Northern Ireland: Towards a Framework for Smart Specialisation

1. Northern Ireland:Towards a Framework for Smart Specialisation July 2014

2. Smart Specialisation theory Society Government Eco-System Eco-System Smart Specialisations Academia Feedback Industry Coordination Coordination Monitoring/ Evaluation Feedback Discoveries Strategic Vision Collaboration/ Open Innovation Extending Emerging Equipping Rebuilding and Rebalancing the economy

3. Presentation Structure • Regional Context • Analysis • Entrepreneurial dynamics • Critical Mass and Priorities • Governance • Implementation and budgets • Measuring the Process

4. Regional Context • 1.8 million inhabitants • Smallest of UK regions • Devolved Government • Large public sector • Large service sector • SME dominated • 480 companies out of 80,000 involved in R&D • Low in EU Innovation Scoreboard

5. Regional Context • Programme For Government • Economic Strategy- • Strategic Framework • Innovation Strategy • (draft)

6. S3 Process Inception Northern Ireland Economic Strategy 2030 March 2012 MATRIX Science Industry panel established 2006 • Public Consultation Joined S3 Platform May 2012 Draft Economic Strategy Independent Review of Economic Policy 2009 Draft Innovation Strategy 2013 NI S3 policy ‘Expert Reviewed’ July 2013 Northern Ireland Executive Sub-Committee on the Economy Northern Ireland Executive Sub-Committee on the Economy ERDF Operational programme 2024-2020 Innovation Strategy 2014- 2025 • Public Consultation • Public Consultation • Public Authorities & Agencies • Civil society • International experts • Actors of knowledge • Investors • Private Enterprises • Public Consultation Consultation Response Document Economic Strategy Steering Group Consultation Paper Economic Strategy Working Group • Public Consultation

7. Regional Context Economic Strategy for Northern Ireland 2012 • Focus on; • Innovation • Export Led Growth • Regional Strengths “An economy characterised by a sustainable and growing private sector, where a greater number of firms compete in global markets and there is growing employment and prosperity” 7

8. Regional Context Public Sector dominated Economy - Public sector expenditure 63% of GDP

9. Regional Context % of BERD financed by Government BERD as % of GDP

10. Regional Context Northern Ireland: ‘Innovation Follower’

11. Northern Ireland In-House R&D expenditure 2010 Regional Context Northern Ireland Research and Development Statistics 2010

12. Regional Context- Challenges in NI Public Sector • Public Sector dominated economy (63% GDP) • High reliance on Government support for B.E.R.D. • Service Sector Dominated (Lower value) • High number not in employment (High Economic inactivity) Labour Market Brain Drain • One-third of students leave to study elsewhere • Less than half of these (44%) return when degree is complete • 80% of NI private sector employment is in SMEs (under 60% for UK) • Only 22% of turnover is in large firms compared with 51% in UK SME Dominated Innovation and R&D • Lagging behind top EU performers in R&D spend • 480 out of 80,000 involved in R&D • Low in Innovation Scoreboard

13. Cluster Analysis • FDI analysis Analysis

14. Analysis Porter’s Diamond- Strengths Firm Structure/ Rivalry • SME Dominated Economy • SME make largest contribution in the UK • Companies beginning to be export orientated • Large increase in BERD in 2010 Factor Conditions Demand Conditions • Proximity to Europe, North America & India • Small region with devolved Government • Younger population than UK & EU average • Skills system founded on industry needs • Outperforms UK & EU in secondary education • Literacy levels similar to OECD average • Good Region for pilot projects • World class Telecommunication infrastructure • Demand traditionally linked to UK & Republic of Ireland • Access to Global Markets • A resilient Agri-food sector • Competitive ICT base • Competitive Science & Technology sector • Good recent record in FDI • Clusters in Aerospace, Science & Technology, business services, Financial Services, Tourism, Creative Industries • Collaborative Networks • Competence Centres • Innovation Centres • MATRIX (Science & Technology Panel) • NISP clustering across technology sectors Supporting Industries (Clusters)

