RNE 10 pager Transition Pathway Entrepreneurial Region (version Sept 15, 2016)

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1 RNE 10 pager Transition Pathway Entrepreneurial Region (version Sept 15, 2016) This version of the Transition Pathway Entrepreneurial Region is a second draft, still under discussion with relevant stakeholders. The transition pathways Digital Gateway, Smart Energy Delta and Circular Economy of the Roadmap Next Economy demonstrate that very significant transitions are needed and indeed happening as a consequence of the digitization, deep decarbonization and circularity of the economy. Very ambitious goals are set and challenging roadmaps are put into place in order to reach those ambitions. Entrepreneurship is required to realize those roadmaps as well as to reap the benefits of the new products, services and business models being developed. Not only business, but also government, education and (R&D)-institutes need to be more entrepreneurial than they currently are. The transition pathway Entrepreneurial Region gives an analyses of the current state and sets ambitions on entrepreneurship. It also defines roadmaps to enhance the Entrepreneurial Region. 1. Successful entrepreneurial region The Next Economy appears to be characterized by a radically different economic model. It will be dominated by laterally organized networks instead of vertically integrated structures operating in specific sectors. Therefore we need to focus on stimulating innovations across and beyond sectors, which will most likely trigger new value chains, business models, products and services. We will need to create an environment where entrepreneurs and scale-ups can quickly grow, where testing and deployment of innovations can thrive in a dedicated investment climate. This must be assisted by a government that is entrepreneurial on all levels: policy, legislation, permit authorization, purchasing, investments in infrastructure, education and coaching. In order to do this, we need to build upon the definite and strong sparks of entrepreneurial spirit in our region. This will enable us to establish an ecosystem in which all actors, entrepreneurs, investors, financial institutions, corporations, knowledge institutions and government operate in an entrepreneurial way towards meeting their own distinctive objectives, like job creation, knowledge generation, product acquisition, talent retention, wealth creation, etcetera. All stakeholders must benefit if an entrepreneurial ecosystem is to be self-sustaining. The relationship between entrepreneurship and economic development is complicated. There is no hard evidence that increasing the number of start-ups, offering financial incentives or establishing co-working spaces and incubators will necessarily stimulate economic development. However, successful entrepreneurial ecosystems around the world show a combination of: entrepreneurial culture: soft factors like personal and institutional leadership and risk tolerance; create a local vibe and entrepreneurial dynamism; care for and connect the entrepreneurial initiatives and persons in business, government, education and institutions. Ensure an effective branding that attracts talents, businesses and inventions entrepreneurial structure: hard factors like institutions and infrastructural support; ensure intense contacts a concentrated and dense area such as MRDH; use the current strengths of the region (its DNA) by cross-fertilizing strong sectors entrepreneurial practice, which concerns venture-friendly markets, incentives, dedicated finance and a benevolent regulatory framework, enabled by a government that is entrepreneurial on all levels

2 A model for Entrepreneurial Ecosystems [Stam] The next economy model aims for an inclusive economic growth, which requires a balanced approach to technological and social innovations. This effectively bridges TP4 Entrepreneurial Region with TP5 Next Society: Social enterprises and businesses that seek to combine economic success and societal added values are referred to as impact economy. These activities increasingly find their way in the emerging sharing economy, in which on line platforms provide the democratized context for peerto-peer collaborations, spanning a wide variety of crowd based networks, from purely commercially driven to purely idealistic, mission driven and all stops in between. This creates an exciting, hybrid economic space for which the rules of engagement are still in the process of being established. However, there are already some indications that demand-side economies of scale (a.k.a. the network effect ), increased usage of spare assets ( idling capacity ) and supply-side differentiation enabled by these democratized peer-to-peer platforms might actually induce inclusive economic growth (increased variety = increased consumption = economic growth).

