Innovation Arms Race July 16, 2018 - Center for Advancing ... · Innovation Arms Race July 16, 2018 Report By: Rosemarie Truman, Founder and CEO ... Table of Contents Introduction

Confidential & Proprietary the Center for Advancing Innovation and Gazelle Futures - Do Not Distribute without Permission

Innovation Arms RaceJuly 16, 2018

Report By:Rosemarie Truman, Founder and CEO

2Confidential & Proprietary to The Center for Advancing Innovation. Do Not Distribute

Table of Contents

Introduction to the Center For Advancing Innovation and PatSnap

Global Innovation Performance Analysis

Implications and Recommendations


INTRODUCTION TO THE CENTER FOR ADVANCING INNOVATION


Key Focus Areas

The Center for Advancing Innovation

Operational Capabilities Transformation

Due Diligence

Growth Strategy

Team Capability: • Leader: Led IBM’s Innovation Strategy Practice Globally • Capability: End-to-end from invention to maximizing

commercial potential of inventions

Qualifications and Experience: • Track record of working with private equity, investment

firms, serial entrepreneurs and Fortune 500 firms to identify the right investments to realize value quickly

• Key Clients: MedImmune/AstraZeneca, Danaher, Welch Allyn, Medtronic, Pfizer, GSK, Novartis, IBM, Nokia, Microsoft, Alcatel Lucent etc.

Trade Secret Methodologies: • Trade secret models for growth strategy & due diligence,

operational optimization and maximizing commercialization


CAI - Partial Innovation AssessmentsTech transfer, innovation and commercialization

Deep Dives

University, Govt, & Hospital

State

Industry

Global

• Identify, analyze and forecast ROI for all key innovation levers

• Evaluate federal lab, university and hospital innovation performance

• Benchmark US state-by-state innovation performance

• Assess industries global innovation performance

• Benchmark countries innovation performance globally


GLOBAL INNOVATION PERFORMANCE ANALYSIS


0

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1,200

1995

1996

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2010

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2012

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2015

Thou

sand

s

Patent Applications by Applicant Origin (1995-2015)

U.S.UNITED KINGDOMKOREA, SOUTHTAIWANCANADASWITZERLANDISRAELINDIASINGAPORENORWAYRUSSIAN FEDERATIONBRAZILTotal, ChinaTotal, EU

Global Patent Applications – West has Lost LeadershipWhile the US and EU volume remains high in patent applications, they have lost their leadership to China* since 2011

Source: CAI Analysis Model, World Bank, WIPO Patent Database

RegionPatents/Million

Capita (2015)%CAGR Patent Apps (’95-’15)

%AAGR Patent Apps

(‘95-’15)Total, China 734 25.8% 26.4%

SINGAPORE 1117 20.3% 22.5%

INDIA 18 14.1% 14.4%ISRAEL 1729 8.0% 8.6%SWITZERLAND 5550 6.9% 7.1%KOREA, SOUTH 4669 6.6% 7.1%NORWAY 1101 5.8% 6.2%US 1654 5.4% 5.6%Total, EU 969 5.3% 5.5%

CANADA 691 5.2% 5.6%BRAZIL 32 3.8% 4.0%RUSSIAN FEDERATION 235 3.2% 3.7%UNITED KINGDOM 820 2.9% 3.1%

US

China

EU

UK

Korea

*All China numbers includes Hong Kong and Macau


0

50

100

150

200

250

300

1995

1996

1997

1998

1999

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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Thou

sand

s

Patent Grants by Applicant Origin (1995-2015)

U.S.UNITED KINGDOMKOREA, SOUTHCANADASWITZERLANDISRAELINDIASINGAPORENORWAYRUSSIAN FEDERATIONBRAZILTotal, ChinaTotal, EU

Global Patent Grants – West Lags Growth In 2015, US and EU lost their competitive stance in patent grants to China, and are behind in growth compared to East Asia

RegionGrants/Million Capita (2015)

%CAGR Patent Grants (’95-

’15)

