Association of Industrial Automation in Ukraine (APPAU) defines many policies of the national development in so-called policy papers. Such a paper was developed to argue the model of innovative ecosystems in industrial high tech sectors. This article briefly explains the main framework of this model and comments about current status of the ecosystem with regard to the model.
This framework explains how the innovation cycle infrastructure for industrial high-tech companies works, fig.1.
Fig. Model of Innovative ecosystem of industrial high-tech. The legend: EU (End users) – end customers, OEMs – machine-builders, PE (Process engineering) – technological, engineering companies, CSI (Control System Integrators) – automation control system integrators, ІТ SI – system integrators IT, SW dev (Software developers), HW (hardware) makers
In the center there are 8 categories of participants of market value chain (chain of creation of innovative solutions for the end customer), on the outer circle – infrastructure elements (organizations and institutions), responsible for innovative development. They are distributed in 4 zones which make in total the full innovation cycle.
This split into 2 circles suggests that players in the inner circle can exist without the outside one. At least, for a while. That means that any engineering company can be fully equipped with imported equipment and deliver a ready, innovative solution to the End User (EU, at center). Returning to the statistics and trends in these categories, we see the following trends in Ukraine:
- the number of global vendors, integrators and engineering companies, their product volumes remain at approximately the same level;
- the number of machine-building companies (OEM) and their volumes have fallen sharply in Ukraine over the last 5 years;
- the number of software developers has grown significantly, but most of them are focused on international markets.
The first conclusion that comes from above is about the very low competitiveness level of local machine-builders (all its categories – aircraft, ship, process equipment, etc.). In opposite, Ukraine has still very strong potential in many segments of developers and engineering designers.
Second, the outer circle gives a more detailed picture and explains why at the exit of the inner circle (arrow 4) we have innovative products or do not have (and are replaced by imports).
- Value chain zone (innovation cycle management) – includes actors playing the role of enablers & policy makers. They are designed to manage the challenges and gaps that emerge at different stages of the innovation cycle and at different levels, from national to an industry. As a rule, these are various clusters and associations, development agencies, innovations and investments agencies.
- Innovation zone includes organizations that typically generate innovation. Usually, it’s about Universities, R&D Labs, Design offices, research institutes or startups.
- Incubation zone includes organizations that create possibilities for the incubation and acceleration of innovators. It is fairly easy to understand, but relatively complex and unusual for manufacturers. Meanwhile, incubators and accelerators, business angels, various foundations, donor organizations, etc. – without them, it is impossible to move the innovative idea to the prototype stage.
- Zone of experience and testing contains elements that allow innovation to be tested for viability. This zone is the latest for quick testing and market entry. This is where the big difference between industrial markets and B2C (consumer) markets becomes so obvious. No industrial customer will not even consider an unproven, «crude» product to manage, say, a steam boiler, a rolling mill, or a bottling line. The potential risks here are many times greater. That is why there should also be actors here – organizations that promote faster testing, licensing and certification (if needed) of new innovative products and solutions.
The logic behind this model is quite simple – there are 3 basic principles:
- the completeness or sufficiency of the infrastructure elements in each zone of the cycle determines the bottleneck on each zone, which form the constraints of the systems. It is not necessary to be a super-analyst to guess where they are in local industrial high-tech: unlike in developed countries, Ukraine has almost no techno-parks, centers of expertise, modern laboratories, etc. All this is an area of capital investment that is usually supported by States.
- The quality of the elements: here, we traditionally have many questions about the quality of the products of our universities (more than 300) and scientific institutions (more than 100).
- Integrity and reliability of interactions between different categories of participants. Here, on the surface, we have as issues the integration of the same universities and research institutes into the internal, market circle, but also the mass of other interconnections – both on the two circles, between them, as well as on the cross. It is a worldwide practice that these links «by themselves» are not established.
Thus, and in the context of understanding the progress of innovations in Ukraine, we are most interested in the faster development of second circle. Because it determines whether innovations from Ukrainian ecosystems will end up and goes to the market or the local end users will be served just be imported products. In practical use, we can use this model as the simplest checklist. To understand the situation, we compare industrial ecosystems with what the Ukrainian IT industry, which is closest to Industry 4.0, offers today.
According to these data, the situation in Industry 4.0 local ecosystem does not look very attractive. The weakest are the Incubation and Experience zones. In Ukraine there are de facto no modern techno parks and almost no industrial incubators and accelerators.
On the other hand, it is a great opportunity for potential investors. The country has huge human potential, there are hundreds of technical universities, research institutes, and 100+ thousand of industrial developers.
In summary. The Government of Ukraine and expert communities, business associations, as APPAU, are working on fundamental changes to the innovative ecosystems of industrial high-tech companies. Over the last 2 years, we have proposed a model and strategy for the development of innovative ecosystems of industrial high-tech and introduced a number of initiatives in the new Innovation Strategy of Ukraine. The main directions of development are:
- Accelerated integration of National Academy of Science of Ukraine (NASU) and Universities into the market environment.
- Creating a network of regional Centers of Expertise 4.0.
- Creation of techno parks, industrial incubators and accelerators.
Ukrainian Industry 4.0 is looking for foreign partners and investors for cooperation and implementation of new models, and policies of these areas.