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The King’s Fund, a UK health charity ran a scenario essay writing competition, which I entered. I didn’t win, but here is the link and of course congratulations to the winner: (winner, runner up and other scenarios, but not mine).

Below is a  version of my submitted scenario, revised and generalised to any care system. The scenario builds on the notion of service unbundling and draws on strong and weak signals of changes likely to impact health and social care perhaps to about 2035. The scenario is written as a retrospective view from the year 2047.

Unbundling 2035

Between 2016 and 2035, the way that people worked had substantially changed by widespread digitisation of information. Smart machines and robots had moved from doing physical work to being central to much cognitive work and which led to fundamental restructuring of the economy. By 2035, taxation was changing from taxing people to taxing the work done by devices, cognologies, and robots.

The fault lines between reality and expectations were starkly evident during the 2020s, as public investment in health and social care struggled to cope with the rapidly changing world. People were becoming accustomed to flexible access to personalised services that came to them and expected the same from care provision. Rising displeasure at service decline led to middle-class flight to alternatives with rising use of private medical insurance, progressively fracturing the social contract that legitimated publicly-funded care. Indeed, by 2028, 38% of the population used private care, with over 55% amongst Millennials.

Fearful health and social executives and worried Ministers of Health had reacted to these stresses by pulling the system even more tightly together, to protect jobs and avoid the failure of publicly-funded institutions.

This fed further public displeasure by the dominant middle-aged Millennials who challenged the traditional approaches to health and social care. In the United Kingdom, for instance, this unrest led to the 2028 Referendum on their tax-funded healthcare system, leading to the replacement of this system with social insurers and personal Social and Health Care Savings Accounts.

The process of changes in health and social care around the world has become known as Unbundling. This brief historical retrospective outlines three of the key components of that unbundling.

The 1st Unbundling: of knowledge and clinical work

Professional knowledge was affected by digital technologies which had unbundled knowledge from the expert. This changed how expert knowledge was organised, used and accessed; research institutions and knowledge-based organisations were the first to feel the changes, with librarians being one of the first professions to face obsolescence. Rising under-employment, particularly in traditional male-dominated occupations was still being absorbed by the economy.

Routine cognitive work and access to information and services was increasingly provided by cognologies (intelligent technologies) or personal agents as they were called. Widely used across society, they were embedded in clinical workflow from diagnosis to autonomous minimally invasive surgery. By this time, jobs with “assistant” in the title had generally disappeared from the care system, despite having been seen as an innovative response to workforce shortages through the late 20-teens. These jobs had turned out to be uninteresting, and being highly fragmented, required time-consuming supervision.

The benefits of precision medicine were substantial by this time, enabling earlier diagnosis and simpler and less invasive treatments. Theranostics, the merging of diagnosis and therapy, unbundled the linear care pathway and the associated clinical and support work. This also led to the unbundling of specialist clinical services, laboratory testing and imaging from monopoly supply by hospitals. Indeed, the last hospital was planned in 2025, but by the time it opened in 2033, was deemed obsolete.

The 2nd Unbundling: of financing and payment

The unbearable and unsustainable rise in health and social care costs necessitated better ways to align individual behaviours and preferences with long term health and well-being. Behavioural science had shown that people did not always act in their own best interests; this meant the care system needed people to have ‘skin in the game’, best done by monetising highly salient personal risks.

Existing social insurance systems which used co-payments were more progressive in this direction, while countries with tax-funded systems were forced to reassess the use of co-payments, and financial incentives. The Millennials, having replaced the baby-boomers as the primary demographic group, were prepared to trade-off equity for more direct access to care. It also became politically difficult to advance equity as a goal against the evidence of poorer health outcomes as comparisons with peer countries drove performance improvements.

The use of medical/social savings accounts was one way that gave individuals control of their own money and building on consumerist behaviour, this directly led to improved service quality and incentivised provider performance as they could no longer hide behind the protecting veil of public funding. The social insurers were able to leverage significant reforms through novel payment systems, and influence individual health behaviours through value-based (or evidence-based) insurance not possible under a taxation system.

The 3rd Unbundling: of organisations

With people used to having their preferences met through personalised arrangements, care was organised around flexible patterns of provision able to respond easily to new models of care. This replaced the “tightly coupled” organisational approach known in the early part of the 21st century as “integration”, which we know led to constrained patient pathways, and limited patient choices unable to evolve with social, clinical and technological changes.

The big-data tipping point is reckoned to have occurred around 2025. Because the various technologies and cognologies had become ambient in care environments they were invisible to patients, informal carers, and care professionals alike; this enabled the genesis of smaller and more diverse working environments.