3 2. Analysis 2.1 Entrepreneurship MRDH is a region with a huge potential, yet its current economic growth is only average as compared to other Dutch regions. Several factors are often mentioned in this regard: 1. Concerning entrepreneurial culture: a. Many entrepreneurs show a focus on technology and product innovation, where soft factors as sales & marketing and human resources receive insufficient attention b. Insufficient capital and investor readiness at entrepreneurs, limiting growth and thus limiting the number of start-ups c. MRDH is not known for or branded as an innovative and growing region, although the facts prove differently 2. Concerning entrepreneurial structure: a. Insufficient cooperation between sectors and in production chains, insufficient networking between public and private organizations, and between entrepreneurs b. Insufficient insight in innovative solutions and state-of-the-art science in the region c. Insufficient valorization of public R&D and patents in the knowledge institutes d. Mismatch of supply and demand on the labor market, in particular in IT and engineering 3. Concerning entrepreneurial practice: a. Insufficient amount of private investments in R&D and in implementing innovations; b. Entrepreneurial incentives, regulatory framework and the way the framework is differently on a local scale slow down rather than stimulate economic growth. As a consequence, the region is good in attracting talents (TU Delft, EUR) and starting companies, but less good in retaining the talents and scale-ups. Yet, things are changing rapidly. The mere foundation of MRDH and of InnovationQuarter shows that on a policy level the urgency to combine forces, invest and innovate is not only felt but also acted upon. Networking organizations such as CleanTech Delta, The Hague Security Delta and Holland Instrumentation have been formed recently, growing rapidly and starting to co-operate. YES!Delft has grown in ten years into a European top incubator. Other incubators are formed and also growing (CIC, ECE, ESA-BIC, etc.) and cooperating. Investments funds of InnovationQuarter and RoboValley (100 M each) give ample opportunity to public as well as private investments and aid in improving investor readiness. In fact, the total investments by Venture Capitalists has increased by a factor 7 from 2014 to The province of South-Holland contained 648 scale-up businesses, 23% of all Dutch scale-ups, most of which are concentrated in MRDH. Most are active in high-tech systems, agri & food and logistics. Remarkably, most new scale-ups are high-tech companies. Cross-sectoral co-operations are popping up in many places, examples being Fieldlab FreshTeq.NL (Greenport and HTSM/IT), Fieldlab SMASH (Maritime, Aerospace and IT) and Green Village (CleanTech, Water, Energy). 2.2 Economy The MRDH-region is quite a-typical. Its largest assets (port and logistics, petrochemical industry, Greenport) are extremely dependent on fossil fuels, space consuming and add relatively little value. The potential of younger industries like Life Sciences, HTSM and ICT, is not yet optimally realized and their potential to break open the traditional sectors is still insufficiently employed. Many hidden champions in these new industries have as yet insufficient influence on policy. An analysis of top-sectors in The Netherlands shows that all of them have a focal point in the province of Zuid-Holland, i.e. the greater MRDH. Even HTSM, traditionally linked to the Eindhoven region, in fact is concentrated more heavily in the Delft region, the TU Delft and TNO being top generators of HTSM-companies. The co-existance of all sectors in MRDH has long been regarded as a

4 disadvantage due to a supposed lack of focus and mass. In fact, all of these sectors have considerable mass as well as increasing focus. In a world where cross-overs between sectors give rise to the new innovations, the presence of so many top sectors in fact is an asset and a strength. This diversity should be embraced and employed to stimulated cross-overs, as is currently done for instance in dare-to-cross. 2.3 Conclusion The Entrepreneurial culture in the Netherlands in general and in the MRDH in specific can and needs to be significantly improved. A society where people have a license to fail, where ambition is respected and rewarded and where people invest rather than save their capital is not built overnight. It can be stimulated only by indirect means and will take at least one generation to come to full effect. Given the actions that have already been taken and starting to take effect, we need to focus on four points that still need to be addressed or need more attention: - Individual entrepreneurship (1.a, 1.b) - Branding (1.c) - Cooperation and cross-overs (2.a-c) - Entrepreneurial Government (3.b) The mismatch on the job market (2.d) is dealt with in Transitional Pathway Next Society.