15. Analysis Porter’s Diamond- Weaknesses Firm Structure/ Rivalry • Over-reliance on public sector – Fiscal “Subvention” • Small private sector • Low levels of entrepreneurship • Low Innovation, Patients and absorptive capacity • Brain Drain’ and workforce migration • ‘BMW’ Syndrome • Reliance on a few large firms FactorConditions Demand Conditions • Weak Skill profile compared to world leading economies • High proportion of workforce with no qualifications • Low living standards, productivity & wages compared to leading economies • Reliance on UK and Republic of Ireland Market • Fiscal subvention affects demand conditions • Over reliance on a small number of firms for R&D • Large amount of FDI in low value sectors • Small private sector with over reliance on public sector • Very few cluster organisations Supporting Industries (Clusters)

16. Analysis Regional S.W.O.T . Analysis

17. Analysis Analysis of Technology Specialisations Led by Industry Inspired by Academia Facilitated by Government “Cross sectoral market opportunities”

18. Analysis Analysis of Technology Specialisations • 13 members (9 from industry) • Focus on strategic markets not sectors • ‘Now sight’ then Foresight • Involving 100 companies • R&D and science and technology issues • Emerging relevant technology priorities • Promotion of innovation, R&D, and creativity • Promotion of Collaboration • Overcome the perceived disadvantage of SME dominated economy • Reports build on regional strengths and skills capabilities

19. Analysis Analysis of Technology Specialisations “Then focused on more specific cross-sectoral markets” Advanced Manufacturing Advanced Materials • Priorities • Collaboration • Timescales Life Sciences ICT Agri-food “Exploiting capabilities and market opportunities” Sustainable Energy

20. Analysis Advanced Manufacturing Advanced Materials Life & Health Sciences Telecoms & ICT Agri-food

21. Analysis

22. Analysis Analysis of Technology Specialisations

23. Analysis Analysis of Technology Specialisations 90% 93% 12%

24. Analysis Foresight • System Scanning • Creates shared understanding of issues • Scenario Planning • Conceptual modelling of market opportunity scenarios • Analysis & Selection • Prioritisation through negotiations among stakeholders • Transformation • Establish relationship between future and present for a change programme • Action Plan • Create structural and behavioural transformations to exploit markets

25. Foresight Reports–2 – 5 – 10 year; Analysis Foresight • Sustainable market opportunities • Exploitation priorities • Relevant wider global science and technology innovations • Early wins and longer term gains • Synergistic actions required • Enabling networks required • Investments required • Further analytical or horizon scanning work to be undertaken

26. Northern Ireland star clusters* are: Analysis Cluster Analysis- EU perspective Business services Construction Financial services Power generation and transmission Aerospace Stone quarries - Representing 79,700 employees (11% of total NI) • *Stars awarded for industries based on: • Size (within top 10% of employees in EU27) • Specialisation (focus is more than twice EU27 average) • Focus (within top 10% of clusters in the economy)

27. Analysis Cluster Analysis- top 10 sectors in N.I. within EU context Data extracted from cluster observatory Star clusters represent 11% of total NI employment

28. d) NI Industry Focus Analysis Cluster Analysis-N.I. Industry Focus Three largest sectors are ‘star clusters’ Remaining largest sectors are not ‘star clusters’ but NI may have strengths in these areas

29. Analysis Cluster Analysis- Key groupings NI below UK average although above EU27 NI below both UK and EU27 averages NI below both UK and EU27 averages

30. Analysis EU Star Clusters in N.I. within EU employment context Business Services Aerospace Stone Quarrying Financial Services Construction Power Generation & Transmission Data extracted from cluster observatory Star clusters represent 11% of total NI employment

31. Analysis FDI Analysis Research Capabilities Analysis • Identified R&D intensive sectors • Identified Research Capability (R.A.E. , R.E.F. etc) • Alignment of research capability with FDI sectors • Prioritisation of FDI sectors using Northern Ireland Research Capability i.e. CRITICAL MASS

32. Analysis FDI Analysis- Exploiting N.I. research base Software &IT Telecoms Aerospace Renewable energy Electronic components High Correlation with Matrix Market Opportunities Biotechnology

