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In this Age of Austerity, good ideas risk being lost. The dynamics of funding of innovations has always been full of risk. But as various debt-laden governments try to balance bloated public balance sheets, should we worry about where the ‘next big thing’ will come from? Yes, if you believe that governments can find and fund winners (the evidence says they can’t by the way, but can act as catalyst or midwife), no if you believe that the wisdom of crowds, otherwise known as markets, might be a useful driver of innovation development and adoption.

The diagram below summarises the funding of innovation, identifying in particular the so-called ‘valley of death’ where good and bad ideas go to die for lack of funding. The risk we, as taxpayers, face is that governments will continue to fund innovations into the valley of death, perpetuating what I call the ‘research funding welfare state’, where research happens, but innovations don’t. Hyperactive civil servants with indelible portfolios will continue to pursue dead-end projects despite evidence that the world has moved on. The real problem for governments isn’t finding money for funding research (though that is hard enough), but realising a simple algorithm:

  1. the world is characterised by change
  2. the world will change faster than our ability to respond
  3. this will not change.

Europe has a shortage of innovation gorillas compared to other countries, and if the politics of some countries are to be believed, would rather retreat into a safe haven of social solidarity and protected interest groups, than face the harsh realities of the modern world. This Fortress mentality will not keep the disruptive wolf from the door and will only add to domestic turmoil as native talent packs up and leaves for more encouraging countries.

The harsh reality of innovation is that it can be violent, overthrow trusted ways of doing things, and challenge what may be thought of as defining cultural norms and social innovation is just as much part of innovation as the inventions themselves. The other true thing about innovation is that it knows no favoured nation or culture — anyone and any country can do this.

Find the risk

Mike recently chaired an event for UK companies to explore the opportunities for health information technology companies in Canada. Sponsored by UK Trade and Investment, GLE London, and the Canadian High Commission, the event attracted a group of firms with expertise in this sector, to hear presentations from EMIS and RIM and also learn about R&D tax credits, FP7 opportunities and partnering opportunities that are often not exploited.

Opportunities abound in Canada as it seeks to enhance the uptake of information technology in healthcare. Canadian physicians have a low adoption rate of office-based clinical systems, while connectivity between hospitals and primary care is not well developed. The focus in Canada has seen public investment, mainly linked to InfoWay, being poured into hospitals systems, with very little actually where the bulk of clinical encounters occur, namely in primary care. Slow adoption of electronic prescribing systems, coupled with often weak and poorly defined provincial electronic health record implementation strategies suggest that market entry opportunities lie in bringing order out of chaos and demonstrating clear benefits for clinician adoption.  The companies attending this event had that experience and could bring this level of structure to the market.

The partitioning of health markets into provincial systems means market entry strategies must pay particular attention to provincial characteristics and objectives, and incentives, such as tax credits, but also links to provincial infrastructure and innovation opportunities. There are pros and cons to each provincial system from a market entry strategy where the Alberta system has clearly centralised to Ontario with a purchaser/provider split and major reform underway in Quebec. There are also opportunities in specific market segments such as military health, prison health, workplace health and aboriginal health, which are frequently ignored as firms tend to focus on the publicly funded system as a whole and ignore these specific areas of opportunity and which offer market entry. Working with smaller Maritime provinces for instance offers scalable opportunities.

In addition, Canada’s position next to the US offers firms access through NAFTA, to take advantage of the huge stimulus in healthcare technology that is linked to health reform in the US; providers are early adopters and invest in technologies, including clinical systems so there are market-based opportunities around, for instance, clinical decision-support systems.

My own presentation focused on the opportunities working with Canadian academic health science centres [AHSC], which anchor provincial specialist service delivery, research and professional training. Since they combine research, teaching and service delivery, they offer partnering opportunities across a wide range of areas, and have sufficient commercial freedom to engage in alpha or beta partnering as well co-investment with start-ups. While many are still tied to the traditional technology transfer or licensing model, other ways of structuring deals are available.  They are valuable sources of new technologies for early stage investment, and with a relatively small early stage health investment community, the AHSCs are always looking for new people to have commercial discussions with. There is considerable interest by the federal government to ensure that early stage firms do stay in Canada so jobs and opportunities stay domestic, rather than being exported mainly to the US. But risk aversion and apparent shortage of second round financing sees many firms find their future with US investors. The removal, though, of disincentives in the income tax act which made life overly complicated for investors (similar to disincentives used in Australia) by the current government may encourage investors to feel more relaxed about the income tax regime.