Innovation Actors in the Øresund Region by Dansk Design Center

INNOVATION ACTORS IN THE ร RESUND REGION Danish Design Centre Malmรถ University November 2014

Innovation Actors in the Øresund Region Published by: Danish Design Centre, www.ddc.dk Malmö University, www.k3.se The partners conducting the work have consisted of a team from the Danish Design Centre in Copenhagen and Malmö University in Malmö. The Danish Design Centre team: • Anne Dorthe Josiassen, Head of Design and Innovation • Christina Melander, Senior Project Manager • Maria Hørmann, Project Manager • Susanne Schenstøm, Graphic Designer, Architect MAA • Lasse Damgaard, Project Assistant • Meik Brüsch, Project Assistant • Frederik Bækgaard, Student Assistant • Tanja Bisgaard, Consultant The Malmö University team: • Gunnel Pettersson, Senior Lecturer and Artist • Kristina Lindström, Senior Lecturer and Artist • Peter Lövschall, Business Developer • Åsa Ståhl, Senior Lecturer and Artist ISBN: 87-90904-73-7 December 2014 © Danish Design Centre and Malmö University All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Danish Design Centre/Malmö University.

THE EUROPEAN UNION The European Regional Development Fund

Innovation Actors in the Øresund Region Background Definition of innovation actors The number of innovation actors in the Øresund region Characteristics of innovation actors Framework conditions for innovation actors in the Øresund Region

4 6 8 10 15

Background It is well known that the Øresund Region has a strong position in information technology and a number of other technologies such as censor technology, laser technology, robotics, materials technology that all are technologies that will be crucial for new intelligent solutions which are expected to take shape in the coming years. It is solutions where products and devices become more intelligent, but also become connected, and collect, distribute and use data in smart systems such as intelligent supply systems, traffic systems, automated homes and other examples of the Internet of Things. The Øresund Region also has a strong position in design, social sciences and humanities, which also plays an important role in the design of new smart solutions, that should focus on the user and enable the user to both use and master new intelligent solutions if social and sustainable potential is to be harvested. In recent years, there has been an emergence of exciting examples of the fusion of technological and artistic skills under the name of art and technology or in short form arttech. This fusion can take many forms. It may be communities where they experiment with new forms of artistic expression or the limits to technology; it may be experiments that have the aim to address human or social challenges in new ways, but it can also be new companies with both technological and artistic skills, which are interested in the commercial opportunities by merging art and technology – arttech companies. In a report to the Øresund Committee, arttech companies and communities in the region are described, and it can be seen that the region has a large and dynamic growth layer of new businesses, communities and networks within arttech. There is no formal benchmark of arttech environments, but it is the perception of several actors with good knowledge of arttech environments, that the Øresund Region has one of the largest and perhaps most exciting art and technology communities in Europe. London probably has the largest environment that can fully measure up to the leading environments in the US, but following them is probably the Øresund Region, Berlin, Amsterdam and Barcelona. 4

The three environments or clusters – new technologies, design and user understanding and arttech – gives the Øresund Region an interesting and promising platform to participate in the global competition in all the ways that is offered by new technology, and it is not just about having access to technology, but also utilising creativity and innovative capacity to make new products, services and intelligent systems which are designed in a way that is easy for users to handle. The potential of the three environments lies within the environments themselves, which can foster solutions and companies that can help to create both sustainable prosperity and welfare, but it also lies within cooperation between the environments in which ideas and skills can fertilize each other. But the greatest potential lies perhaps in the environments’ ability to foster innovation throughout the business communities. On behalf of the Danish Ministry of Business Affairs, the Danish Design Centre has made an analysis of the future challenges of innovation for large industrial enterprises, and the need for innovation actors who master both the new technologies and their ability to create solutions with people and sustainability1. The analysis does not address traditional innovation consultancies, but is about the new actors carrying out or helping to carry out the innovation process, which is an increasingly important competitive factor for all businesses. The foundation for creating the new innovation actors is the three environments or clusters – new technologies, design and user understanding and arttech. The new innovation actors can be start-ups that are born innovation actors, or they may be existing firms that change their business areas, develop new skills and act as innovation actors, because there is a growing demand for new innovative solutions. They can be design firms previously ’only’ selling certain design services, but gradually evolving into innovation actors. It can be technology companies previously ’only’ selling certain technology services, but gradually evolving into innovation actors. And it can be arttech companies, which often have the skills and experience that make them good innovation actors. 1 New Innovation Actors, DDC, 2014