%AAGR Patent Grants

(‘95-’15)Total, China 203 29.1% 32.3%

SINGAPORE 495 27.9% 41.9%

KOREA, SOUTH 2139 13.4% 18.4%INDIA 4 13.1% 15.2%ISRAEL 763 9.5% 9.7%SWITZERLAND 2679 6.7% 7.3%CANADA 382 6.4% 6.6%NORWAY 593 6.1% 6.8%US 801 4.8% 5.0%

Total, EU 503 4.8% 5.1%UNITED KINGDOM 330 3.5% 3.8%BRAZIL 7 3.5% 5.0%RUSSIAN FEDERATION 173 0.8% 2.4%

US

China


EU

Korea

UK


Global Patent Effectiveness – West Quality DeclineThe US, EU and UK’s ability to convert patent applications to patent grants, or Patent Effectiveness, is flat or declining. South Korea, China and Singapore lead in growth of quality patents


Region

%CAGR Patent Effectiveness

(’95-’15)

%AAGR Patent Effectiveness

(‘95-’15)KOREA, SOUTH 6.4% 13.5%SINGAPORE 6.3% 13.4%Total, China 2.6% 4.8%ISRAEL 1.3% 2.3%CANADA 1.1% 1.5%UNITED KINGDOM 0.5% 0.8%NORWAY 0.3% 1.4%SWITZERLAND -0.2% 0.2%BRAZIL -0.4% 1.1%Total, EU -0.5% -0.2%US -0.5% -0.1%INDIA -0.9% 0.7%RUSSIAN FEDERATION -2.3% 0.8%

0%

10%

20%

30%

40%

50%

60%

70%

1997 2000 2003 2006 2009 2012 2015

Pate

nt E

ffec

tive

ness

(Gra

nts/

App

licat

ions

)

Patent Effectiveness (3-Year Aggregates from 1995-2015)

U.S.UNITED KINGDOMKOREA, SOUTHCANADASWITZERLANDISRAELINDIASINGAPORENORWAYBRAZILTotal, ChinaTotal, EU

US

China

EUKorea

UK


Global Patent Effectiveness Index – 2015 SnapshotIndexing global Patent Effectiveness on a per capita and GDP basis shows the US, UK and EU are trailing; they are not focused on innovation that turns into GDP…

Key Insights• Per capita the EU and UK rank #10 and #7, respectively; the US ranks #9, more than 6-times lower than South Korea at #6• China and India are in the bottom 2 on a per capita basis due to their large population size• The US is last in effectiveness per GDP, approximately even with China (#12), but over 12-times behind South Korea (#6)


0.001 0.0020.006

0.080

0.104

0

0.02

0.04

0.06

0.08

0.1

0.12

INDIA

Total, C

hina

BRAZIL

Total, E

UU.S.

RUSSIAN F

EDERATION

UNITED K

INGDO

M

KOREA, S

OUTH

CANADA

ISRAEL

SWIT

ZERLAND

SINGAPO

RE

NORW

AY

Effe

ctiv

enes

s / 1

M C

apita

Patent Effectiveness / 1M Capita (2015)

0.029 0.0340.149

1.5311.597

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

U.S.

Total, C

hina

Total, E

U

BRAZIL

INDIA

UNITED K

INGDO

M

CANADA

KOREA, S

OUTH

RUSSIAN F

EDERATION

SWIT

ZERLAND

NORW

AY

SINGAPO

RE

ISRAEL

Effe

ctiv

enes

s per

$1T

GDP

Patent Effectiveness per $1T GDP* (2015)

*Numbers adjusted by Purchasing Power Parity (PPP) to 2010


0.001 0.0020.006

0.071

0.117

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

Total, C

hina

INDIA

Total, E

U

BRAZILU.S.

KOREA, S

OUTH

UNITED K

INGDO

M

RUSSIAN F

EDERATION

CANADA

SINGAPO

RE

ISRAEL

SWIT

ZERLAND

NORW

AY

Effe

ctiv

enes

s / 1

M C

apita

Patent Effectiveness / 1M Capita (1995)

0.052 0.0520.204

1.654

2.478

0

0.5

1

1.5

2

2.5

3

Total, E

UU.S.