By 2032, medical consultants were no-longer hospital-based, having become clinical care social organisations, with their cheaper, smaller, portable, networked and intelligent clinical resources. Other care professionals had followed suit. These clinical groupings accessed additional clinical expertise on as-needed basis (known as the “Hollywood” work model); this way of organising clinical expertise helped downsize and reshape the provision of care and met patient expectations for a plurality of care experiences.

It takes time to shift from the reliance on monopoly supply of care from hospitals in those countries that continued to pursue a state monopoly role in care provision. However, most repurposed themselves quite quickly as focused factories, while the more research-oriented specialised in accelerating the translation of research into daily use, helped along by the new research discovery tools and the deepening impact of systems biology which was making clinical trials obsolete.

Conclusion

This Unbundling arose as a product of the evolution of social attitudes, informed by the emerging technological possibilities of the day. The period from 2016 to 2025 was a critical time for all countries, exacerbated by shortages in the workforce coupled with economic difficulties and political instability.

Today, in 2047, we are well removed from those stresses that caused such great anxiety. We must marvel, though, at the courage of those who were prepared to build what today is a leaner, simpler and more plural system, removed from politicised finance and management decisions.

It is hard to imagine our familiar home-based theranostic pods emerging had this trajectory of events not happened. As our Gen-Zeds enter middle age, they will, in their turn, reshape today’s system.

Plus ça change, plus c’est la même chose.

27 December 2047

Note on the Scenario

This scenario is informed by strong and weak signals, including:

Ayers A, Miller K, Park J, Schwartz L, Antcliff R. The Hollywood model: leveraging the capabilities of freelance talent to advance innovation and reduce risk. Research-Technology Management. 2016 Sep 2;59(5):27–37.

Babraham Institute. The zero person biotech company. Drug Baron. http://drugbaron.com/the-zero-person-biotech-company/

Cook D, Thompson JE, Habermann EB, Visscher SL, Dearani JA, Roger VL, et al. From ‘Solution Shop’ Model to ‘Focused Factory’ in hospital surgery: increasing care value and predictability. Health Affairs. 2014 May 1;33(5):746–55.

Cullis P. The personalized medicine revolution: how diagnosing and treating disease are about to change forever. Greystone Books, 2015.

Does machine learning spell the end of the data scientist? Innovation Enterprise. https://channels.theinnovationenterprise.com/articles/does-machine-learning-spell-the-end-of-the-data-scientist

Eberstadt, N. Men without work. Templeton, 2016.

Europe’s robots to become ‘electronic persons’ under draft plan. Reuters. www.reuters.com/article/us-europe-robotics-lawmaking-idUSKCN0Z72AY

First 3D-printed drug just unveiled: welcome to the future of medicine. https://futurism.com/first-3d-printed-drug-just-unveiled-welcome-future-medicine/

Ford M. The rise of the robots: technology and the threat of mass unemployment. Basic Books, 2015.

Frey BC, Osborne MA. The future of employment: how susceptible are jobs to computerisation? Oxford Martin School, Oxford University, 2013.

Generation uphill. The Economist. www.economist.com/news/special-report/21688591-millennials-are-brainiest-best-educated-generation-ever-yet-their-elders-often [accessed December 2016]

Lakdawalla DN, Bhattacharya J, Goldman DP. Are the young becoming more disabled? Health Affairs, 23(1-2004):168-176.

Susskind R, Susskind D. The future of the professions: how technology will transform the work of human experts. Oxford UP, 2015.

Topol E. The creative destruction of medicine: how the digital revolution will create better health care. Basic Books, 2012.

With Samsung’s ‘Bio-Processor,’ wearable health tech is about to get weird. Motherboard. http://motherboard.vice.com/read/with-samsungs-bio-processor-wearable-health-tech-is-about-to-get-weird

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The UK government is releasing, over time, its review of the balance of competencies of EU legislation. Within the first 6 papers released is the one on Health, Review of the Balance of Competencies between the United Kingdom and the European Union: Health.

At minimum, these reviews provide a timely perspective on this balance of competencies, and provides a focus for further commentary. Other EU members states may find it useful to be reminded what this balance is. It is not always in the interests of the European project to look at all things taken together as it shows whether overall the claimed benefits are in fact there. But such policy review, if that is another way of talking about them, does draw a line in the sand against which to measure and assess changes in the future, and avoids the problem of the boiled frog syndrome, where small incremental changes are not noticed until it is too late.

