Innovation — Agent of societal change in Sweden

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There has been a change of mentality among the people in Sweden because of a strong social security and a great start-up ecosystem.

SWEDEN has a long history when it comes to innovation and in this respect, the leading authority that plays a key role in improving this is Vinnova – the Swedish Governmental Agency for Innovation System.

It focuses on funding research and innovation projects, fostering collaboration between businesses and the academia, and supporting initiatives that drive economic growth.

Vinnova’s efforts contribute to creating a favourable environment for start-ups by promoting innovation and providing financial backing for promising projects.

According to its chief strategy advisor Kjell-Hakan Narfelt, innovation brings about societal change.

“Because innovation can change the behaviour of the people, and if we want to address sustainability, we have to address the behaviour of the people.

“Usually, innovation policy has been about renewal of industries, competitiveness of industries, growth of companies and industries.

“But now, we realised that the government has to take a stake in the directionality that society takes,” he told Malaysian journalists participating in a recent programme in Stockholm.

Narfelt says innovation brings about societal change.

Moreover, Narfelt said working with directionality remained a challenge because it was not a directive that came from the Prime Minister or the King, but a collaborative effort of different agencies and organisations to create the kind of directionality, and to mobilise actors in a societal directionality that is kind to economy, ecology, and society.

‘Changing mindset’ 

An organisation called Ignite Sweden, which is partially funded by Vinnova, aims to foster innovation through connecting start-ups and scale-ups with public and private organisations.

According to its director for international cooperation Sasan Shaba, because of a strong social security and a great start-up ecosystem, there has been a change of mentality among the people in Sweden.

Many students, having been exposed to the possibility of starting their own start-ups while still at school, no longer go for the job market after finishing their education.

A co-working space in Vinnova, the Swedish Governmental Agency for Innovation System.

“It is mindset changing, and that is because the technology ecosystem is evolving a lot,” said Shaba.

Ignite Sweden supports early-stage start-ups, whether they are in deep technology or other areas, by creating commercial collaborations for the start-ups not just with corporations but also with municipalities.

It does this by giving start-ups the best practices, network, sales training, coaching, negotiation skills, and they also help to do match-making with the corporates.

The organisation has been actively working with about 1,400 start-ups, 300 corporates and 44 public organisations, and they have done it in 11 countries with more coming in.

Moreover, it has done 450 commercial collaborations so far.

Shaba said Ignite was established formally in 2017, as a part of Swedish Incubators and Science Parks (SISP) meant to resolve the gap in bringing start-ups to the market.

“We have great companies in Sweden, great start-ups, great technologies, but we are lacking the means of bringing them to industrial customers.  We need to take them even faster to the market.

“Matchmaking happens when the start-ups are able to provide the solution to the challenges that the corporates and municipalities face.

“That (matchmaking), however, would not happen if it’s not a good fit,” he said, adding that so far, Ignite Sweden has 55 per cent hit rate of follow-ups.

He added that once the start-ups got a follow-up, Ignite Sweden would proceed to the 20-minute meeting with the start-ups to explain to them the needs and the challenges.

“It is not a pitch. It is much focused on the deals and solving the challenges of the corporate or municipality.”

Shaba says many students in Sweden, having been exposed to the possibility of starting their own start-ups while still at school, no longer go for the job market after finishing their education.

Shaba also said Ignite Sweden would also strive to make the start-ups understand that they could both integrate and reroute solutions.

“What I mean with that is that start-ups, as well as the corporates, need to understand that the company and predictive maintenance – say, one that is focused to work in a car manufacturing industry – can as well take that and reroute it to life sciences.

“Still, many start-ups and corporates are so focused on their own things that they do not understand that they can do much more in different industries and fields,” he pointed out.

Shaba then cited a case of a company called ‘Renewcell’, where they thought they had something that was supposed to be used as fuel, but it turned out that they could use it as a fibre product.

“This is what we try to make both sides understand, and when you have that in sight, then you can have the trust of co-creating together, rerouting and finding other ways.”

‘Later-stage facilitation’

There is another organisation that has an ecosystem that allows start-ups to co-create together and turn ideas into reality – the Epicenter.

It is hailed as the first digital innovation house that helps the entrepreneurial ecosystem in Sweden accelerate internationally, while continuing to strengthen its roots deep in the local market.

Based in Stockholm, Epicenter creates space, community, advisory and events to help scale start-ups, with the entrepreneurs obtaining the membership in order to connect to people, be part of events, get people to innovate and come up with ideas, generate interactions, gain feedback and also secure good marketing spots.

Under Epicenter, there is a cluster called ‘Accelerate’, which is programme-driven to allow start-ups and scale-ups get the best conditions to grow.

However, Epicenter is not a think-tank, according to the head of Accelerate at Epicenter Stockholm, Jack Melcher-Claësson.

