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National Report on Innovations in Russia-2016

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National Report on Innovations in Russia-2016 NATIONAL REPORT ON INNOVATIONS IN RUSSIA-2016 Report prepared by a team of authors led by Evgeny Borisovich Kuznetsov NATIONAL REPORT ON INNOVATIONS IN RUSSIA-2016 TABLE OF CONTENTS TABLE OF CONTENTS OPENING REMARKS. HOW TO AWAKEN SLEEPING GIANTS .......................3 EXECUTIVE SUMMARY ....................................................................................4 1. From Theory to Practice: Application of Report-2015 Tools ..................................6 1.1. Report-2015 as an Instrumental Framework for Innovation Policy ...................................................... 7 1.2. Report-2016: Transforming the Concepts into a System of Innovation Policy Measures .................. 13 2. From Creating Conditions to Promoting Growth: Problem Definition ................14 2.1. Ready for Takeoff: Where is the Innovation System Moving? ............................................................... 15 2.2. The State’s Innovation Policy Today ...................................................................................................... 20 2.3. Why is There no Innovation Breakthrough? ......................................................................................... 28 2.4. Big Business in Russia: Sleeping Giants.............................................................................................. 31 3. How to Awaken the Champions? Making Big Companies Innovative ..................37 3.1. Impact on Big Businesses: Industry Examples .................................................................................... 38 3.2. Lack of Innovation Erodes Big Companies’ Competitive Position ....................................................... 39 3.3. What to Strive for? Opportunities for Innovative Development............................................................ 43 3.4. What are the Hurdles? Barriers to Innovation ..................................................................................... 44 3.5. What Can Be Done? Measures to Promote Innovation ....................................................................... 50 4. You Can’t Manage What You Don’t Measure: How to Set and Achieve Targets ...61 4.1. Innovation KPIs in Russia Today ........................................................................................................... 62 4.2. Choosing the “Main Attack Avenue” ..................................................................................................... 64 4.3. Cascading KPIs...................................................................................................................................... 70 4.4. Implementation Issues: Shortcomings of the Current System ........................................................... 76 4.5. How to Set Achievable Targets? Global Experience ............................................................................. 79 4.6. Project Office: Organizational Options.................................................................................................. 85 APPENDIX 1. DASHBOARD METHODOLOGICAL UPDATE: HARMONIZATION WITH IDS-2020 ................................................................. 89 APPENDIX 2 . KPIS FOR “MAIN ATTACK AVENUE”: METHODOLOGY DETAILS .............................................................................. 96 LIST OF ILLUSTRATIONS ............................................................................... 99 SOURCES ...................................................................................................... 100 2 TABLE OF CONTENTS OPENING REMARKS HOW TO AWAKEN SLEEPING GIANTS? Dear friends, The first national report “On Innovations in Russia”, which was issued a year ago, suggested to the state a set of in- novation policy tools, including a “dashboard” to measure the condition of the innovative environment, as well as the overall map for recommendations on priority areas of technological development. In the new second release of the Report, equipped with these tools, we shall evaluate progress over the past year and attempt to work out a range of innovation policy measures that would allow us within a short period to approach the leading countries in terms of technological development. Given that these countries do not intend to rest on their laurels, we need rapid and visible results in order to achieve a successful breakthrough. In recent years, the initiatives taken by the state have mainly focused on areas where the impact yields a delayed effect: the innovative environment, science, education and venture investment. These support measures are critically import- ant for the development of innovation and it is crucial that they continue to be implemented. However, these measures are insufficient in order for us to catch up with the leading countries. In our view, the key source of rapid and significant victories is large business. If we can move large companies in key sectors towards new technologies, even through their own weight they can reshape the country’s economy in a short time; moreover they can favor the emergence of self-reproducing research and business ecosystems around them- selves. The recent experience not only of Russia, but also several leading countries – such as the UK, Norway, and South Korea – offers specific successful examples of such action on the part of the state and their major representa- tives. So how can we awaken our big business – these sleeping giants – to the technological revolution? The task is by no means a trivial one, given the low responsiveness of big business to innovations, the rigidity of sectoral structure and inter-sectoral dealings, heavy regulation of markets and processes, the high degree of state ownership and social significance of large enterprises. However, all of this has been seen in many countries that hold leading innovative ratings. How did they manage to pull themselves up and then stay at the top? The bulk of this report is devoted to an analysis of that experience. The report is intended strictly for practical purposes: we expect that the recommendations set out herein will be ap- plied to operations and will at least have an impact on shaping the government’s technological agenda in the coming years. Mikhail Abyzov Minister of the Russian Federation NATIONAL REPORT ON INNOVATIONS IN RUSSIA-2016 3 EXECUTIVE SUMMARY EXECUTIVE SUMMARY The objective of this release of the Report is to shift in the oil and gas industry the lack of innovation will from general recommendations about priorities in in- lead to a 6% decline in oil output already in 2025, novative policy, set forth in the 2015 Report, to the de- according to forecasts by the Ministry of Energy. velopment of specific measures capable of speeding up At the same time opportunities exist to develop innova- technological development in the country. tions already in the short term: In 2015-2016 the innovative environment improved in for example, technology for the “connected vehicle” Russia, although innovative activity did not increase. in automotive; Russia’s positions improved in the Global Innovation development of non-capital intensive innovative Index (from 48th to 43rd position) and the Global Com- products, for example in the area of geophysics in petitiveness Index (from 45th to 43rd position), while the oil and gas industry. Russia’s lag behind leading innovative countries also decreased for 12 of the 41 dashboard indicators char- Barriers to innovation exist inside large companies and acterizing the innovative environment (while deteriora- suppliers, as well as on the part of regulation and mar- tion was seen only in five indicators). kets. At the same time, we see mixed performance of inno- The management at large companies does not push for- vative activity without any clear positive trend: ward innovative agenda due to short planning horizon. In addition, low innovative activity over a long period results growth was observed in a number of indicators: state in a situation where companies lack the competencies demand for innovative products, R&D expenses in and processes required to implement innovation. the budget sector, and research cooperation; For innovative development of suppliers the main bar- however, the key indicators show a decline in the fol- riers are their lack of resources for innovation and a lowing areas: patent activity, R&D expenses, and the limited sales market due to a high degree of vertical number of innovative companies integration of large companies and high entry barriers. The main reason for this is that state initiatives were The conditions which prevail on the Russian market – aimed at areas where the effect is either delayed (sci- for example the current pricing system for state de- ence, education, innovative environment), or limited fense orders and limited competition on the part of due to an “open-loop innovative system” (startups, foreign companies – do not produce the incentives re- venture investments). quired to develop innovations at large companies. Big business should be the main source of quick and Moreover, the state lacks a strategic approach to in- significant wins in the development of innovations. dustry standards and consistent policy for financial Efforts aimed at innovating big business should sup- support of innovations. This also has a negative impact plement and create a synergetic effect with initiatives on innovative activity. which have already been taken. To resolve these issues it will first be necessary to cre- Mature business creates the main demand for innovation,
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