Health is a funny subject for the EU as it is both inside and outside the European competency box, depending on how you define things. Countries can run their healthcare systems broadly as they wish, and maintain control of financing, but the European Court of Justice, in a variety of decisions, has defined the contours of that national control, as seen through the lens of the single market, and freedom of movement of goods and services in particular — both of which are agnostic with respect to health. It all depends whether you think of healthcare systems commercially or socially. That hospitals are socially beneficial but also commercial entities does not help, any more than drugs as goods flowing across EU borders, and so on.

The report concludes in the main that the balance is about right. There is little argument with the benefits of European action in medicines regulation, public health, tobacco, etc. Where the UK has a problem is with employment policy as it impacts the UK more generally and the National Health Service specifically. Different logic of the relationship between the employee and the workplace applies in the UK and this throws up a wide range of relevant issues.

The Working Time Directive is the elephant in the room here. The concerns are how the NHS structures clinical work, trains junior doctors, and generally organises itself to provide for continuity of care. Other countries, not just the European ones, have the same concerns about over-worked doctors. The heroic fictional doctors on television, who nap on couches and awake fully prepped to save patients is fantasy. Next time you’re in mid-Atlantic, be grateful your pilots got a good night’s sleep. The criticism of the WTD is more an indictment of the inability of the NHS and its massive provider infrastructure to put in place appropriate patient management systems that ensure a sensible balance of workload and rest. But the Health Paper makes the point that the European Court’s judgements have actually further constrained operational flexibily within the NHS. While the paper notes that the NHS operates on a 24 hour system, it actually doesn’t as it isn’t fully staffed on weekends, and many services operate within a traditional working hour day (e.g. laboratories, imaging). Much of this arises from the politically influenced structure of the NHS which has made it very difficult for alternative providers to enter the healthcare market in the UK, and thus offer relevant services, whether day-case surgery, or imaging, at times more convenient to patients. However, other countries in Europe appear able to manage demand and service provision more easily, so one much wonder why the NHS problems of their own doing.

The other area that exercises the NHS is free movement of patients. Medical tourism is a big issue in the UK, as its health system is based on residency. Social insurance systems have built often formidable barriers to gaining healthcare cover because they generally link the insurability with the workplace. Self-employed individuals are frequently disenfranchised from full benefits, and often pay disproportionately. Retired people continue to need insurance. But an insurance system does make cross-border transactions much easier. The UK has not really understand the operational dimension of the differences for UK taxpayers moving within Europe. The Limosa Convention is not mentioned in the briefing, while the European Health Insurance Card is. The EHIC is only really for tourists and retired people and the paper promotes the benefits of them. However, the EHIC is not for people temporarily located in another country for employment or work purposes.  They do not refer to the bureaucratic overhang of the A1 and S1 forms needed for people working in other EU countries and the forum-shopping associated with it as countries seek to get ‘the other country’ to pay the bills. I wonder how many people realise they need an S1 to run a seminar in another country as this is defined as work, or that working from home and living in country A while your office is in country B could be a bureaucratic nightmare. The report is silent here.

Just about every country has identified life sciences in some form or other as a priority for academic and commercial development. But what will characterise the countries that may in the end prevail?

  1. The research community needs a high degree of autonomy. The European University Association released an interesting study,
    Ireland's Highest Peak

    The rigidity and frigidty of state controls. (Photo credit: mozzercork)

    University Autonomy in Europe II: the Scorecard, in 2011, assessing the degree of institutional autonomy universities in the various EU member states enjoyed. The countries with the greatest university autonomy were from northern Europe: Denmark, Ireland, UK, Finland, Sweden Latvia, Lithuania. Those with highly regulated and state controlled systems were from southern Europe, or had systems where the state just likes to intrude: France, Luxembourg, Greece, Italy and others. To be fair, some countries were more or less autnomous on different indicators, but the rough distinction can be drawn. Surprisingly, at least to me, was the middling performance of countries like the Netherlands, Austria and Germany. No doubt various higher control states will endeavour to justify why the state needs to be so intrusive, but as evidence that this is perhaps an unhealthy state of affairs, we see the highly instrusive French state over the past year moving to create greater diversity and differentiation in funding for its universities with greater autonomy (see this news item for instance). Clearly, greater autonomy necessitates greater diversity and differentiation and in the end some will need to become better than others. While we would like to think that all universities are essentially the same, reality suggests that the only real equality lies in the extent to which they all meet minimum standards, rather than all trying to meet some arbitrary ‘gold standard’.