Total, C

hina

BRAZIL

UNITED K

INGDO

M

KOREA, S

OUTH

CANADA

INDIA

SWIT

ZERLAND

SINGAPO

RE

RUSSIAN F

EDERATION

NORW

AY

ISRAEL

Effe

ctiv

enes

s per

$1T

GDP

Patent Effectiveness per $1T GDP (1995)

Global Patent Effectiveness Index – 1995 Snapshot…and there has been little change in rankings since 1995; China and South Korea improved marginally and the US and UK declined

Key Insights• In 1995, on a per capita basis, the US, EU and UK rank #9, #11, and #7, respectively; China, India, and the EU were in the bottom 4• The US and EU are last in effectiveness per GDP



0

500

1000

1500

2000

2500

BRAZIL INDIA SINGAPORE UNITEDKINGDOM

ISRAEL CANADA U.S. NORWAY Total, China Total, EU RUSSIANFEDERATION

KOREA, SOUTH SWITZERLAND

Pate

nt G

rant

s / $

1B G

ERD

Patent Efficiency (Patent Grants / $1B GERD) 2015

Key Insights• The US, EU and UK rank #7, #4 and #10 in Patent Efficiency; he US, EU and UK are 2.5 to 3 times behind the leader, Switzerland• The US and UK rank below all top performing patenting countries (China, EU and South Korea)

Source: CAI Analysis Model, WIPO Patent Database, UNESCO Institute for Statistics

Global Patent Efficiency Index – 2015 SnapshotAnalyzing Patent Efficiency, converting $1B in R&D to patent grants, illustrates that Switzerland and South Korea generate the highest number of issued patents per R&D dollar; it costs too much per patent for the US, EU and UK


41138

297

576 594 610 611 634

812 8721032

1562

1977

0

500

1000

1500

2000

2500

BRAZIL

INDIA

SINGAPO

RE

UNITED K

INGDO

M

ISRAEL

CANADAU.S.

NORW

AY

Total, C

hina

Total, E

U

RUSSIAN F

EDERATION

KOREA, S

OUTH

SWIT

ZERLAND

Pate

nt G

rant

s / $

1B G

ERD


11 44 49 117

296 339 341435 464

549654

1026

2043

0

500

1000

1500

2000

2500

SINGAPO

RE

INDIA

BRAZIL

Total, C

hina

CANADA

ISRAEL

NORW

AYU.S.

UNITED K

INGDO

M

KOREA, S

OUTH

Total, E

U

SWIT

ZERLAND

RUSSIAN F

EDERATION

Pate

nt G

rant

s / $

1B G

ERD


Key Insights• Russia and Switzerland led in efficiency, but Russia dropped in efficiency rankings since 1995• The US, EU and UK all dropped in efficiency rankings, losing its position to China and South Korea• China and Singapore have the greatest growth improvement in efficiency with a 10% and 18% CAGR, respectively

Source: CAI Analysis Model, WIPO Patent Database, UNESCO Institute for Statistics

Global Patent Efficiency Comparison – West DeclineThe US, EU and UK Patent Efficiency dropped in rankings, overtaken by China and South Korea, from 1995 to 2015


Key Insights

• Although the volume of US and EU GERD rank highest, the US ranks #4 and EU ranks #10 in R&D spending per capita• The EU and UK have modest GERD expenditure per capita and are growing at a steady rate• China has explosive growth in GERD overall; the US and EU has also lost GERD volume to BRICSource: CAI Analysis Model, WIPO Patent Database, UNESCO Institute for Statistics

GERD Volume and Growth – Is this the Issue?The decline in quality patents in the West theoretically could be due to lower Gross Domestic Expenditure on R&D (GERD) volume and growth however, China and South Korea both outperform the West in patenting metrics

$0.00$100.00$200.00$300.00$400.00$500.00

$0

$500

$1,000

$1,500

$2,000

SIN

GA

PO

RE

KO

RE

A,…

SWIT

ZE

RL…

U.S

.

