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6 February 2018

From Garages to Science Parks: Origins of Ukrainian Innovations

Dmytro Yeriomin

The Managing Partner of UNIT.city Innovation Park

"Market winners emerge from players learning the way to combine fundamental researches with business, and build a sustainable system on such basis. Once this gap between the foundation and business components is eliminated, only then we’ll have our competitive products."

Republished from  LIGA.net

Why business makes the agenda of innovations implementation, and how it can be used for the benefit of the state

Innovations are quality changes. If something enhances sustainability of a system, it offers better opportunities for such system. For instance, if we change the quality parameters of our defence industry, we thereby decrease the probability of our soldiers’ deaths.

Everyone seems to perceive it, but as far as the issue of responsibility is raised, all play the blame game and point fingers at others. Therefore, first of all, we have to fundamentally solve the issue of innovations support: should the lead be taken by the business or by the state? I’m sure that the business should be the flagship. When the business determines a certain direction, the state may either support it or make no obstacles, and no other option is possible.

No matter how simplistic it may sound, but Ukraine needs to follow the direction towards import substitution innovations, when everyone in our country will have the opportunity to give preference to the renowned principle of buying things made in Ukraine. So far, we keep on selling tanks which are not deployed by the Ukrainian Army. Can you explain to a prudent person that we have no money to provide our army with our own tanks? I can say one thing for sure – I’d forbid purchasing of arms that are not used by the army of the manufacturing country.

Import substitution is our trend for the forthcoming decade. It will be the foundation of our own further developments.

We are learning to develop innovations alongside our restrictions. In Ukraine, such restrictions are largely attributable to the lacking system of developments commercialisation in the former Soviet Union. In other countries, such system was clearly formed.

For instance, in the USA, any research institute, group or an individual having the required professional skills may attempt to offer a solution for the Department of Defense (expect for secret developments). After presentation of the concept or the initial stage of promising technology development (the acceleration program, as a matter of fact), the researcher is awarded a grant. The deadline is clearly fixed. A representative of the Department of Defense quarterly arrives for controlling purposes. The decision of further cooperation is taken based on the representative’s report. If a technology emerges, the state wouldn’t commercialise it, but rather engage a corporation that may do it within the shortest time limit. As a result, the author receives the interest, the corporation gets the product for further sale, and the state has the product ordered by it. Everyone is happy.

We have no such mechanism on the state level. However, the open market is developing and offers various solutions.

Ukraine should implement the business component in all processes of technology development. Talking about the defence industry, state-run companies are majorly engaged here. They may be assisted by private companies accelerating operation of technology teams to create innovative products, for instance, the Innovation Development Platform, i.e. the agency specialising in commercialisation of military developments. However, the primary focus should be placed on the technologies that may be commercialised in domestic and international markets with the minimum resources spent. There is no need to develop the direction from the ground up, we’d better first identify our strengths and support them.

Many people question which influence tax remissions have on development of innovations. For sure, their influence is favourable, significant and needed! However, tax remissions are an international market tool of competing for resources between corporations looking for better places of their business penetration, whereas innovations require another critical factor. If we look at the Middle East countries having major tax remissions and resources, we may see that creation of the environment is the foundation of innovations. With understanding of their environment problem, the Middle East countries largely invest in the existing environment.

We cannot compete with the USA in commercialisation, since they discern emerging demands faster, and they have a larger market. Thus, we can add on the elements of our strengths. For instance, in data protection, we have powerful outsourcing with a robust fundamental basis. It’s all about our "cheap guys" (conventionally cheap, if compared with the up-market). We a strong agricultural sector – even in UNO’s land development reports, Ukraine is a separate list item. Why don’t we make use of the advantages?

For historical reason, Ukraine has had strength in hardware. Based on hardware developments, software packages, as a integral element of any modern system, will be created as add-ons. For instance, in the defence industry, such scenario will be adopted for objective reasons. Once hardware is designed, we’ll have to add our own software. Hardware is the primary element, and software is the secondary element in our environment. Such situation is due to weak competences in software commercialisation. Ukraine is among global leaders in the outsourcing market, while we trail far behind others in product markets.

It should be borne in mind that real money is generated by a product rather than outsourcing, which is only a part of pricing.

Our next stage is the attempt aimed at creation of the Ukrainian product.

Presently, the majority of such products (with some exceptions) are local copies of the global market products. By the example of Uber, taxi services are emerging in our country. Following the example of Facebook, our local social networks are created. In other words, we try to peep and replicate. At the next stage, many of such businesses just wait to be purchased by a global player. We have to learn seeing and feeling of the product demanded by the global market.

The Government should identify the industries that require the least resource to get the promptest results. By way of example, let’s look at our Academy of Sciences. The National Academy of Sciences of Ukraine has a host of bright brains, but, to tell the truth, nobody knows the right way to use them for the benefit of the state. It’s like a suitcase with no handle – everyone perceives that something valuable is inside, but none knows what it is exactly. So, the suitcase is just stored.

We have a major problem of professionals aging from science, and, within several forthcoming years, we may loose the fundamental basis that has been formed for decades. A researcher would leave the native country, if he or she has no opportunity to fulfil the own potential. Why is there no such opportunity? Because of the lack of money. In our governmental paradigm, moneys for researches are to be allotted from the state budget. And the budget is empty, since we have no developing companies. It’s a vicious circle.

Without a favourable environment for implementation, a technology would be lost. If the business makes an order, the state should bring about the statutory conditions to implement the relevant technology. It would be the only – and far from cost-intensive – part of the state. Thereby, the business shows a problem, and the state would give its support, and bring it to the required level.

Besides, we’d rather forget the fables about start-ups that emerged from garages. Such ‘romance’ belongs to the past and gives up in favour of developed environments with the right infrastructure, community, links and growth programs. Innovation parks have all of these features. Here, we and UNIT.city pioneered in Ukraine. With time, such parks will be numerous in the country, and we, objectively, welcome such scenario. We have sown only the first grain.

Changes in the education system are critical to have this slow-response mechanism aligned with real sector needs and global realities. New occupational standards and new curricula are needed. The overall education system should make use of the new skill improvement principles that have proved to be efficient.

I may say that no innovation centre in the world has been created without the educational component. Even if such parks were initially launched as technology concentration sites or industry clusters, with time, education (followed by researches based on the education platform) turned to the key element of the system.

Market winners emerge from players learning the way to combine fundamental researches with business, and build a sustainable system on such basis. Once this gap between the foundation and business components is eliminated, only then we’ll have our competitive products.