Definition of innovation actors Innovation actors develop new business solutions for other companies, either because the company does not have the necessary skills or because they want to cooperate on innovation with external partners for other reasons. The result of the innovation can be a product, a service or a combination, where there is a brand new solution to a problem that has not previously been possible to resolve in a satisfactory way, but where new technology or other know-how makes it is possible to make a better solution. But a new solution may also be changes in production methods, new sales or marketing models or a change in corporate organisation 2. There have always been companies who helped others do something new, but in the past it was usually in the form of subcontracting where the acquiring party entered into a contract to supply a certain defined result. This is not the case with the new innovation actors. Here we are talking about a collaboration in which the acquiring company does not have full control over the process and the end result since an innovative process is about solving a problem in an innovative process where it is not clear which solution will be found and whether it is commercially viable. An innovative collaboration can be organized in several ways. Either the external innovation partner, the innovation actor, can ’move in’ and work in the company’s innovation department in line with the company’s own innovation staff, or the innovation process can be completely outsourced and done by the external innovation partner. There are obviously a lot of forms in which the work can be divided into several phases, which extend in varying forms of cooperation and in different physical locations. The new innovation actors can be independent companies, or they may be individuals who act on their own or in different networks depending on the nature of the project. In the book New Innovation Actors there are examples of how innovation actors work in different organisational forms3.

2 Definition of a new solution corresponds to the Oslo manual’s definition of innovation: http://www.oecd.org/science/inno/oslomanualguidelinesforcollectingandinterpretinginnovationdata3rdedition.htm 3 New Innovation Actors, DDC, 2014

There is strong growth in the number of innovation actors, and this is due to new technology; new knowledge and new data (big data), that makes it possible to make much more intelligent solutions than were regarded as realistic a few years ago. It is very complex solutions that few or perhaps no company can solve itself. Therefore, we see new and surprising innovation partnerships emerging everywhere. New innovation actors can also work with their own business, and only act as innovation actors in specific contexts. For example, a company that makes computer games as its main business can in certain situations use its programming and animation skills to develop solutions for other companies that do not have anything to do with computer games. Working as innovation actor requires special skills and probably a different corporate culture than we have been accustomed to. In any case, there are some characteristics of the start-ups that act as innovation actors, which is different from the past. Typically, a new company was started on a new idea, and if there was a market for the idea, the company concentrated on exploiting the idea as best possible, by being as efficient as possible. If they managed and grew the company could develop new ideas, but the focus was still on growth and earnings. The new start-ups that are born innovation actors, focus on maintaining a creative and innovative culture and have design thinking in their blood, in the sense that they focus on a problem that they seek to address with the user in mind. They are multidisciplinary with strong technological and design skills or have close business partners with complementary competencies. The new start-ups that are born innovation actors do not have scaling and growth as a goal, but want to maintain an innovative organisation that is constantly creating new solutions to societal challenges and preferably solutions that are more sustainable and more inclusive. Many innovation actors cannot see themselves in large organisations, and this is an important reason why incumbents must organise their innovation in new ways. It can often be a condition to get access to the best talent and most creative ideas.

The number of innovation actors in the Øresund region There is no clear and strict definition of innovation actors, and there might perhaps never be one, especially since a person or a company can both act in the traditional way and only occasionally act as an innovation actor. The number of innovation actors in the Øresund Region cannot be determined with certainty, but it is possible to get an idea of how many innovation actors exist by searching information from websites and social media, and asking various experts. This study is conducted primarily on Internet screening of databases from different start-up communities such as Øresund Start-ups, #CPHFTW, Media Evolution, Founders House, Skabelonloftet, Version2 and Trends Online. Interviews have also been conducted with experts from DDC’s network based on their knowledge of the people and companies who act as innovation actors. Finally, there has been a so-called snowball, where examples of innovation actors are listed and experts are asked if they know people or businesses that are missing from the list, and if they know of experts who have not yet been asked. All the examples of people and companies that have been obtained by the above methods are evaluated on the basis of the characteristics that characterize innovation actors. This means first and foremost, that a company must solve innovative projects for other companies, but in addition, emphasis is placed on three competence criteria and three cultural criteria, see Box 1.

