

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Hurdles

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“You'll always miss 100% of the shots you don't take”, Wayne Gretzky

Innovation always involves risk. It can be hedged, mitigated, insured against, and shared with others, but—by definition— it never can be eliminated from innovation, nor should it be. Leaders and companies that will not take enough risk will never be able to achieve payback through innovation. Companies that say they want to innovate, but then do everything possible to remove all the risk, will confound the process and drive innovative people away.

The greatest risk that leaders and their companies face is taking no risk at all 6

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ROI: The missing link

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BAH, Global Innovation 1000, 2005, Money Isn’t Everything

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Risk Aversion

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Exploitation vs. Exploration

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innovat

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A nightmare at the CIO Office: A fictional story

Once upon a time, a young entrepreneur made a proposal to the CIO of a big company to radically change IT management...

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Dreaming of innovation

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You are what you measureHBR, Dan Ariely

CEOs care about stock value because that’s how we measure them. If we want to change what they care about, we should change what we measure.

It can’t be that simple, you might argue— but psychologists and economists will tell you it is. Human beings adjust behavior based on the metrics they’re held against. Anything you measure will impel a person to optimize his score on that metric. What you measure is what you’ll get. Period.

To change CEOs’ behavior, we need to change the numbers we measure. Stock value metrics that focus on the long term are a start, but even more important are new numbers that direct leaders’ attention to the real drivers of sustainable success.

What are those numbers?

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Gut feeling: Understanding our inner workings

“Left unchecked, subconscious biases will undermine strategic decision making. Here’s how to counter them and improve corporate performance”

“Executives should trust their gut instincts—but only when four tests are met.”

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Mckinsey Quarterly

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02Culture

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Markets: The Innovation Machine

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Trend Line

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20

30

40

50

60

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1938

1948

1958

1968

1978

1988

1998

2008

2018

2028

Avg. life of a S&P 500 company has fallen from ~65 yrs in the 1930s to ~20 yrs in the 1990s

(Richard Foster & Sarah Kaplan, “Creative Destruction: Why Companies that Are Built to Last Underperform the Market”)

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The Red Queen Effect

In two major studies published in 2002 and 2005, Robert Wiggins of the university of Memphis and Tim Ruefli of the University of Texas, added some rigor to the question of competitive advantage.

They examined a sample of 6,772 companies across forty industries from 1974 to 1997. And their finding confirmed that true competitive advantage is both rare and relatively short lived:

• Only 5% of the companies in the sample ever achieved a period of superior performance lasting 10 years or more

• Only 32 companies (less than 0,5%) made it 20 years

• Only 3 companies (American Home Products, Eli Lilly and 3M) sustained high performance to the 50 year mark

Wiggins and Ruefli also found that the intensity of competition increased during the 23 year sample period and also showed that there is no such thing as a safe, stable industry. Schumpeter’s ghost was alive and well: “the gales of creative destruction” were blowing harder than ever

While Wiggins and Ruefli’s data presents a major challenge to the notion of strategy based on traditional economy, the patterns they identified would come as no surprise to an evolutionary biology. Competitive advantage is rare and sort lived in the biological world as well. Indeed it is exactly what one would expect in an evolutionary system

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Non Zero-Sum Games: Cooperation

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3 C’s

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Innovator’s DNAHBR, Jeffrey Dyer, Hal Gregersen, Clayton Christensen Associating: The ability to successfully connect

unrelated questions, problems or ideas from different fields… The Medici Effect

Questioning: Ask Why, Why not, What if. Play the devil advocate. Hold two diametrically opposing ideas in your head at the same time. Constraints as catalysts

Observing: Discovery driven executives produce uncommon business ideas by scrutinizing common phenomena, particularly the behaviour of potential customers. In observing them, they act like anthropologist and social scientist

Experimenting: Like scientists, innovative entrepreneurs actively try out new ideas by creating prototypes and launching pilots

Networking: Unlike most executives, innovative entrepreneurs go out of their way to meet people with different kind of ideas and perspectives to extend their own knowledge domains

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Tinkering:

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"Siempre estoy haciendo cosas que no puedo hacer, así es como logro hacerlas." Pablo Picasso

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OECD Innovation Strategy: Key FindingsFoster entrepreneurshipBusinesses, especially new and young firms, are the main source of job growth from innovation.