5 3. Action Program We propose the following four action programs: 1. Scale-up program, as one of the measures to stimulate individual entrepreneurship in addition to the effects of the existing start-up and accelerator programs 2. Fieldlab ecosystem, to stimulate cross-over innovations, between companies and sectors, as well as with R&D and educational institutes, also contributing to individual entrepreneurship 3. Strange Attractor Dutch Wind Wheel, as brand and trademark for an entrepreneurial region, the first of hopefully many iconic and singular examples of our innovative power and entrepreneurial capability 4. Entrepreneurial Government, with specific and targeted actions to slash current rules and regulations that limit innovation, to synchronize the local application of rules and regulations and to stimulate entrepreneurship in innovative ways. Each of these programs is discussed in some detail below. 3.1 Scale-up Program New economic activity is necessary for reaching the ambitions in other transition pathways. Successes with new businesses will demonstrate that becoming an entrepreneur is fun and worthwhile. Quite a lot is already being done on stimulating start-ups. However, new business in existing companies and scale-ups deserve more attention. Figure 2 gives an overview of the roles of different organizations and different (regional) financial instruments in the various phases. Colour codings clarify where addition attention is needed. The process starts with the formulation of an idea (ideation). This can be inspired by business intelligence (market pull) and R&D-results and patents (technology push). Existing network organization such as CleanTech Delta, Medical Delta, The Hague Security Delta and Holland Instrumentation play a role in organizing matching events, recognizing technology needs and bringing R&D experts and entrepreneurs together.

6 Quick wins Organize cross-over events The only significant cross-over event currently organized is in the Drechtsteden; financing and organizational power are needed to bring this to MRDH on a professional level Continue to stimulate networks Networks are currently financed by the Province of Zuid-Holland, under the questionable assumption that only temporary support is needed. Continuing that support, also for existing networks, would secure their position for a prolonged period. Prof-meets-CTO Holland Instrumentation has developed a successful method for transferring knowledge between universities and companies, Prof-meets-CTO (PMC). Medical Delta is already copying this system, which should be employed by all network organizations Project: Scale-up Stimulation The real growth potential and employment opportunities come with scale-ups. A regional program partly inspired by the Scale-Up Nation initiative, needs to be set up to ensure fast growth of scaleups in relevant market segments. This may include the following activities: support programs comparable to YES!Delft, ECE and CIC for scale-ups: flexible space, programming, intervision, vibe, good investor climate, etcetera cooperate with other initiatives to build a Randstad Scale-up initiative program on business model development and internationalization provide flexible prototyping and manufacturing space that can be hired for short terms and on short notice providing cheap locations by retrofitting unused office spaces for small series production of high tech products and for use by IT-firms, etc. last mile transport for production sites: data driven, well integrated, electric & automated scale-up of the YES!Delft model by creating satellites in the regional business districts as well as a shake-up of YES!Delft to create more ambitious and entrepreneurial start-ups start a club of entrepreneurs to discuss scale-up, circularity and other issues start a financing hub, where investors and entrepreneurs regularly meet support project developers in making their projects RNE-proof start an investment program for civilians to invest in RNE-proof innovations (crowd funding) A basis for the investment program may be found in the Road to Capital initiative that is currently being developed by InnovationQuarter, ECE, YES!Delft and Venture Café. Projects are envisaged on: investor readiness of both young companies and young potential investors, a scale-up program and active enhancement of the relations between entrepreneurs and investors. 3.2 Field Lab Ecosystem Field Labs are open access facilities for developing, testing, demonstrating and validating new disruptive technologies (e.g. robotising, 3d printing, big data processing and sensor technology), products and innovations. The working model is based on triple helix collaboration, led by a consortium of regional companies. Field labs have three objectives: boosting the regional economy by bridging the valley-of-death from prototype to market introduction; contributing to the solution of social issues (aka the wicked problems ) and improving the interface between education and labour market. A Field Lab ecosystem aims to improve and elaborate the cross-sectoral innovation, practical education and quadruple cooperation between end users, companies, R&D and government, as well as to remove the obstacles that stand in the way of innovation. Field labs will help to establish a more collaborative, distributed, open and laterally scaled approach to entrepreneurialism.