Three criteria about competencies

Box 1. Criteria for Innovation Actors

1. Each company has design thinking in its DNA (starts with the problem to be solved, and focuses on the needs of users) and can work multidisciplinary. 2. The company has the skills to use technology or uses partners with the necessary technological skills. 3. The company has the skills to use design or uses partners with the necessary design skills. Three criteria about culture 1. The company has a creative and innovative culture. 2. Partners and employees find it difficult to see themselves in large organisations. They want to preserve an innovative culture, and do not see growth as an attractive goal. 3. Job satisfactions and the meaning of the company are based on the ability to create solutions that are meaningful to people and create better living conditions.

The criteria are used in relation to the information companies provide on their website. Only in very few cases, is there sufficient information to check if all criteria are met. However, if a number of key criteria are met, the company is counted as an innovation actor. A total number of 144 companies are identified as innovation actors. 44 are in MalmĂśLund and 100 are in the Copenhagen Capital Region. The identified companies have received a questionnaire where they were asked about the different characteristics of the company and how the company assesses the business environment for innovation actors in the Ă&#x2DC;resund Region. The questions and representativeness are assessed in the annex. There is a response rate of 49 per cent, and it is estimated that the responses are representative. 9

The companies are asked about the number of employees, and on that basis the number of companies working fully or partially as innovation actors in the Ă&#x2DC;resund Region is estimated. It is an uncertain estimate, but it seems to be between 1500 and 2000. The majority work in small businesses with up to 25 employees. 36 per cent have 1-5 employees and 49 per cent have 6-25 employees, while there are few without employees and a modest number of slightly larger companies, see figure 1. Figure 1. Innovation Actors. Number of companies according to size.

60% 50% 40% 30% 20% 10%

Percentage of response rate

0% 0 1-5 6-25

26-50

More than 50 employees

Characteristics of innovation actors The companies were asked where they would place themselves on a continuum from technology-oriented to art-design oriented today and in 5 years. Only a few companies see themselves in an extreme position as a pure technology company or a pure art-design business. 30 per cent of the companies position themselves in the middle, while 29 per cent see themselves as predominantly art-design-oriented, and almost 41 per cent see themselves as predominantly technology-oriented, see figure 2. 10

Figure 2. Innovation actorsâ&#x20AC;&#x2122; location on a technology-design continuum

40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 Technology-oriented Design-oriented

Percentage of companies

In the coming years, the innovation actors that are technology-oriented expect to become more design-oriented, while the design-oriented innovation actors expect to become more technology-oriented. The change is largest for the design-oriented innovation actors, see figure 3. 3.0

Change in design-oriented direction

Change in technology-oriented direction

2.5

Figure 3. Estimated change in location on the technology-design continuum

2.0 1.5 1.0 0.5 0.0 -0.5

1 2 3 4 5 6 7 8 9 10

-1.0 -1.5 -2.0 -2.5 -3.0

Technology-oriented

Design-oriented

Percentage of companies

Note: The figure shows the direction and the degree to which respondents expect to change their position in a technology-design continuum in relation to their current location on this continuum. The change is calculated by assigning respondents points from 1-10 respectively for their current location and their expected future placement in a technology-design continuum. The expected change in the location on this technology-design continuum is calculated as the average point difference between the expected future location and its current location. This means that a positive difference indicates an increased design-orientation in five years and a negative difference indicates an increased technologyorientation in five years. 11

The majority of the innovation actors are design-oriented, and since they are moving more towards technology, than the technology-oriented are moving towards design, the net result is that the majority of the innovation actors are becoming more technology-oriented, and more multidisciplinary. It should not be surprising that the design-oriented innovation actors are moving in the technology-oriented direction, with vast opportunities offered by the new technologies from the rapidly increasing digitisation, sensor and robotics, new material technology, large amounts of new data and the enormous computing power, which makes the unthinkable possible. The companies were also asked about their professional core competencies to further investigate where they perceive that they are strongest. The companies were given three specialised areas where they had to state whether they had the skills in-house and if they had them to a high extent, or to some extent. The three areas are Technology, Design and Art, and Social and Human Sciences. Most innovation tasks require that all three skills come into play, but it is different to what extent, the skills are required. There are innovation tasks where technological competence are absolutely crucial, and there may be tasks that draw particularly on design and artistic skills, and there may be challenges where a deep user understanding obtained by the methods from the social and human sciences is at the heart of the innovation project, but in most cases it will be the multidisciplinary collaboration and the use of all three skills that lead to successful innovations. About half of the companies state that they have one area where they have skills to a high extent, while almost 35 per cent state that there are two areas where they have skills to a high extent, and almost 13 per cent of companies state that they have all three skills in-house to a high extent, see figure 4. Of the companies that have one core competency in-house, the vast majority indicate this is technology, while somewhat fewer indicate design and art or social and human sciences. Of the companies that have two core competencies in-house the majority 12