ISR

AE

L

GE

RM

AN

Y

NO

RW

AY

TA

IWA

N

CA

NA

DA

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al, E

U

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ITE

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al, C

hina

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SSIA

N…

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IL

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GER

D (B

illio

ns)

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D p

er C

apit

a

GERD (Billions) and GERD / Capita

GERD per Capita GERD (Billion)

Region GERD CAGR (‘95-’15) GERD AAGR (‘95-’15)China 11.0% 17.3%US 3.4% 3.1%EU 3.0% 3.4%Korea 2.7% 7.8%UK 2.3% 2.4%

$0

$50

$100

$150

$200

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$300

$350

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GER

D ($

Bill

ions

)

Total GERD (1995-2015)

U.S.KOREA, SOUTHTotal, EUBRICTotal, ChinaUNITED KINGDOM

US

South Korea

China

EU

UK

BRIC


GDP from R&D – East Asia’s Investment Drives GPDEast Asian countries are consistently investing more on innovation/GERD relative to GDP, compared to the static investment trends in the West

Key Insights

• GERD/GDP for the US, EU and UK has remained relatively flat since 1995

• From 1995 to 2015, Asian countries saw rapid increases in GERD/GDP, notably South Korea with a GERD/GDP of 5.5% in 2015

• From 2004 to 2005 China surpassed the US in R&D investment per GDP and maintains a 1.3% gap in 2015

Source: CAI Analysis Model, UNESCO Institute for Statistics, World Bank GDP Estimates

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

GERD

/GDP

GERD per GDP (1995-2015)

U.S.UNITED KINGDOMKOREA, SOUTHTAIWANCANADASWITZERLANDISRAELINDIASINGAPORENORWAYRUSSIAN FEDERATIONBRAZILTotal, ChinaTotal, EUUS

South Korea

China

EU UK

Country CAGR (1995-2015)China 7.4%South Korea 3.2%EU 1.6%US 0.6%UK 0.3%


IMPLICATIONS


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201520162017201820192020202120222023202420252026202720282029203020312032203320342035

Pate

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ssue

d (M

illio

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CAGR Forecast Patents Issued(based on 1995-2015)

U.S. South Korea United Kingdom China EU

0

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0.6

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1

1.2

1.4

1.6

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Pate

nt A

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atio

ns (M

illio

ns)

CAGR Forecast Patent Applications(based on 1995-2015)

U.S. South Korea United Kingdom China EU

Key Insights• China has the highest growth rates for patent applications (22%) and grants (24%) – together with the large increases in

historical volume (‘95 to ‘15), this creates forecasted volumes massively larger than any other country• By 2035 China will have grown to 40x the US patent application volume and 25x the US patent grant volume• Volume of patenting by China has already outpaced US, EU and UK volume combined

US

US

China (surpassed the US in 2014)

China (surpassed the US in 2014)

WIPO Global Patent ForecastForecasts based on a global view predict Asia will continue to outperform the West; China will continue to widen the gap, with South Korea poised to overtake the US

Source: CAI Analysis Model, WIPO Patent Database


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Brazil

India

United Kingdom

EU

Switzerland

China

Russian Federation

U.S.

Singapore

Israel

Canada

South Korea

Norway

Patent Effectiveness (Grants/Applications)

Patent Effectiveness Forecast (2035)

Key Insights• The US will be overtaken by South Korea in Patent Effectiveness, while the EU and UK will drop below China• Given the growth rate of patents issued is lower than the growth rate of patent applications, the US, EU and UK will

lose ground to China in volume of quality applications that convert to issued patents

Patent Effectiveness Forecast – West Loses GroundGlobal patent data shows the US, EU and UK will lose ground to Asia in Patent Effectiveness if current trends continue

Source: CAI Analysis Model, WIPO Patent Database

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Brazil

India

United Kingdom

China

Switzerland

EU

South Korea

U.S.

Canada

Israel

Singapore

Russian Federation

Norway

Patent Effectiveness (Grants/Applications)

Patent Effectiveness (2015)


Key Insights

• The gap in GERD investment between the EU and the US will widen and the US will be overtaken by China in 2029

• South Korea’s growth is accelerating

2015 RE Top 5:1. US2. China3. EU4. S. Korea5. India

2035 RE Top 5:1. China2. US3. EU4. S. Korea5. India

$0

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$1,000

20152016

20172018

20192020

20212022

20232024

20252026

20272028

20292030

20312032

20332034

2035

GER

D (

$B

illi

on

s)

CAGR Forecast of GERD(based on UNESCO 1995-2015)

U.S.