7 A collaborative network of field labs, makerspaces, innovation districts, multi-stakeholder living labs and free-zones for enabling experimentation and R&D in real world circumstances creates an environment in which the deployment of technological innovations is stimulated, scaled up and translated into real business (cases) and job opportunities. Sixteen of such initiatives are currently bundled in the Field Lab Infrastructure, supported by MRDH, PZH, Innovation Quarter and TNO (Fig 3). A nine-point plan for supporting and stimulating these plans is presented. The Field Labs each address different large international markets that resonate with our current industrial and know-how basis. There is a responsibility for MRDH to address the international market potential and support the existing critical mass and focus that are already available in our region. More initiatives are known and popping up and can be supported by this infrastructure. Examples include a High Tech Maritime & Smart Industry Campus (RDM Campus and Schiedam); a public/private Harbor Internet of Things Faculty (part of KPN IoT Academy) and a Circular & Biobased Research & Education Centre (related to Circular University Delft). However, too many initiatives in a scattered landscape will compete for the limited available funds and cause defocus. Therefore we aim to bring more focus. Merger of existing field labs on closely related topics is being considered in order to increase the critical mass. At the same time we must understand that technological innovation is a moving target. Therefore we need to keep an open mind to accept new significant initiatives can be added to further complete the landscape. Quick wins Support the Field Lab Infrastructure In order to realize the nine-point program, the partners MRDH, Innovation Quarter, PZH and TNO need to set priorities and in part need financial back-up. Project Aspects that need to be organized: [under construction] create a Field Lab Fund build a Field Lab Support System (exportable product) devise programming across and beyond sectors

8 3.3 Strange Attractors The cumulative force of the collaborative cross-sectoral field lab approach may even result in strange attractors in our region that will have a strong pull effect on creative pioneers from all over the world and contribute to substantial clustering of talents. Such initiatives can prove to be the catalysts for new innovations across and beyond sectors. Investments in such state of the art technologies and cutting edge facilities should be closely linked to topics that are aligned to the existing economic strengths and knowledge expertise in the region, providing the greatest potential for creating new business & jobs. Some field labs might also have the potential to develop as strange attractors themselves. The first example of an initiative that shows all the characteristics of a strange attractor is the Dutch Wind Wheel (Figure 4). This project encompasses many of the innovations (Smart Grid, Big Data, Last Mile Transport, Safety& Security) that are being developed in the various field labs (see figure 3) and has the potential to become a visual icon for the next economy of historic proportions. It will stimulate tourism and therefore new jobs. And most importantly: become the brand and trade mark of MRDH. Quick Win Stimulate the formation of the Field Lab Dutch Wind Wheel Project Realisation of the Dutch Wind Wheel