Tech, social, design:12,7%

Figure 4. Innovation Actors distributed based on professional core competencies

Social, design: 7,3% Tech: 36,4%

Tech, social: 1,8%

Note: Very few companies state that they do not have the skills to a high extent in any of the three areas

Tech, design: 27,3% Design: 7,3% Social: 7,3%

indicate it is technology and design, while fewer specify design and social and human sciences, and very few reply technology and social and human sciences. Most if not all innovation tasks require that all three skills are applied and as most innovation actors do not have all the skills in-house or at least not all of the core competence in-house, they need partners. More than 80 per cent of the companies indicate that they have partners when carrying out innovation projects for other companies, see figure 5. Figure 5. No business partner: 19%

Have a business partner: 81%

Partners.

The partners are in particular other technology companies, creative individuals or design companies, but many also include manufacturing companies and universities in their innovation cooperation, see figure 6.

Figure 6. Innovation actorsâ&#x20AC;&#x2122; partners

0% 10% 20% 30% 40% 50% 60% Tech & engineering companies Creative individuals Design & art companies Manufacturing companies Universities & institutions

Percentage of companies

Other

The innovation actors solve innovation tasks for many different customers, but not surprisingly, most of the customers are other companies. Almost 70 per cent of the innovation actors indicate that they solve innovation tasks for small and medium-sized companies, while over 60 per cent indicate that they solve innovation tasks for large companies. The reason for more innovations tasks being solved for small and medium-sized companies, is because there are far more small than large companies, yet it might still be surprising that so many innovation actors have innovation projects for small and medium sized companies, but it is a good sign, since innovation is an increasingly important competitive factor. 60 per cent of innovation actors say they have innovation tasks for public authorities and institutions. This high number may also seem surprising, but must also be taken as a positive sign, see figure 7.

0% 20% 40% 60% 80%

Figure 7. Innovation actors’ customers

Small & medium sized companies Big coorporations Public authorities & institutions Consumers Other

Percentage of companies

Half of the innovators indicate that they also have consumers as customers, which means that almost half of the innovation actors have a mixed business model where the company sells products directly to end users and perform innovation projects for other companies.

Framework conditions for innovation actors in the Øresund Region The innovation actors have quite a positive assessment of the framework conditions in the Øresund Region. This was also expected since there are many signs that the Øresund Region is home to one of the largest concentrations of precisely that kind of companies in the value chain for innovation actors. It is well known that the Øresund Region has many IT companies, and the region has strong expertise in key technologies such as sensor and robotics, laser technology and similar technologies. The Øresund Region also has many design companies, and in recent years a dynamic growth layer of arttech companies and arttech communities have evolved. The companies that are identified as innovation actors have evaluated the framework conditions for innovation actors in the Øresund Region on a scale from excellent to poor. Just over a third find the framework conditions very good and more than half find them mediocre, and only a few find them not good or even bad, see figure 8. 15

Poor 3% Not good 7%

Figure 8. Innovation actors’ assessment of the framework conditions in the Øresund Region

Excelent 6%

Very good 31%

Mediocre 53%

The framework conditions for creative companies have previously been highlighted in studies for the municipality of Copenhagen4. Based on the studies eight important framework conditions were selected see Box 2.