Barriers to firm entry and exit need to be reduced

Policies that facilitate structural change are crucial for reallocating resources. • New enterprises drive many obsolete firms out of the market

and often do not survive very long themselves.

• Evidence from OECD countries suggests that between 20% and 40% of entering firms fail within the first two years.

• This reallocation of resources to more efficient and innovative firms is central to innovation and economic growth and should be based on open and competitive markets.

• Labour market policies should provide the flexibility and mobility necessary to enable reallocation of resources from declining to innovative firms, along with support for lifelong learning and re-skilling of workers.

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How to start an entrepreneurial revolutionHBR, Daniel J. Isenberg Do public leaders... • Act as strong, public advocates of

entrepreneurs and entrepreneurship?

• Open their doors to entrepreneurs and those promoting entrepreneurship?

Do governments...• Create effective institutions directly

associated with entrepreneurship (research institutes, overseas liaisons, forums for public-private dialogue)?

• Remove structural barriers to entrepreneurship, such as onerous bankruptcy legislation and poor contract enforcement?

Does the culture at large...• Tolerate honest mistakes, honorable

failure, risk taking, and contrarian thinking?

• Respect entrepreneurship as a worthy occupation?

Are there visible success stories that... • Inspire youth and would-be

entrepreneurs?

• Show ordinary people that they too can become entrepreneurs?

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1. Stop Emulating Sillicon Valley

2. Shape the Ecosystem Around Local Conditions

3. Engage the Private Sector from the Start

4.Favour the High Potentials

5. Get a Big Win on the Board

6. Tackle Cultural Change Head-On

7.Stress the Roots

8. Don’t Over engineer Clusters; Help Them Grow Organically

9. Reform Legal, Bureaucratic, and Regulatory Frameworks

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What do you want to be when you grow up?

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Putting a ding in the universe!

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Culture: The 10 CommanmentsEric Beinhocker, The Origin of Wealth

1. PERFORMANCE ORIENTATION

2. HONESTY

3. MERITOCRACY

4. MUTUAL TRUST

5. RECIPROCITY

6. SHARED PURPOSE

7. NON-HIERARCHICAL: Junior people are expected to challenge senior people, and what matters is the quality of the idea, not the title of the person saying it

8. OPENNESS: Be curious, open to outside thinking, and willing to experiment; seek the best wherever it is

9. FACT BASED: Find out the facts. It is facts, not the opinions, that ultimately counts

10.CHALLENGE: Feel a sense of competitive urgency; it is race without a finish line

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Performingnorms

Cooperatingnorms

Innovatingnorms

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03Homework

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OECD Innovation Strategy: Key FindingsThe OECD Innovation Strategy

is built around five priorities for government action:

1.empowering people to innovate;

2.unleashing innovation in firms;

3.creating and applying knowledge;

4.applying innovation to address global and social challenges; and

5.improving the governance and measurement of policies for innovation.

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Yes, we can

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Others can: The new world order

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OECD Innovation Strategy: Foster efficient knowledge flows, networks and markets Knowledge drives economies, but mechanisms for its diffusion are not well developed.

Knowledge networks and markets are so far much less developed than product, labour and financial markets. Public policy should therefore support the formation of knowledge networks and markets.

This can be done through policies that encourage the development of knowledge brokerages. In appropriate cases these could facilitate the securitisation of intellectual assets, thereby enabling the capture of value on a much broader range of knowledge assets.

Effective protection of IPRs is necessary to encourage innovation, investment and trade ... Patents are particularly important for small firms, as they can facilitate entry into new markets and enable competition and collaboration with other firms

The protection of knowledge needs to be combined with policies and mechanisms that facilitate access and transfer. Excessively strong IPR may hamper the appropriate use of protected knowledge and discourage follow-on research and research in adjacent areas to the detriment of both competition and innovation.