  2. The bulk of significant research results in life sciences is undertaken in centres known as academic health science centres (AHSC). This is a theme I warm too, as it provides an organisational model that drives innovation from the clinical user end, rather than from the research end. Yes, more research funds are always needed, but we also need solutions. Efforts to operationalise translational medicine are doomed to fail if the driving forces are not coupled to the clinical user and innovation policies in general need to start with problems needing solutions, and hence a factor more likely to be evidenced. Only a few countries have AHSCs — such as US (over 50), Canada (about 14), Sweden (1), Belgium (1), Netherlands (8) and the UK (5). (Note: reforms in the UK look set to expand the AHSC model into networks) Germany arguably has at least one as does Italy. France has none. The challenge (and this was the subject of a paper I presented on academic health science centres and entrepreneurialism) is that while universities are more likely to enjoy degrees of autonomy, hospitals are less likely to. The UK was only able to move toward establishment of AHSCs when the state control of the hospitals was relaxed through successive periods of NHS reform. The Netherlands model built on existing relationships. Countries without AHSCs, though, will confront the twin challenge of institutional autonomy of both universities and hospitals.
  3. Not all countries will be able to do everything in life sciences. This entails setting some priorities. National priorities are hard to conceive, because countries usually think of themselves as being able to do everything and so efforts for instance, get diluted and underperform. Cash is tight these days (think debt) and governments just cannot afford everything, so the most difficult challenge is establishing priorities.  There are ways to set research and innovation priorities (I’ve developed some approaches if there is interest), and they help deal with the challenge of deciding where to start. Not all research produces winners, but the state is really bad at picking winners. When it tries to pick winners (aka, national champions), state and political interests dominate over reality; the result is an expensive mistake, and we all know hubris keeps politicians from changing their minds — as it would evidence of having make a mistake.

There is a clutch of small states within the European Union. There are many more small states outside the EU.

TAMPA, FL - JULY 13:  John Winskas, a student ...

Small states? (Image credit: Getty Images via @daylife)

Much can be learned from them, as at least within the EU, some seem more robustly managed and economic productive than their larger debt-laden counterparts.

Healthcare systems are often seen as requiring some degree of economy of scale. This in part is a function of how prevalent diseases are, such that in some small countries they would have one case in 2 years, rather than one case per million of population. Healthcare technologies can be incredibly pricey; for instance, a proton therapy facility will run between €100 and €200 million to set up. Healthcare buildings and research infrastructure are expensive to build and run. Health professionals can be expensive to train and employ and are generally globally mobile.

Associated with investment in healthcare within the EU, we find that almost every region or member state has life sciences, in some form, in their top 5 or so areas of national priority. Life sciences is challenging and demanding, and requires high degrees of global visibility and connectivity to other researchers. Commercialisation of life sciences in Europe is generally appalling; the EU’s research budget focuses on research, not translation and there is precious little to help good ideas bridge the ‘valley of death’ where unfunded good ideas go to die. Financing for life sciences developments consume vast quantities of risk capital, some of which will be unlikely to return any value for a decade or more.

Many EU countries try to avoid downside risks of failure by punishing it, rather than creating opportunities to learn. Countries that encourage risk taking, and make it easy to start and close down companies, with associated flexible labour practices, will outstrip protectionist fearful countries. While many countries fear unemployment, they fail to encourage job creation, which is an economies way of moving work around. Life sciences is one such area that requires particular flexibility owing to the nature of the work.

I recently had the privilege of working with colleagues in one of the EU’s small states, to help develop a life science strategy. National excitement included the construction of a new bioscience research and commercialisation centre (partly funded by the EU, thanks for that). The University is active across its faculties in life sciences areans, and with the College are both keenly extensively in high quality training of health professionals. Local industry is building on past successes in life sciences. The country has a well-developed and well-financed healthcare system.

The main lesson to small countries building life science (or any research-based commercial capacity for that matter) is that setting priorities is more important the smaller you are, as you can’t do everything. That means that some people may be disappointed that they are not on the short list of first projects. It means, too, that infrastructure projects are precious, as they are enablers of future potential — the longer term vision must be sustainable, as getting it wrong can be expensive — research buildings don’t make very good hotels.

Some thoughts:

  1. build on what you already are doing well as that is evidence you have the expertise, networks and working practices in place
  2. keep in mind that life sciences is much, much more than drugs; progress may be quicker in other areas, such as informatics, telecommunications, engineering, materials science, physics, chemistry, agriculture, etc.
  3. you can’t sensibly do life sciences with a weak university, so this may entail some difficult and hard rethinking of priorities and some sensible review of research productivity
  4. you can’t sensibly do life sciences without a teaching hospital; the academic health science centres in the US account for over 80% of productive life sciences research, so think about reorganising your own infrastructure to enable closer collaborations and alignment between university and hospital; this may, by the way, raise real issues for government if the teaching hospital(s) is state run
  5. you can’t sensibly do life sciences without understanding the logic of ‘bench to bedside’; productive work lies in translational research and solving clinical problems; this can challenge academe, which rewards the production of papers and volume of research funding for career progression; in life sciences, solving problems is paramount; understand what the Grand Challenges in life sciences are and see which one(s) you can focus on
  6. you’ll need to consider the economic developments that come with building a life sciences sector as you’ll need to energise high net worth individuals as angel investors to help start and run the small businesses that you’ll create; I’d discourage too much public sector hiring as it disincentivises university graduates from pursuing entrepreneurial careers (there is good global evidence that this can be a problem, so don’t make that mistake); best role for government is ensuring a flexible corporate start-up environment, a non-punitive bankruptcy regime, sensible taxation of start-ups, and seed funding; it might also be a good idea to give away all that publicly owned intellectual property;
  7. finally, the good news is that size doesn’t matter for innovation; there is no correlation between the size of a country and the ability of the country to innovate; many very large countries have clumsy policies that disincentivise and frustrate.

I wrote a paper looking more generally at healthcare systems of small countries (which includes a few remarks on life sciences). Paper on Overview of Small Health Systems

If these issues stir you to think more about life sciences and / or the challenges of smaller states, do make a comment.

The Academic Health Science Centre undertakes three important missions:

  • they treat patients

  • they conduct research

  • they teach the next generation of clinicians

The AHSC model, as a structured and integrated organisational form, is most developed in the US, Canada, Netherlands, UK, Sweden and a few others, and emergent in other countries.

They are a distinct and probably unique type of organisation, quite expensive to run (annual revenue streams on the order of €2 billion or more), very complex and home to a diversity of stakeholders. Often, AHSCs are thought of simply as teaching hospitals in a loose affiliation with universities but this underpowers their role.

The AHSC represents the most robust model of an institution that could be seen as sitting at the nexus of innovation and entrepreneurialism in health sciences. They essentially own the challenges facing us in the biomedical and treatment arenas, and have access to, or indeed may own, their own research capacity to solve those problems – they can be seen as both producer of new knowledge and consumer of it. And through their role in the intergenerational transfer of knowledge (i.e. teaching), they can influence future priorities, and clinical treatment practices within healthcare systems. As large and potentially well connected organisations, they have the potential to access considerable sums of start up capital, and spin-out a variety of new companies.

Not all teaching hospitals have the capacity to be an AHSC. Not all universities become an AHSC simply by linking their medical schools to a hospital, anymore than simply bolting on some labs to a hospital creates productive research capacity.

Virtually all countries, and regional economies, prioritise biomedical research probably within at least their top 5 areas of investment – despite frequently have significant deficiencies. While thinking that an AHSCs may be seen as the best local solution, local capacity can be lacking or weak. A critical worry is that AHSCs will be created from small, dysfunctional, and poorly performing institutions into large dysfunctional and poorly performing institutions, wasting public money, frustrating researchers and would-be entrepreneurs, weakening treatment capacity, and failing to deliver the innovations.

Internationally, AHSCs should be seen as sitting at the top of the healthcare pyramid, providing care from the simplest up to the most complex, and with unique expertise. While challenging to national/regional innovation strategies (which are often parochial in perspective), AHSCs should be at the forefront of international collaborations and integral to globalisation of knowledge transfer and evidence-based care.

Therefore, creating an AHSC as a driver of innovation and home to entrepreneur is not to be undertaken lightly.

One aspect of the AHSC that is particularly important to conceptualise and operationalise effectively is how they commercialise their intellectual property as a result of being both owners of problems, and creators of solutions to these problems. Risks here include inappropriate de-risking of research, premature efforts at commercialisation, confusion over ownership of the work itself, and conflict between institutional components on the methods to choose. These all track back into the AHSC itself, and how it is governed and how the executive suite and board, decide what can and cannot be done, or done well.

The paper draws on the author’s professional experience of working in an AHSC, working with an AHSC in thinking through their commercialisation strategy, and comparative policy research on commercialisation of research and strategies.

What is an Academic Health Science Centre?

AHSCs come in many forms. Understanding why particular arrangements are needed is important to ensuring that AHSCs are not created out of poorly performing component institutions. They are not simply an aggregation logic for pooling knowledge and capabilities. AHSCs can be vertically integrated providers through to a confederation of autonomous institutions. In some countries, the structure of AHSCs is accredited, mandated or otherwise designated, while in others, they emerge as a logical and rational solution to various research/ treatment/ teaching challenges. In addition, AHSCs also form networks for further collaboration.

