Focus: access to funding for innovation strategies

Building a culture of innovation is not an easy feat.

It also takes some time to cultivate it, but no longer than seven years, according to the UAE government which aims to place the emirate among the world’s most innovative nations by 2021.

The goal was set at a meeting in Fujairah’s 500-year-old fort at the end of 2014 when the UAE Cabinet adopted the National Innovation Strategy.

The strategy is focused on fostering innovation in seven main sectors – renewable energy, transport, education, health, technology, water and space.

No less than $18 billion will be invested in achieving this goal. And no fewer than 30 government initiatives have been instantly implemented to encourage innovation in these sectors within a three-year period.

Acknowledging the importance of a good start, 2015 was also declared the ‘Year of Innovation’.

After many local exhibitions of forward-looking ideas throughout the year, around 800 events and initiatives, organised by federal and local government and private bodies, took place within a week at the end of November – the UAE’s first ‘Innovation Week.’

An innovation culture may stem from one source, but an active engagement of a number of, if not all, stakeholders is necessary to sustain it.

Beehive, an online marketplace for peer-to-peer (P2P) finance, is certainly doing its part.

Launched a year ago to connect UAE-based SMEs with prospective investors, the online crowdfunding platform has already helped channel AED25 million ($6.8 million) of funding to 48 local SMEs.

It has also become the first P2P platform in the world to be granted a Sharia compliance certificate.

A research whitepaper Spotlight on SME Innovation, published in mid-November, added to Beehive’s already established profile of an innovative ecosystem builder.

Partnering with Thomson Reuters, they looked to explore how SMEs in the UAE approach innovation, how they use it to grow and improve their business, and what challenges they face as they do so.

It also includes three key learnings shared by a number of prominent SME owners who took part in a roundtable on how to support innovators in the UAE, which Beehive organised earlier this year.

The paper listed the following conclusions of the roundtable:

Fail, but fail quickly

“To innovate successfully, companies build in checkpoints to determine if their developments are fit for purpose and they don’t hesitate to change course when they need to, while always keeping the end goal in mind.”

Encourage your people and engage your stakeholders

“Employees play a central role in achieving innovation, so it is crucial for business owners to find people who can - and want - to co-create with them.”

Embrace failure and learn from it

“Companies must address the fear of failure and learn to build trial and error into their everyday operations and processes in order to keep growing and developing as a business.”

The second phase of the effort was an in-depth survey that reached out to a hundred of UAE-based SMEs.

When exploring how SMEs in the UAE define innovation, the report said that almost 45 percent of them believed that adapting an existing idea to a new market was a definition of innovation in the emirate.

“Our findings identified innovators in Dubai as generally second-movers in the concepts they apply, but first-movers in the local market, adapting existing concepts to the local environment quickly and efficiently,” the paper said.

Although many of the local SMEs feel they have an innovative mindset and ability to generate creative ideas, a number of obstacles often prevent applying these ideas to real business operations and resources.

A few areas of potential improvement are:

• Lack of innovation strategy – “Only 25 percent of SMEs said they had a clearly defined strategy for innovation.”

• Lack of execution skills – “SMEs don’t fully understand how to successfully execute an innovation strategy in practice.”

• Lack of R&D – “The main limitations to fully leveraging an innovation strategy are driven by a lack of research and development (R&D), innovative skill sets.”

• Lack of finance – “51 percent of respondents highlighted finance as a major enabler to innovation.”

Commenting on the results, Craig Moore, founder and CEO of Beehive, said: “Being an SME in the UAE is a difficult feat. You are competing against large organisations in a saturated market, and you need to stand out and differentiate in order to succeed.

“In our Spotlight on SME Innovation whitepaper, we have spoken to SMEs across the UAE to find out what innovation means to them and their businesses, and what drives them to innovate.

“We found that the most successful SMEs in the UAE were the most innovative, whether this meant taking an existing idea and applying it to a new market, or overcoming unaccommodating regulations.

“Our most interesting finding was that a lack of funding to invest in innovation is a big barrier, with 51 percent of respondents highlighting finance as a major enabler to innovation.”

In 2014, SMEs accounted for some 92 percent of all the businesses in the UAE, contributed around 60 percent to the UAE’s GDP and provided 86 percent of all private sector employment, according to the UAE Ministry of Finance.

However, the report further stated, they all still struggle to secure necessary funds.

“When we launched, we were aware there was a funding gap for SMEs in the region, but we didn’t realise what a big impact this was having on innovation,” said Rick Pudner, chairman of Beehive.

In addition to better access to funds to enable execution of innovation strategies, the survey further pointed out to two important themes to help spur future innovations in the emirate:

• Building a culture of innovation inside companies by highlighting the importance of transparency and creating a culture where ideas are shared.

• Building a strong SME community and a collaborative culture in order to enable like-minded innovators to meet and engage with each other.

The UAE Government leads by example and encourages innovation with free-zone business hubs, accessible regulations and leadership, and creates a collaborative culture and community for SMEs, the paper concluded.