Repurposing innovation policies
for an accelerated digitalization
of regulated industries
This is the first of a series of blogs exploring how digitalization is transforming regulated industries (agriculture, healthcare, energy and mobility in particular). The transformation goes hand in hand with a growing need to establish, scale and manage innovation ecosystems. Nobody has ready-to-use answers how to do that, but by asking critical questions and exploring good practices, we may end up to know what works and what doesn't.
According to the European Commission innovation policy “is the interface between research and technological development policy and industrial policy and aims to create a conducive framework for bringing ideas to market.” This definition is in line with the classical view on innovation: innovations stem from research and technological developments and allow firms to develop new products and services in the market. There is nothing wrong with this approach, but the current wave of digitalization in many industries may eclipse the value of the traditional innovation policy approach. Innovating through digitalization requires a different approach since digital technologies (AI, big data, VR / AR, IoT) are already developed and digital devices are flooding the market: digital technologies are a welspring of smart applications that can drastically change existing processes, services or entire business models in different industries. Yet, digitalization is in many regulated industries progressing very slowly. The technical progress of digital technologies is not a constraining factor, but the resistance against the adoption in those industries is. The adoption is a function of the success in coordinating actions of all stakeholders that will be affected by the introduction of digital technologies. It’s not a function of the R&D investments as in the case of classical innovations. Each month that China is rolling out 5G earlier than European countries is an extra month that Chinese companies can develop new, digitally enabled products and services not hindered by foreign competition
Digitization offers unprecedented opportunities to change or disrupt many industries, including highly regulated industries such as agriculture, energy, healthcare and mobility. Healthcare can greatly benefit from digitization: this is the case in hospital care, clinical services, dental care, nursing homes, home healthcare, medications, and research and development. In fact, digital technologies can transform the entire healthcare industry by improving coordination between patients and healthcare professionals, by putting the emphasis of healthcare on prevention rather than cure, by integrating data across the entire healthcare continuum, by making existing processes more effective and achieving personalized care. Keeping the European healthcare industry among the best in the world will require accelerated digitization over the next 10 years.
Digital technologies also have the potential to transform other regulated markets such as energy, mobility and agriculture. In these industries, the digital infrastructure such as the standardized and interchangeable use of electronic patient records (EPD) across the healthcare continuum, digital energy meters and 5G networks are critical parts of the digital infrastructure we need to benefit from the full potential of digitalization. Wearable devices, vehicle-to-vehicle and vehicle-to-infrastructure transportation systems, industrial automation and utility applications, wireless health services, consumer and business virtual and augmented reality services, some smart city applications, smart homes and a number of uses for mobile broadband all need 5G-networks.
The digital infrastructure has been rolled out way too slowly in Europe and digital data can’t talk with each other because interoperability of digital platforms is not secured through legislation and regulations. The rollout of the digital meters in Belgium for instance is a blatant example – the responsible organizations have time till 2030 to install the meters, while technically this can be done in one year.
It requires a new way of ecosystem wide collaboration, but we currently lack the tools and experience to manage such collaboration successfully
Europe is slow, but why should we bother? Why should we create a sense of urgency? One reason is that start-ups in digital services can’t be established and develop new products or services as long as the digital infrastructure is not operational and platform standards are not agreed upon. Once the digital infrastructure is established, research institutes and start-ups can introduce novel technology applications, and it creates opportunities for large companies to develop new businesses. High income jobs will be created through this data driven economic growth. Imagine, Belgium or the Netherlands without the harbor development after world war II, or London, Paris, Frankfurt or Amsterdam without modern airport infrastructure. None of them would have benefitted from the post war economic boom without these investments in transport infrastructure. The digital infrastructure has the same potential for the current economy in Europe. Invest in digital infrastructure and enforce data standards and interoperability early on to secure the competitiveness of European economies! An extreme sense of urgency is needed because other countries (mainly Asian) are ahead of us in this game. Each month that China is rolling out the 5G network earlier than European countries is an extra month that Chinese companies can develop new, digitally enabled products and services not hindered by competition from Europe. They can build their competitive advantage, while European companies can’t even start the race without the digital infrastructure. We make Chinese companies rich because of our own inability to install the digital infrastructure in Europe in time.
The current generation of policymakers is responsible for this malaise in Europe. Countries including Singapore, China and Estonia are digitalizing their economy at an incredible speed. In each of the three countries the government plays an important role. Accelerating the digitalization of the European economy requires a shared vision of the future in Europe and governments, hospitals, public organizations, agencies and industry must work together. It requires a new way of ecosystem wide collaboration, but we currently lack tools and experience to manage such collaboration successfully. Without appropriate policies and ecosystem wide collaboration, digital development in healthcare, energy and mobility will continue to lag behind countries that are already accelerating the digitalization of their economy.
There is another reason to repurpose innovation policies. Our traditional view on innovation policies starts with local or national financial support for R&D and technology development activities. In a globalized economy where multinationals capture a disproportionate share of the support, the ultimate economic benefits of newly developed products and services are likely to be captured in other parts of the world. In contrast, an accelerated digitalization in different industries is focused on the transformation of the local / national economy, generating economic benefits in a local context. This is even more the case for regulated industries, where organizations, assets and management are strongly embedded in the local institutional context. Over time, accumulated expertise in digitalization will put local firms / start-ups in a favorable position to internationalize improving a country’s trade balance. The advantages of an accelerated digitalization are especially interesting for small economies such as Belgium and the Netherlands, because international “leakages” of new-to-the-world R&D are larger the smaller the national economy.
Wim Vanhaverbeke- Professor Digital Innovation and Entrepreneurship - Surrey Business School
Added 2/7/2020 - (Translated from De Tijd July 2, 2020)
Did you have your heart rhythm already measured by an app before a video consultation with the doctor? Or did you already hear about agricultural machines sending data directly from the field to a central hub? Both are applications that are already under development.
However, they have difficulties to get off the ground in our country (Belgium), because the much-needed digital infrastructure is not developed. Medical app developers are confronted with rigid and inaccessible data structures in hospitals, digital agricultural start-ups have to wait for the superfast mobile internet 5G to roll out. The speed on the digital highway is increasing, but the Wetstraat (the political centre in Brussels) is progressing at a snail's pace in establishing the digital infrastructure.
Pieter Haeck - Journalist Tech & Media
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