How to design an innovation agency

A tendency to reproduce agency and program structures regardless of the circumstances can undermine the efficacy of new innovation agencies, argues a report released last month.

A failure to build in flexibility from the start and the difficulty of measuring success and attributing it to individual interventions are also key challenges, says British innovation charity Nesta.

It’s important to recognise the range of possible models for innovation agencies, they explain. Simply copying another jurisdiction’s system may not be a good idea, depending on your goals, budget and local circumstances, so thinking through goals and expectations is a necessary part of setting up a new authority.

The approach that will work best in a given country “will only be possible after a detailed mapping of the national innovation system”, argues the report, which is based on case studies of agencies that work to promote innovation in ten different countries.

Governments need to “be both ambitious and realistic” about what they want to achieve and acknowledge the creation of a new body is just one lever in a fast moving and unpredictable policy area.

And you need to give them space to work — innovation agencies require a considerable amount of autonomy and an ability to follow through on longer-term interventions if they are to respond to new needs and challenges well, thinks Nesta.

Priority setting is important. Agencies must find a balance between having strong priorities to drive efficient and effective spending and a need to respond to changing circumstances:

“An innovation agency that is working towards many different objectives at the same time will find it difficult to establish a clear sense of purpose and a coherent portfolio of programmes. Mission creep may also lead the agency to spread its resources too thinly and fail to deliver on any of its objectives. However, having a long-term vision of what success looks like should not prevent an innovation agency from experimenting with new approaches and quickly responding to new needs and opportunities within the innovation system.”

The authors identify four types of innovation agencies.

  • Market and System Fixers: seek to address failures in markets and networks that impede business innovation and investment in R&D, often without preference for specific technologies or sectors.
  • Industry Builders: focus on transforming an economy or creating new sources of economic competiveness by investing in the development of a set of new sectors or technologies.
  • Mission Drivers: aim to induce innovations that address major societal and economic challenges, often in policy areas of significant traditional R&D spending such as defence, energy, the environment or health.
  • System Optimisers: work towards ensuring continuous global competitiveness and creating more effective and enabling innovation systems by experimenting with different policy and programme mixes.

Based on a review of the case studies and literature, the report recommends public servants designing a new innovation agency should consider eight key questions:

  1. What is the specific problem that needs to be solved?
  2. Which types of beneficiary should the agency support to further its mission?
  3. How much autonomy does the agency require to design and deliver its mission?
  4. What resources does the agency need to deliver on its objectives?
  5. What kind of support should the agency provide?
  6. What geographic level should the agency work at?
  7. What systems and processes should be put in place to understand outcomes?
  8. How can the agency’s overall value be judged?

Innovation promotion is all about making an impact on the real world, of course — and measuring its effect is a vital part of knowing what works. The report recommends a mix of quantitative and qualitative assessment of interventions:

“Understanding and attributing impact to innovation agencies is particularly difficult, since they operate in uncertain and changing systems, make complex interventions, and aim to achieve outcomes that are inherently unpredictable. As such, measuring their impact needs to include quantitative assessments of their portfolios, but also involve judgements of the quality of their management, their ability to take (and learn from) strategic risks, and the skill with which they design and implement their programmes.”

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