33. Entrepreneurial dynamics Incubators Start up support Innovation services Training & awareness for innovation Industrial PhD’s Creativity innovation Innovation orientated public procurement Tech funds/ R&D support/grants Support to R&D Centres Infrastructural development Human Capital for S&T PPP for innovation Research Networks/ Poles Cross border research centres • Competence Centres • Collaborative Networks • New generation science parks • Venture and Seed capital • Guarantee schemes for financing innovation • Science Parks • Technology Transfer Schemes • Technology Brokers • Talent attraction schemes • Innovation awards • Open source-Open science • Markets for Knowledge KnowledgeExploitation Knowledge Generation “ A wide range of Innovation programmes” KnowledgeExchange

34. Entrepreneurial dynamics “ A wide range of Innovationprogrammes” Driving New Knowledge Applying New Knowledge Competence Centres Technology Led Grant for R&D: Industrial Research Collaborative R&D Adoption of Knowledge Open Access Facilities Grant for R&D: Experimental Development Knowledge Transfer Partnership Building Innovation Intellectual Property TDI Design Developing Capacity Proof of Concept Innovation Advice Innovation Vouchers Market Led Business Innovation Link Short Term Reward Long Term Reward

35. Collaborative Network Programme Entrepreneurial dynamics “a collection of businesses working in conjunction to share their complementary strengths and capabilities in order to achieve some common goal. By engaging in collaborative activities, it is envisaged that companies can ultimately improve the productivity and competemore effectively on the regional, national and international stages’

36. Example of S3 Process Collaborative Networks “working together to achieve a common goal” Collaborative Networks “ Government provides Industry Experts as Honest Brokers”

37. Entrepreneurial dynamicsExamples of Collaborative Networks Plastics & Polymers Global Maritime Glantek Medical Devices European Connected Health Whisple

38. Entrepreneurial dynamicsExamples of Collaborative Networks

39. S3 process in action Recommendations Consultation Feedback Short listing Innovation ecosystem Collaborative Networks Competitive Call Expression of interest • Route to Market • Industrial Innovation Communities • Limited Liability Partnership • Competence Centres • Innovation Ecosystem • Open Innovation Scoping Facilitation (by Industry experts)

40. Entrepreneurial dynamics • Competence Centre Programme • Evolution of Collaborative Network Programme • Based on Competitive Call process • Potential Competence Centres in:- • Sustainable Energy • Advanced Engineering/ Composites • Connected Health • Cloud Computing • Agri-Food Led by Industry Competence Centres Inspired by Academia

41. Entrepreneurial dynamics – business to business mentoring

42. Phase 1- Proof of ConceptPhase 2- Prototyping Entrepreneurial dynamics Innovative Procurement – endorsed as policy across N.I. Government • N.I. - 3% of UK Applications N.I. - 11% of UK contracts N.I. - 12% of total UK funding Source: Technology strategy Board; SBRI

43. Innovative Public Procurement (SBRI) Un-met Need Competition Phase Proof of Concept Proof of Concept Proof of Concept Proof of Concept S B R I Prototype X Prototype X Full Open Procurement

44. Governance

45. Governance Innovation Support Ecosystem LOCAL EUROPE NATIONAL Framework / H2020 R&D Tax Credits Government Departments Invest NI TSB HE / FE EU Structural Funds BIS InterTrade Ireland Other Support Orgs* Enterprise Ireland Public Research Institutes * Includes NISP, MATRIX, Sector Bodies etc

48. Critical Mass & Priorities

49. Critical Mass & Priorities Clusters Business Services Financial Services Agri-food Telecommunication & ICT Life & Health Sciences Advanced Materials Creative Industries Sustainable Energy Tourism Advanced Engineering Financing R&D and Innovation Rebalancing themes Economic Infrastructure Education & Skills Global Economy Business Growth

50. Critical Mass & Priorities Sustainable Energy Intelligent Energy Systems Packaging & Application Software Clusters Financial Services Engineering Smart Specialisations Telecommunication High Performance Computing Niche Areas “Connected Health” “Near Shoring” “Cyber-Security” Creative Industries Cloud Computing ICT Life & Health Sciences Social & Digital Media Energy- security & reduced costs Advanced Materials Agri-food Computational Science Composites “Clean- Tech” Nano-Structured Materials Enhance Customer Knowledge Advanced Manufacturing Differentiated Food Processing & Packaging Biomaterials