The quality of patents is important to ensure competition.

IPRs not only contribute to innovation, they are also a means of diffusing knowledge and creating value. A variety of collaborative mechanisms, such as licensing markets or pools and clearing houses, can facilitate access to and use of knowledge

In a knowledge-based economy, governments need to take concrete steps to foster the development of knowledge networks and markets.

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Global Challenge: Building an IP Marketplace

Historically, the economic activity generated by the exchange and valuation of physical goods has been supported by functioning marketplaces that provide transparency of ownership, integrity that creates a stable environment, and mechanisms that enable valuation based on the principles of an open market.

As economic focus shifts from physical goods to intangible assets in the 21st century, many agree an analogous supporting marketplace needs to be developed.

Patents have become an important currency and a principal means to establish value for creators and users of knowledge-based assets.

A fully functioning IP marketplace infrastructure has yet to emerge, however, placing an undue burden on patent systems. This void creates uncertainty that leads to a number of problems including increased litigation and speculative behaviors that Inhibit the innovation patent systems were designed to protect.

US Companies intangible Assets as a Percentage of Total Assets, WIPO

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Spain – a bird’s eye view

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Indicator Value Year Rank Trend Best Source

GDP (nominal)

1.464 B US$ 2009 9 = EU IMF

R&D Intensity

1,12% GDP 2007 25 UPSweden (3,82%)

OECD

BERD 0,46% GDP 2010 28 UP Israel (3,93%) OECD

Direct Gov. Funding of

BERD0,12% GDP 2010 5 ? USA (0,18%) OECD

Scientific Production

448.2401996-2008

9 UPUSA

(4.307.536)SJR

Patents

3.267 Resident

4.289 Non Res.

20071218

UPJapan

(333.498)USA (168.605)

WIPO

Networked Readiness

4,37 2010 34 DOWN Sweden (5,65) WEF

Ease of doing

Business2010 62 DOWN Singapore

WORLD BANK

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Spain

United Kingdom

Netherlands

Iceland (2004)

Czech Republic

China

Belgium

Ireland

New Zealand

Sweden

Denmark

Italy

Germany

Luxembourg

South Africa (2005)

Estonia

Korea (2008, manufacturing)

Canada (2004, manufacturing)

Large firms SMEs

%

0 20 40 60 80

South Africa (2002-04)

Australia (2006-07)

Estonia

Iceland (2002-04)

Portugal

Chile

Czech Republic

Luxembourg

Germany

Japan (1999-2001)

China

Belgium

Spain

Austria

Netherlands

Korea (2005-07, manufacturing)

Italy

Canada (2002-04, manufacturing)

Large firms SMEs

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Investing in Innovation

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Expenditure on innovation, by firm size, 2006 As a percentage of turnover)

Firms receiving public support for innovation, by size, 2004-06 (As a percentage of innovating firms)

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Ease of doing Business

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Ease of doing Business

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Spain51 to 621 REFORM

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Spain: Entrepreneurial Motivation

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Global Entrepreneurship Monitor, GEM España, Informe Ejecutivo, 2009

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How we innovate

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We have an open innovation framework steered by TEF operating businesses...

Technology provide us a sustainable competitive advantage

Customers should lead the definition of our product and services

... and guided by two principles

SCIENTIFIC GROUPS

TECH OBSERVATORY

UX LABS

PARTNERSHIPS

LEADERSHIP Telefonica I+DLocal OBs/Competence Centers+

- +-

TECH TRANSFER

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Scientific TeamsEarly radar: for warning and discovery beyond vendors and gov

funding agencies.• Access high-impact early ideas before the buzz is already on…

To speak to talented people, you need talent…Learning the process, not just the result.

• Often understanding what did not work is most important.

To generate unique differential technology whenever it makes sense:• in areas where the operator has a lever

• developing technologies that accelerate the commoditization of vendor's equipment or that are against vendors’ interest

• opening new markets adjacent to Telcos (e.g. Amazon Dynamo and cloud computing)

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User experience & Usability testing: making sure it works (and delights)

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Software design, coding and testing: making it real

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