What the innovation ecosystem in Saudi Arabia needs
The Saudi economy has experienced major changes in a very short time due to the incredible pace with which the authorities are working to deliver the Kingdom’s Vision 2030.
Saudi crown prince’s vision and push to diversify the economy away from reliance on oil exports is reshaping the future of Saudi Arabia. Establishing and sustaining a healthy, resilient, and diversified economy that creates opportunities and wealth has become a national focus for public and private sector leaders.
One of the major enablers for such an ambitious economic transformation is innovation. According to the Global Innovation Index 2021 report, Saudi Arabia ranked 66th. The report assesses world economies annually according to their innovation capabilities. Saudi Arabia is investing heavily in building an innovation ecosystem and certainly there is no shortage of political will and funding to make innovation part of the culture and DNA of the public and private sectors.
However, Saudi Arabia’s global ranking indicates that there is a gap between the government’s investment in innovation and the impact of this investment as the report stated the Kingdom “performs better in innovation inputs than innovation outputs.”
As someone who has been in the middle of the Saudi innovation ecosystem and living the daily struggles of commercializing deep tech, the gap is clear, and the solution is also clear.
However, you can only see it if you are taking the innovation journey by yourself through this ecosystem, which is vibrant but very fragmented. That is why innovation output is not reflecting the full potential of Saudi talent and the government support.
People fail to realize that innovation is an ecosystem process. And like any business process inside a corporation, it will fail every time it is executed without having the right resources and the right support.
The innovation ecosystem components such as talent, funding, tech developers, market, etc. are all there, but the system is not well connected. Think of the innovation ecosystem as physical engine. The existence of an engine mechanical components on the table does not mean that you have an engine. Only when you build the engine from these components and every gear is meshing with another, then your engine will start working and produce output.
A Saudi innovator’s journey to the market is difficult because of this fragmentation and lack of a coherent ecosystem process to support all stages of the innovation journey. As an innovator, you need the government’s grant as seed funding to develop the expensive technology prototype because private investors will never touch an innovation at this early stage.
You will also need funds to build the startup and hire the core team. If you cannot secure required funding to complete this stage, the startup will fail before reaching the private investors and securing funding in series A to build a production line and make market entry. You need to find an incubator to host your team to reduce the cost of running the startup and you need to find a technology developer to build the prototype and MVP (even simple technologies are expensive to design and build).
Every single step in what is mentioned is a potential failure point that leads to many startups to experience “sudden death.” Think of journey through the desert where there are water holes along the way. If you can’t make it in time to the next water hole to replenish your water supplies, you and your camel will die out of thirst. That causes sudden death of startups when either they run out of cash or get lost in their journey (wrong market fit).
Other countries, such as the US, realized this through experience and established a complete process to support innovation like the SBIR program executed by 14 defense departments. The Small Business Innovation Research, SBIR, program identifies technology needs and sets aside 2-3 percent of the research and development budget to support innovators to meet those needs.
Innovators apply to develop the innovation and receive funding in two stages. If the technology is successfully developed, then a 5-year offtake contract is signed. I met the former vice president of the DOE SBIR program in Washington and I asked him about the reasons behind the high success rate of the program. His answer was simple, we recognized that startups need cash to survive so in addition to the 5 years offtake contract, payments are always expedited and, in some cases, the program pays in advance under a special support mechanism. That reflects a deep understanding of what innovation really needs and when.
All the government support programs and funds will not help if they do not come at the right time to support the innovator. It should be clear to innovation stakeholders in Saudi Arabia that unleashing Saudi innovation to reach its full potential can be achieved by adopting a process approach to innovation that attends to the innovators’ various needs throughout the innovation journey. Saudi Arabia is almost there in terms of building the ecosystem, what is left is connecting the gears in the ecosystem to set things in motion.
• Dr. Mishal Al-Harbi is a senior executive and strategist at the Research Product Development Company, a subsidiary of the Saudi Technology Development and Investment Co. (TAQNIA). He has a doctorate from Texas A&M University and a master’s degree from Stanford.