Box 2. Critical framework conditions for creative businesses

• • • • • • • •

Access to risk capital Multidisciplinary training programs Creative spaces with low rent Meeting places for talent and creative companies The presence of dealmakers, nodes and local heroes Branding of the creative communities (e.g. international creative events) Incubators, fablabs and accelerator programs Intelligent and innovative public demand and social experiments

It is not an exhaustive list, but the framework conditions that have been discussed in interviews, workshops and conferences are highlighted as the most important, and they are in good accordance with international studies of framework conditions for creative companies in some of the world’s leading creative metropolises. Each of the critical framework conditions in Box 2 can obviously be improved, but that requires new initiatives and in some cases substantial investments. 4 http://ddc.dk/publikationer/erhvervsstrategi-for-kreative-virksomheder-i-kobenhavn/

There are many actors that influence the framework conditions, and who can implement important initiatives. This applies to public authorities and institutions, which have taken many initiatives, but of course still have the opportunity to improve the conditions. But it also applies to universities, research institutes and educational institutions, capital institutions, property owners, large, established companies, and a number of individuals with roots in the creative environments. The many actors can take initiatives separately, or they can act together and may thus have a greater effect. As part of the basis for new ideas for improvement of the framework conditions for creative companies in the Ă&#x2DC;resund Region, the identified innovation actors were asked where new initiatives are most needed. The companies have also been able to suggest initiatives in areas that are not on the list. The innovation actors have been asked to indicate where the need is greatest on a scale from 1 to 5, where 1 indicates no need and 5 indicate great need5. The overall result is that even though the framework conditions are considered to be rather good, there is a need for significant improvements in all the areas mentioned. The greatest need is better access to capital, where more than 60 per cent of companies say that there is a great or relatively great need for better access to capital. It is not surprising that most of the innovation actors want better access to capital. Most of the innovation actors are young companies in need of capital to develop the company and it is doubtful whether the existing sources of capital, the skills, experience and financial instruments are suited to arttech and the innovation actorsâ&#x20AC;&#x2122; specific needs. But improvements within the other framework conditions are also given a high priority. Over half of the innovation actors indicate that the need is either great or fairly great, see figure 9.

5 These results are based on the survey response. A closer analysis of the results will be conducted at a later point, investigating if there are differences in the responses from companies based on either the Danish and Swedish side of Ă&#x2DC;resund as well as if there are differences based on company size, age and professional profile etc

0% 20% 40% 60% 80% 100% Figure 9. Four framework conditions with the greatest need for improvements

Better access to risk capital Creative spaces with low rent Incubators, fablabs and accelerator programs Meeting places for talents and creative companies The presensce of deal makers, nodes and local heroes

Share of respondents indicating a great need (5 points) Share of respondents indicating a need (4 points)

Intelligent and innovative public demand and social experiments Branding of the creative communities (eg international creative events) Multidisciplinary training programs

Looking at the framework conditions in which innovation actors have indicated the greatest need (5 points) creative space with low rent has the second highest priority, but the differences in priorities between the highest prioritised is marginal. Also incubators and fablabs and meeting places are high priority areas. The result emphasizes that most arttech companies and innovation actors are dependent on the exchange of ideas with others and participation in joint projects and innovative collaborations, why they often cluster together in attractive urban space and creative environments, but they do not need expensive facilities - on the contrary, they are attracted to creative spaces with low rent. There is also a great need for meeting places where innovation actors can grow and develop their network, get new impressions and meet new actors, and incubators and fablabs where start-up companies have access to workshops and laboratories and where they can be with others in the same situation and get inspiration and advice to develop their company. 18

It may be surprising that more meeting places, incubators and fablabs etc. are prioritised highly considering the many places that are already established in the Ă&#x2DC;resund Region, but the need seems to be large, which is related to that it is in attractive urban spaces and creative meeting places that the dynamic layer of companies are based and seek nourishment. There is also a great need for actors who can create networks and connect companies with each other, make contact with funding sources and contact with customers and the global market. There are probably less of such dealmakers, nodes and local heroes in the Ă&#x2DC;resund Region than in the leading creative metropolises. Many innovators are therefore looking for more actors that can bring the community together and make contact with venture capitalists, business angels and clients. Three framework conditions appear to have a slightly lower priority, even though about half of the innovation actors see a great or fairly great room for improvement. They are innovative public institutions and social experimentation, branding of creative communities and international events, and multi-disciplinary training programs. It could be argued that such surveys will always result in a strong desire for improvement. Who does not want improvements if you do not have to bear the cost yourself? However, several similar studies have been made in other areas that show greater differences in assessing the need for better conditions. During the test of the questionnaire before it was distributed, the test subjects were asked to indicate the three framework conditions in which they found most in need of improvement. This prompted criticism when several test subjects claimed that there was just as great a need for improvement in more than three areas, why the questionnaire was adjusted.