“We help start-ups in a rather later stage, (for them) to really take off to become scale-ups, and then as really fast-growing international start-ups,” he said, adding that the organisation did it not only for the Nordic companies, but also for those in South Korea and even in Singapore – just to name a few.

Photo shows one of the spaces at the Epicenter in Stockholm.

Scale-ups, said Melcher-Claësson, must generate turnovers of at least two million euros and with at least 30 per cent year-on-year growth, which Epicenter would help to double up through its programmes.

Nonetheless, he also acknowledged that each start-up would have its own individual challenges, pain points and opportunities.

According to Epicenter head of advisory Edgar Luczak, many founders are good at their products, but lack the understanding on ways to grow a business, especially in trying to grow their operations outside the home market.

He cited a case last year when they had a company from Asia that recorded 10 million euros in turnover with revenues coming from its home market.

However, during its presentation at Epicenter, the company spent the time talking about its founders, products and machines, but never about the problems that their potential clients might have that they could solve.

Luczak stressed that such business pitch was ‘unlikely to work in Sweden’.

“We’re not saying that they are not good in doing business, because of course, if you had 10 million euros (in revenue), you must be doing something right.

“That said, it does not matter if you had 10 million euros back home – you would have zero revenue from Sweden with that type of sales approach,” he pointed out.

Luczak observes that many start-up founders are good at their products, but lack the understanding on ways to grow a business, especially in trying to grow their operations outside the home market.

Luczak added that even with Epicenter’s programmes that could help companies arrange for a better pitch when entering meetings with the potential investors, there was no guarantee that any company could have specific meeting with a specific investor.

“Also, we are very careful before we open our network of both business relations and investor relations.

“So, we would only do that when we have a reason to believe that this might be interesting for you,” he said, adding that Epicenter would not stop companies from taking contacts themselves.

‘Exposing ideas’

Apart from Accelerate, other clusters established by Epicenter include real-estate, retailing and food.

“Clusters is all about gathering the members to expose their ideas.

“While it is important to do matchmaking in business, it is also equally important for start-ups to find that connecting points through community events,” said Luczak.

One of Epicenter’s members is called ‘Future Ordering’ – a platform that enables restaurants to offer customers an ordering experience directly through applications, web or self-service kiosks.

A member, who was involved in the creation of Future Ordering, had stated: “The space, the spirit, the energy and the synergy among companies enable innovation to happen, and to have it grow the business’.

On this, Luczak explained: “Eat Up (a separate platform), they are in a similar industry, so we have actually been bouncing ideas together here.

“We realise that: ‘Hey, you’re building stuff for our client, maybe we should look into how we can do stuff together’.”

Today, Future Ordering is being deployed across 10 countries, powering some of the most profitable and innovative restaurant chains in the world.

Researchers at work in the Retail Lab Store of Epicenter.

In 2022, start-up ecosystem map and research centre StartupBlink hailed Sweden as having the best start-up ecosystem in the European Union (EU), ranking second in Europe, and in fifth position globally.

A report by the Organisation for Economic Cooperation and Development (OECD) has stated that Sweden boasts 20 start-ups for every 1,000 employees.

Amidst such commendation, however, Luczak said up to 96 per cent of all companies did not make 500,000 euros in turnover after three years.

“Only about 0.4 per cent of companies make more than 10 million euros in turnover in five years.

“I believe that it is important to understand that not all companies would succeed; still, if one out of 10 companies succeeded, the country probably had saved the taxpayers loads of money.

“Thus, it is more about enabling some companies to succeed, so that the entire economy would benefit from it.”

Malaysia’s take on start-ups 

Sweden is a good start-up nation in ICT and life sciences. It releases lots of competence, and entrepreneurship has become part of the culture that the country has created interesting scenes for new companies.

So, what can Malaysia learn from Sweden when it comes to innovation and start-up ecosystem?

According to Innovation Index 2020, Malaysia ranked the second most innovative country in Southeast Asia, and also ranked 21st in the Top 100 Emerging Ecosystem as reported by the Global Start-Up Ecosystem Report.

Nonetheless, Malaysia still has some distance to go in creating a robust start-up ecosystem.

The government, through various agencies such as Cradle Fund, Malaysian Technology Development Corporation (MTDC), Malaysia Debt Ventures Bhd (MDV) and Malaysia Digital Economy Corporation (MDEC), offers direct financial support to local start-ups.

However, for such ecosystem to flourish, there is a need of involvement from different sectors to create public and private partnership to support it – for it to become an ecosystem that is based on trust and allows people to come together to co-create and realise their ideas.

Sweden’s ecosystem constitutes a diverse range of players rooting for its people to succeed and ensuring entrepreneurs to be ‘constantly hungry’ to innovate.

There is an interplay between government and its agencies, academia, corporates, political system and organisations in making sure that those venturing in entrepreneurship would succeed.

Their constant effort to ensure strength and open society that embraces cooperation and competition would enable innovation to continue thriving.