Business Forum Italy-Turkey 2014 Innovation Driven Growth in Turkey December 12 th, 2014 Michael Weiss
DRAFT 2023 vision and relevance of innovation Five major business drivers are expected to shape the world in the upcoming years Macro drivers and sub-drivers shaping the future Globalization Natural resources Technology Demographics Consumer behavior Moderate and uneven global economic progression Increasing environmental issues and concerns New paradigms in product design manufacturing Rise in global population Increasing consumer diversity Reorganization of the supply chain Volatile commodity markets Path towards higher production flexibility Aging population in developed countries New models for consumer engagement Easy access to information/knowledge Increase in raw materials prices Continuous research for new technologies Global urbanization trend New consumer segments More inclusive globalization Decrease in energy intensity across countries Increasing importance of Big Data and Cyber Security Changes in workforce structure New era of squeezed profitability How to drive innovation within this macro-trends best? Source: A.T. Kearney Global Business Policy Council Strategic Foresighting Team A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 2
2023 vision and relevance of innovation Turkey has set the 2023 vision to establish its economy in the global premier league challenged by flat neighboring markets GDP growth rates breakdown by country Real GDP growth rate (2008) Real GDP growth rate (2013) >5.0% 2.0-3.5% 3.5-5.0% <2.0% Unavailable Source: The World Bank, A.T. Kearney A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 3
2023 vision and relevance of innovation These targets are challenged along three inter-related key pillars Challenges towards 2023 targets 1 Export ambitions drive the need for resources, raw materials and energy Trade imbalance Limited access to these resources drive import of intermediate goods Limited product variety offered by domestic industry Imports rising faster than exports, triggering a trade deficit Current manufacturing capabilities limit both domestic product variety and value add in exports Consequently, export volume increases cannot always be translated to value increases Insecure access to resources, raw materials and energy Source: A.T. Kearney High import dependency on scrap (~70%) and lack of influence on prices Dependence on four countries for energy supply: Russia, Iran, Algeria and Azerbaijan Efficiency issues further drive resource needs 2 3 Domestic businesses are then even more dependent on external inputs, also challenging net exports Limited capability along selective parts of value chain Limited technology, know-how and infrastructure (labor competency, quality standards, education, research faculties, innovation, ) availability Limited modularity, missing value chain elements and lack of interindustry integration A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 4
2023 vision and relevance of innovation Turkey s growth ambition requires a significant uplift in value per unit exported Export unit value and volume comparison Metals industry - Example Export unit values in selected countries (US $/kg, 2009-2013) 4.8 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 1.8 2009 2010 2011 2012 2013 Brazil Czech Germany Korea Poland Turkey Export volumes of selected countries (mn units, 2009-2013) 35 30 25 20 15 10 5 0 27.7 6% 9% 11% 12% 18% 44% 2009 Brazil 31.2 5% 9% 11% 12% 18% 45% 2010 Czech Poland 34.9 4% 9% 11% 12% 19% 45% 2011 Turkey 31.6 5% 0% 12% 14% 23% 46% 2012 Korea 31.4 4% 13% 0% 15% 24% 44% 2013 Germany TIM has started to launch several initiatives to improve innovation driven exports Source: Trademap, A.T. Kearney A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 5
2023 vision and relevance of innovation Further R&D investment and efficient innovation management are key Innovation metrics analysis by country Countries Metrics R&D expenditure (% of GDP) # of researchers (per ths.) Global Innovation Index score Turkey 0,9 1,0 38,2 US 2,8 4,0 60,1 Singapore 2,1 6,4 59,2 Germany 2,9 4,1 56,0 South Korea 4,0 5,9 55,3 Japan 3,4 5,2 52,4 Spain 1,3 2,7 49,3 China 2,0 1,0 46,6 Malaysia 1,1 1,6 45,6 Hungary 1,3 2,4 44,6 Poland 0,9 1,8 40,6 Brazil 1,2 0,7 36,3 Mexico 0,4 0,4 36,0 India 0,8 0,2 33,7 Indonesia 0,1 0,1 31,8 1. Balance of Payments of charges for use of intellectual property Source: Global Innovation Index 2014, A.T. Kearney A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 6