Depending on national funding systems in higher education and in healthcare, AHSCs may have to deal with a large number of government ministries or agencies (in addition to health and higher education: social/community care, research councils, labour, industry/commerce ) which may be at differing levels in government (national/federal, state, local) as well as charitable and international sources. With this comes a diversity of public supervisory and oversight arrangements, which unsurprisingly may conflict on a number of levels: research priorities, service delivery objectives, degrees of institutional autonomy, and not to ignore the diversity of political interest which may complicate this further.

And within this mix, the challenge of coordination looms very large, to accommodate the autonomy of constituent parts, public accountability and institutional mission.

How should AHSCs organise themselves to conduct research and development for commercialisation?

AHSCs should be understood as accelerators of innovation. In virtue of owning the problems, they can disseminate new practices, enhance the evidence base for treatment options, and alter the very structure of service delivery itself.

Therefore, a critical issue for an AHSC is how they go about commercialisation, that is, operationalising the acceleration and dissemination of innovation and how they enable the entrepreneurial nature of researchers.

Particular challenges arise when higher educational institutions and healthcare organisations are state owned and run, with the result that staff (academics and researchers) are public employees or civil servants. This has the potential to create difficulties for individuals who may wish to be entrepreneurial yet retain their relationship to those issues which sparked the innovation in the first place.

Problems in this area have been raised by the French government with respect to the visibility and commercialisation of national research from state-owned laboratories and from the universities themselves. Institutional restrictions on commercialisation can create conflicts as in the UK where the universities pursue one approach while NHS hospitals use NHS/Department of Health commercialisation strategies.

External sources of seed capital are faced with constructing sensible funding arrangements in this environment. This has led institutions such as Karolinska in Sweden or Imperial Innovations in the UK to create an entrepreneurial subsidiary to deal with the commercialisation process. We are a long way from simple technology transfer here.

What are implications for policy: on research, on commercialisation and on higher education?

At some level, AHSCs are ill-defined in the European context, what their characteristics are, how they are organised and perform. Sensible investigation is needed to identify the performance, role and function of AHSCs in Europe, and to understand whether they are in fact a nexus of innovation or a quagmire of bureaucratic interference.

We need lessons and cases to draw on to understand how to structure appropriate innovation policies that may require the formation of high performing AHSCs that can be breeders of entrepreneurs. We also need to think beyond biomedical research as the potential scope of AHSCs includes innovations in systems and ways of working, health information technology and software, medical devices and not just medicines and so on. This nexus of innovation is very broad.

As someone who sees the challenge of AHSCs through both the institutional as well as policy lens, some key areas of priority are implicated and which are presented as conclusions:

  • Funding of AHSCs is not quite the same as funding the constituent parts, so national policies need to be harmonised if AHSCs are to become effective accelerators of innovation and enablers of entrepreneurs. This will raise coordination challenges for governments as the incentives they deploy may come from different pots of money with differing purposes.

  • Institutional design is important and only suitably high performing institutions should comprise an AHSC; this has implications for whether a national accreditation system should be used (England), or policies and initiatives to advance the role of AHSCs (Canada).

  • Commercialisation design is important and plays to national policies on public ownership of publicly funded research, whether state-owned research infrastructure should be disposed off to non-state ownership, with corresponding implications for the employment status of entrepreneurs. National taxation and entrepreneurial policies can be remarkably short-sighted and counter-productive; we really need to understand how bad some national legal frameworks are, and how good others are. AHSCs will be embedded in these legal frameworks, so how productive they can be is linked.

  • We really need to understand how national policies can encourage the introduction of high performing AHSCs where none exist, or prune the numbers of AHSCs if they have proliferated without also achieving high levels of (international) recognition and performance, or enable existing AHSCs to be real drivers of innovation.

NOTE:

Presented at the 2012 Entrepreneuriship conference in Maastricht in March 2012: see here for more details.

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Euractiv is reporting some concerns that there will be a decrease in research spending in the EU. The article is here.

According to the survey that triggered the anxiety, some 93% of those surveyed said that “investing in innovation is one of the best ways

Innovation

Innovation can also be quite mundane, it all depends on what problem you're trying to solve (Photo credit: Stephanie Booth)

to create jobs in Europe.” This is absolutely right! However, investing in innovation is not the same thing as spending more on research.

There are two, broad schools of thought here. The first sees spending money on research, translating into innovation. The other is that innovation occurs when real-world problems are solved. The EU and most EU member states have pursued the first approach; the problem of job creation is pursued through the second approach. The evidence on job creation might suggest that the first approach is not working.