United Kingdom

South Korea

Taiwan

Canada

Switzerland

Israel

India

Singapore

Norway

Russian Federation

Brazil

EU

China

2029

GERD Forecast – China Surpasses the US by 2029

Source: CAI Analysis Model, UNESCO Institute for Statistics

US

South Korea

China

EU

UK


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

GE

RD

/ G

DP

GERD Forecast / GDP Forecast (Based on 1995 - 2015)

U.S.UNITED KINGDOMKOREA, SOUTHTAIWANISRAELINDIASINGAPORETotal, ChinaTotal, EU

Key Insights

• China, South Korea, Taiwan, Singapore and Israel will have the largest investments in R&D by 2035, reflecting the faster forecasted growth in GERD compared to GDP• The US, EU and UK have low growth due to a mature and constant GERD. If additional

GERD is wisely spent, an increase in innovation may occur

Region 2015 GERD

US $420 billion

EU $255 billion

UK $37 billion

China $345 billion

South Korea $70 billion

US

China

CountryGERD CAGR

‘05-’15

GERD CAGR

‘04-’09

Total, China 14.55% 11.96%KOREA, SOUTH 8.60% 7.16%SINGAPORE 6.15% 7.08%TAIWAN 5.19% 4.35%BRAZIL 5.16% 2.81%INDIA 4.71% 1.16%ISRAEL 4.45% 5.09%NORWAY 4.01% 4.92%SWITZERLAND 3.29% 3.05%RUSSIA 2.95% 1.20%Total, EU 2.70% 2.01%US 2.51% 2.45%UK 1.99% 2.32%CANADA -0.27% -0.21%

GERD / GDP Forecast – Asia Outpaces the West


South Korea

EU

UK


$0

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$20,000

$30,000

$40,000

$50,000

$60,000

20152016

20172018

20192020

20212022

20232024

20252026

20272028

20292030

20312032

20332034

2035

GD

P (

Bill

ion

s)

CAGR Real GDP Forecast Applied to Nominal GDP(based on 1995-2015 World Bank)

U.S.

United Kingdom

South Korea

Taiwan

Canada

Switzerland

Israel

India

Singapore

Norway

Russian Federation

Brazil

EU

China

2025

2015 GDP 2035 Projected GDP

China $9.2 T $52.2 T

US $16.6 T $26.8 T

EU $15.2 T $21.1 T

UK $2.7 T $4.1 T

South Korea $1.2 T $2.9 T

Key Insights

• The US, EU and UK are ranked among the bottom for GDP growth rate out of the 14 countries included in the study – China was #1• Continuing with the current growth rate, China

will overtake the US in GDP by 2025• Over the last 20 years, the US GDP growth rate

is 2.43% versus China, which is 9.06%GDP Growth Rate

US = 2.43% China = 9.06%

GDP Forecast – China Surpasses the US & EU by 2025


US

South Korea

China

EU UK


Innovation Arms Race Conclusions


• Patent Effectiveness declining in the West: The US, EU and UK’s ability to convert patent applications to patent grants, or Patent Effectiveness, is flat or declining, on a per capita and GDP basis. South Korea, China and Singapore lead in growth ofquality patents

• Patent Efficiency needs to improve: Patent Efficiency is the ability to convert one dollar in R&D spend to a patent grant. It costs much more for the US and UK than China, South Korea and Russia to produce a high-quality patent that gets granted; both the US and UK

• Research expenditure provides little ROI: While the US spends twice as much as each of the UK and EU in research expenditure relative to GDP, R&D spend is not driving GDP growth in the US. In other words, one additional dollar of R&D spend in the US does not drive GDP growth

• Asia will continue to dominate: East Asian countries are out-performing the US, EU and UK in growth of patent grants. China and South Korea are consistently in the lead regarding a number of performance metrics. India, Israel and Singapore are expectedto see the highest growth in patents granted through 2035

• Conclusion: the US, EU and UK needs to harness investments in innovation to drive R&D ROI

Documents

Innovation Arms Race July 16, 2018 - Center for Advancing ... · Innovation Arms Race July 16, 2018 Report By: Rosemarie Truman, Founder and CEO ... Table of Contents Introduction