R&D exp.(% of GDP) 2023 vision and relevance of innovation With translation of increased R&D expenditure on innovation, Turkey can ensure achieving 2023 vision targets in GDP R&D spending and GDP per capita map %5 Low income spenders Bubble size represents GII 1 (2014) High income spenders %4 Korea, Rep. Japan United States of America %3 %2 China Germany Singapore %1 %0 Brazil Malaysia India Turkey Indonesia Mexico Hungary Poland Low-income economizers Spain High income economizers 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 GDP per capita (USD) 1. Global Innovation Index 2014 2. R&D expenditure is aimed to be increased to 3% by2023 Source: World Bank, A.T. Kearney High income spenders Low income spenders High income economizers Low income economizers A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 7
2023 vision and relevance of innovation Translation of this increased expenditure to value can be achieved by a solid innovation strategy, covering macro and micro elements Multi-level strategy building for implementation Turkey 2023 Innovation Strategy A high-level strategic framework to define strategic direction for building innovation capabilities to drive competitiveness and enable 2023 targets Guideline to regulate and align innovation capability building efforts across industries to avoid fragmentation and ensure unified vision Micro-Level Industry Innovation Strategies Macro level innovation strategy translated into industry specific strategic requirements Alignment with future industry trends and technology evolution Industry-specific and cross-industry action plans to ensure competitiveness and targeted growth by 2023 Automotive Steel Electronics Plastics Aviation Execution of innovation strategy actions to boost effectiveness of export strategies across selected key industries: Policies Subsidizations Trainings Source: A.T. Kearney A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 8
İnovaLİG Increasing competitiveness through innovation competition At the same time İnovaLİG has been launched to strengthen the innovation management competence in Turkey Assessment dimensions in İnovaLİG project 4 3 Idea management 2 1 Innovation strategy Innovation organization and culture Innovation life cycle management Product/ service/ business model/ organisation/ process development Innovation results Launch/ Continuous Improvement Enabler, e.g. Human Resource Management, IP-/Knowledge Management, Project and Program Management, Controlling, and IT 5 Description 1 2 3 4 5 Innovation strategy Vision and strategic focus on innovation Implementation of strategy Organization and culture Roles and responsibilities Organizational structure Organizational culture and climate Innovation life cycle processes Idea management Product/Service/Business Model/organizational or Process Development Launch and Continuous Improvement Enabling factors Project Management Human Resources and Incentives IT and Knowledge Management Innovation results ~460 companies participated to the debut year of the competition, and have been competing across 5 dimensions of innovation management Source: A.T. Kearney A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 9
İnovaLİG - İnovasyon Liderleri Ödül Töreni 6 Aralık 2014 İnovaLİG 2014 Finalistleri İnovasyon Stratejisi İnovasyon Sonuçları İnovasyon Organizasyonu ve Kültürü İnovasyon Kaynakları İnovasyon Döngüsü İnovaLİG ilk 25 İnovaLİG ortalaması (178 şirket) Avrupa ortalaması A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 10
İnovaLİG Increasing competitiveness through innovation competition While companies in Turkey are in key categories on peer level with EU markets, the impact has more upside opportunities Comparison of top 25 companies and average Innovation strategy 80% Biggest gap is in translating innovation into results Innovation results 42% 39% 64% 71% 62% Innovation organization and culture Turkey s top 25 All İnovaLİG participants 60% 47% 47% 55% Enabling factors Innovation life cycle processes International Innovation partnerships could offer attractive opportunities to leverage joint opportunities in Turkey Source: A.T. Kearney A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 11
Contacts Michael Weiss Partner A.T. Kearney Yönetim Danışmanlık A.Ş. Muallim Naci Caddesi No: 95 Kuruçeşme 34345 İstanbul, Turkey +90 530 2341050 Mobile +90 212 705 4000 Office www.atkearney.com.tr www.inovalig.com Baris Sazak Strategy & Business Development DEIK-Foreign Economic Relations Board bsazak@deik.org.tr Direct: +90 212 339 5089 TOBB Plaza Harman Sk. No:10 Kat:6 Esentepe, Şişli İstanbul - 34394 Türkey Tel: +90 212 339 50 00 Fax: +90 212 292 30 72 Mail: sim@deik.org.tr www.deik.org.tr www.dtik.org.tr A.T. Kearney X/000000/uMYc55Qkllz7IQQQ1l 12
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