Spending more on research is not, in itself a bad thing. However, the quality of the research has to be good, results disseminated and academic researchers held to account for their work. I am not a big fan of state-run or controlled higher education, and less a fan of protected job status for academics. According to this model, more research literally pushes innovations into the market where hungry investors snap these great ideas up and go off start companies and hire people. And so it goes. This approach does not generally work. It is called the ‘research push’ model, and is faced with the tremendously difficult challenge of research translation, that is, of linking the research through various arrangements to people who can create innovations from the research. Research, itself, is not an innovation; it only becomes an innovation when it becomes useful.  [see Michael Gibbons et al The New Production of Knowledge”, Sage 1994 on the distinction between ‘use-less’ and ‘use-full’ knowledge]

The other model involves innovation emerging in markets, which have needs and which investors, inventors and others are encouraged to respond to. This is called the ‘adoption pull’ model, as it focuses on how markets (that’s you and me needing something and buying it) adopt innovations which respond to our requirements. The value of any research is precisely in the context of whether it feeds this innovation or adoption pull. The research translation process here is about identifying knowledge needs that research can fill, and which in turn can be converted into innovations that people will want and value.

The key distinction is that the needs of academic researchers, to do research, solve problems, learn new things, etc., is not the same thing as the needs people have for innovations. Research commercialisation by European universities is generally very poor, and particularly so in countries which operate the research welfare state. They also have poor access to risk capital, burdensome public ownership of publicly funded research (as though no one learned anything from the role of Bayh-Dole in the United States, or hadn’t gone back to the 1940s and read Vannevar Bush) and generally complex labour market rules which frustrate businesses startups (for those who wonder why this is important, a business start-up is something new, creates employment, is risky, but is where all large companies start from. How they get to become big is not just a function of their products and innovation, but the flexibility by which they can grow, and that is often a function of the perverse impact of national bureaucracies.)

Spending more on research won’t address the development of innovation or create jobs as such. Spending more on research will of course expand the research system, and possibly expand the research welfare state.  I am not ignoring the real challenge of what proportion of research funding should be for pure or curiosity research and which should be mission directed (or linked to Grand Challenges, which are proving such an effective way to align researchers’ interests with compelling real-world challenges.

If you want innovation to create jobs, as apparently 93% of people surveyed want, then you want different things from just more research spending; you need things that in Europe and particularly in some Eurozone countries are proving particularly hard to do, namely:

  1. You need a risk culture where it is easy to start companies, try out new things, and if they don’t work, start again; but many countries penalise innovators who go bankrupt, for instance, while other countries load small start ups with massive social costs, inflexible labour rules, so the company can hardly get going for the tax-burden.
  2. You need an environment which encourages adoption of research findings; perhaps better, you need the academic institutions to be more proactive in encouraging entrepreneurialism amongst academics. Secure employment contracts that restrict freedom to explore alternatives are not help. Key concepts here are: flexible academic employment contracts, real-world incentives within universities to encourage a career focus on problems as well as new knowledge.

Of course, this list can go on. The key message is that equating research spending with innovation investment is a broken paradigm that should be quickly abandoned.

Want to know more?

Well there is a lot out there. I’m going to recommend these for starters:

Roger Miller and Marcel Cote, Innovation Reinvented: six games that drive innovation. University of Toronto Press, 2012.

An older book that is worth a read about companies and innovation (remember that the SME is the engine of job creation, not the public sector) is this one:

Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge-creating Company: how Japanese companies create the dynamics of innovation, Oxford University Press, 1995.

And because this blog is about healthcare, everyone must be mindful that research and innovation in healthcare, as in other sectors, can be highly disruptive (this creates unemployment and new jobs at the same time and may even bend the cost curve down), I’m suggesting a read of this new book:

Eric Topol, The Creative Destruction of Medicine: how the digital revolution will create better healthcare, Basic Books, 2012.

 

 

Dead End - mid

Is this the way to the future? (Photo credit: bennylin0724)

The World Economic Forum meeting in Vienna this week will be grappling with the challenging problem of European innovation. The evidence is suggesting that rather than leading the world, Europe is worryingly backsliding. Worse, of course, is the public rhetoric is not backed up by actual real-world action by governments, who persist in the old ways. This has produced the current complex mix of disincentives for risk-takers with governments fearful of the disruptive impact of innovation on European preferences (ranging from employment to lifestyle), coupled with frequently ineffective and unreformed public sector organisations. This has been admirably addressed, too, in the WEF report on the future of government.

