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1 October 2016

Ukrainian Economy Needs Innovations

Pavlo Barbul

Director of SFTE "SpetsTechnoExport"


"Only ideas or funds are not enough. A full-fledged innovative infrastructure is needed - a system of communications and coordination, competition and cooperation, which participants are interrelated and work together to create innovation."

Tha article is republished from Novoye Vremya:

Only ideas or funds are not enough A full-fledged innovative infrastructure is needed.

Conversations about innovations in our country are associated primarily with the developments by compatriots which did not provoke interest in Ukraine, but successfully implemented (or being implemented) abroad at the expense of foreign investors and for the benefit of foreign economies. The second, no less oppressive option is the import of foreign solutions and developments to Ukraine.

The situation with innovations in the defence industry is somewhat better - the war in the east formed an urgent need to create our own defence technology and products in the shortest possible time. However, in a country that pretends for development, the work on creating innovations must be a priori systemic in all spheres of life. After all, relying on innovations, Ukraine has a chance for a radical transformation of the entire system (production, economic structure, politics, etc.).

A good example is India or China. Long-lasting process of economic transformations in these countries in the last quarter of a century would not have been successful without the initiation and support of our own developments, even on the basis of Western technology. These countries successfully integrated three critical components into the functioning mechanism: developer - project manager - investor. The products created in this way were successfully monetized in the domestic and international markets.

Such a link of participants allows maximizing and optimizing the innovation process - attracting the necessary resources: capital, partners, related and complementary ideas, technology, etc. This approach allows creating a product to solve a specific task. Thus, China and India have opened a new export market for innovative knowledge-intensive products with high added value, as well as a market of technology, intellectual rights, which helps to scale manufacture of such products anywhere in the world.

Creation of innovations is a long process with many inherent risks. Only ideas or funds are not enough. A full-fledged innovative infrastructure is needed - a system of communications and coordination, competition and cooperation, which participants are interrelated and work together to create innovation. In this system, some players produce ideas and realize research and development work, others analyse these ideas from the point of view of marketing, risks, build a business model, carry out project management, some provide an investment resource. For such a system, a high level of mutual trust between participants is a critical factor.

We need to show young scientists and students that their knowledge is in demand in their home country

The core of such a system is, of course, representatives of research and development and design circles. To date, it is obvious that the state cannot significantly increase the amount of funding for science and effectively implement large innovative projects without attracting private funds. Therefore, the main factor in determining the viability of scientific and technological achievements should be the possibility of commercialization of the idea, the product. Speaking about Ukraine, we must frankly admit that no foreign investor will invest only in the idea or in the process of its development. Financing can be attracted for an already created product in the form of a sample or a prototype. Our research and development work lagged behind the global trend and often only work off grants or government funding. When forming a new system, it is important that more and more representatives of science work not for the sake of the process, but for the result that will bring profit to the developer, investor and ultimately to the economy. This is normal, and this is correct.

To increase the productivity of innovation activity, especially in Ukrainian realities, it is worthwhile to use the cluster approach and, accordingly, create an innovative specialization. To date, this approach can only be applied in some sectors. The most attractive in terms of acquired knowledge, resources, understanding of markets and processes in it is the sphere of defence technology. This sector could become an “incubator” of new technological developments not only for defence, but for related industries, as it was earlier the case in all developed countries of the world. In addition, it should be noted that in this industry there is still a serious reserve and potential unlike, unfortunately, many civil areas.

The experience of the United States is indicative in this respect. Established in 1958, the US Defence Advanced Research Projects Agency (DARPA) has become the main engine of progress in defence and space technology, information systems, military medicine, artificial intelligence and other areas. The agency united around itself the most promising projects and organized all the necessary infrastructure for their implementation. The projects of DARPA, since its inception, were in the priority of virtually all US presidents.

However, it should be recognized that American experience cannot be fully applied in Ukraine. On the one hand, our state is not ready to invest large resources in the implementation of projects similar to DARPA's; on the other hand, the level of trust in state-created institutions, especially in the field of investment, science and innovation, remains low.

But it is necessary to search for the optimal Ukrainian model. Without this, we will not have to talk about any technological progress and competitiveness of the economy in the foreseeable future. Existing developments need to be correctly packaged into finished products, and young scientists and we need to show young scientists and students that their knowledge is in demand in their home country,

The first steps in this direction will show whether it is possible to create in Ukraine the system that was not even started in the last 25 years of independence.