9 3.4 Entrepreneurial Government The title for this pathway Entrepreneurial Region is inspired by Mariana Mazzucato's Entrepreneurial State. She emphasizes the crucial role of public investments in breakthrough technological innovations. If our region wants to take a leading position and establish a competitive edge in the deployment of digital platforms and circular technologies, the government will have to take its responsibility seriously. Establishing an entrepreneurial region should not only be aimed at providing support for the benefit of business, with the government sharing in the risks. Benefits of public investments also need to flow back to the government, thereby sharing in the benefits in terms of tax revenues, talent development, job creation, added social value, etcetera. Public as well as private investments are of course a crucial element in the successful deployment of the economic transition. But by itself this will not be sufficient. The existing regulatory framework is at odd with the next economy, because it is still based on a lineair, fossil based economy. These rules and regulations block or at the very least slow down the much needed innovations. The time is right for a new regulatory framework that will stimulate innovation and will actually accelerate the necessary transition, culminating in a new Transition Act (comparable to the Crisisen Herstelwet from a decade ago). To reach this objective we propose to bring all government levels local, regional, national and European - together in a Legal Intervention Team to work on the following issues: 1. Slashing: quickly displace, bypass or (temporarily) circumvent existing rules standing in the way of transitional activities, using MRDH as the testing ground (based on the experimental status provided by the city deal) 2. Smarting: design smart laws that are in step with a digital, carbon neutral, circular, entrepreneurial and inclusive society 3. Synchronizing: synchronize the execution of existing rules (procurement, builing permits, environmental rules, etc.) in the MRDH region, significantly improving the deployment of regional scale projects 4. Stimulating: design rules and regulations that benefit the innovation and business climate and will help attract new entrepreneurs to the region Many examples from each of these catagories have already been collected (see appendix 1) Quick Win Set up the multi government Legal Intervention Team and select and propose three Smart Laws, three synchronizations and three stimulations that can be implemented in short term Project: MRDH: pilot for Next Economy Transition Act MRDH will be the real life testing ground for a new regulatory framework benevolent to innovation and transition, provisionally called the Next Economy Transition Act, based on the RNE City Deal with the national government (from December 2015) Editors: Anton Duisterwinkel / Hans Scheepmaker Sept 15, 2016

10 Appendix 1 Ideas for an Entrepreneurial Government On the basis of this agreement we propose to facilitate testing ground pilots on: new job legislation, e.g.: o a new kenniswerkersregeling to keep high-tech staff employed o use a part of lay-off payments for retaining in a field lab o offer self-employed engineering a free place in field labs new legislation on waste usage new legislation for deployment of PV installations on public buildings (fines for unused public roofs) incentives for deployment of PV on rooftops on privately owned buildings change in procurement rules that will open the competition to starting companies without a minimum of 5 year existence and track record explore regulatory changes that need to accompany the shift from centralized healthcare to distributed healthcare management admittance of health claims in relation to fresh food accept proof for lifestyle as a medicine via randomized clinical trials accommodate new radical approaches to improve pharmaceuticals light permit procedures for companies that have demonstrated to work according to Next Society principles (social entrepreneurship for inclusive economy in neighborhoods) change fiscal rules on innovation and entrepreneurship that contributes to RNE targets establish protocols to ensure safe open public data transfer in a level playing field differentiate tax rates according to sustainability levels of buildings enable ESCO constructions and smart grid deployment tax benefits to inclusive strategies (local employment, local companies, etc.) carbon taxation, carbon reduction benefits, incentives for Carbon Capture & Usage, etc. level playing field between seaports in terms of employment regulations, inspections and fiscal incentives Establish a government commission to reprioritize subsidies and other incentives towards RNE objectives and away from stranded assets oblige local / regional / national government to invest a certain percentage of their budgets on RNE related projects, acting as launching customer / demanding client for RNE objectives oblige local / regional / national government to incorporate RNE objectives into public procurement regulations and criteria set up a government guarantee fund to stimulate procurement of domestically produced smart products and services set up an RNE regional public savings account for individual civilians helping to fund RNE projects (RNE specific crowdfunding mechanism) let government organize innovation contests on very specific innovation challenges reward civil servants actively contributing to realizing sustainable solutions in government realization and implementation of extended investments funds for Innovation Quarter stimulate cooperation between corporates and start-ups stimulate standardization in engineering and manufacturing (e.g. ROD, ODL, SPEMA) ensure that universities use the Birmingham approach: I don t care about IP stimulate social entrepreneurship by rewarding and/or incentivizing social impact solutions create impact economy fund based on targets set in the European Next Work Program establish an Entrepreneurial Club network for meetings on next economy topics establish a Financial Hub bringing together investors, bankers and entrepreneurs to tighten the relationships and cutting through the red tape More will follow from discussing the other transitions paths. Table needs to be divided in stimulation, synchronization and slashing.