Rather than FAST government (flatter, agile, streamlined, tech-enabled) as the WEF calls for, we find hierarchical and bureaucratic, slow and sluggish, complex and unreformed, tech-naive government — these are hardly attributes needed if the public sector is to play a role in public/private partnerships to drive forward innovation. Our innovation culture instead gets:

  • social costs that burden small and medium businesses with a disproportionate share of social costs, which kill off risk takers because they can’t even afford the first day of business; this includes unreasonable start-up capital requirements (1€ should be enough), pointless company start up procedures, wrong-head bankruptcy laws, and inflexible employment laws;
  • unreformed central governments, which absorb productive capacity , require very high levels of tax funding to support, and which generate administrative and regulatory red-tape to little end other than to control;
  • public ownership of intellectual property as the default position for publicly funded research, coupled with the poor commercialisation record of state-owned research infrastructure, leading to hoarding of innovations within bureaucracies, and not accessible to risk-takers;
  • weak academic performance amongst the universities, with little competitive forces within academe to encourage researchers to move outside the university to become entrepreneurs, or to work with investors to generate new ventures, as it frequently jeopardises public sector employment contracts as in many countries academics are civil servants (that is itself is undesirable) — there are very few world-class European universities, based on recent global rankings.

I have some experience here, and while governments value stability in their civil services, what they often get instead is classic ‘rent-seeking’ behaviour, whereby civil servants seek to monopolise whole areas of the economy, ranging from failing to control regulatory creep, to governments having all sorts of pre-emptions rights over private arrangements. This latter point is particularly concerning when it comes to pre-emption rights over intellectual property created with public funds — as the Commission has noted, Europe badly needs its equivalent of the US’s Bayh-Dole Act.

I put my money in a few areas, not just because I know a little about them, but because they have the benefit of driving wider benefits — they act like breeders for other innovations, as well as magnets for innovations developed in other areas:

  • health technologies, including life sciences, devices, new materials, nano-tech, imaging, remote monitoring;
  • information technologies, including the internet (many governments are fearful of the disruptive influence of the internet);
  • new media as the convergence of technological delivery systems (potentially disruptive and problematic when the state is an owner of media).

There are no thousand kilo gorillas in Europe because Europe’s governments have become authoritarians that fear disruptive innovation that may challenge deeply held beliefs and challenge the European model. This is the type of pride that goes before a fall.  So, action is needed in at least four areas:

  • liberating the investment climate to encourage a higher tolerance of risk and acceptance that higher risks should lead to higher rewards, which has implications for taxation, capital gains/losses and bankruptcy;
  • liberating labour markets, to incentivise business to create experimental forms of employment, whereby firms in acknowledged startup situations can have greater flexibility retaining and rewarding staff without being confronted with first euro social costs and minimum wage regimes;
  • understanding the tremendously heavy burden unreformed government and excessively zealous taxation has on entrepreneurs and the need to liberate the entrepreneurial system from official structures as much as possible; this also means that government needs to understand what it can and should do (and of course what it shouldn’t do);
  • placing publicly funded intellectual property on the open market — I would suggest even creating an auction market for publicly funded IP.

The European Innovation Road is not a paved autobahn; it is full of holes, and in some places just goes over a cliff, but it has the potential to be a superhighway if we get the fundamentals right.

Uncertainty can never be removed from the innovation process. We shouldn’t act as though it can.

Want to know more?

Just searching on the internet will produce an avalanche of information. Regretfully, much academic research is still published in journals that are not open access which means accessing them requires either a subscription or the payment of a fee, despite the vast majority of this work having been publicly funded. These articles are not listed. However, authors of papers who would like to have their papers listed here, and provide a pdf for download are encouraged to provide a paper for listing here.

Also consider:

Martin Fransman, The New ICT Ecosystem: implications for Europe (Kokoro, 2007) presents a thoughful policy framework.

Anything by Annalee Saxenian, but her The New Argonauts: regional advantage in a global economy (Harvard 2006) is worth reading in the context of European regional development.

Josh Lerner, Boulevard of Broken Dreams: why public efforts to boost entrepreneurialism have venture capital have failed, and what to do about it (Princeton, 2009) offers a research-based critique of the role of government and why for every dollar/euro/pound government puts into commercialisation of research, the private sector takes one out.

The new report from NESTA, Atlantic Drift [here] is worth reading for its US/UK investment comparisons with important insights for other countries.  It is authored by Josh Lerner, Yannis Pierrakis, Liam Collins and Albert Bravo Biosca.

Lawton Burns, The Business of Healthcare Innovation (Cambridge, 2005), explains important innovation drivers in healthcare, which offers some thoughts on how Europe can succeed here, despite widespread government control of healthcare systems. It is worth noting that virtually all EU countries and their regions have prioritised biotechnology/healthcare/life sciences in at least their top 5 areas.

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