Step up in Social Innovation to stand out in Saudi Arabia
Innovation is a key driver for performance in the private sector, where it is constantly used in order to gain competitive advantages by increasing the range of products or services of the company, managing the resources more efficiently, reducing the environmental footprint or in order to increase their employees retention and motivation.
If the benefits of innovation in the private sector are well known, what about its relevance for the public sector? Should governments start looking at innovation as a tool to increase their overall performance and effectiveness?
Due to the complexity of the issues that the government is dealing with, innovation could help the public sector find new and more resource effective ways of tackling with some of those issues. Hence, The Economist Intelligence Unit created the # Social Innovation Index, which aims to assess the ability of countries to drive social innovation and to pinpoint ways in which countries can stimulate social innovation.
The index is divided into four main areas Policy and institutional framework, Financing, Entrepreneurship and Society, each sub-divided in sub-categories. A more complex calculation formula of the index could be expressed as: A*44,44% + B*22.22% + C*15% + D*18.33%, where:
A= Existence of national policy on social innovation*25% + Social innovation research and impact*20% + Legal framework for social enterprises*20% + Effectiveness of system in policy implementation*20% + Rule of law*15%;
B= Availability of government financing to promote social innovation*50% + Ease of getting credit*25% + Total public social expenditure*25%;
C= Risk-taking mindset*25% + Citizen’s attitude towards entrepreneurship*25% + Ease of starting a business*25% + Development of clusters*25%;
D= Culture of volunteerism*20% + Political participation*20% + Civil society engagement*20% + Trust in society*20% + Press freedom*20%.
In 2016, out of the 45 countries analyzed, the top performers were the United States, United Kingdom and Canada, while the less performant three were Saudi Arabia, Paraguay and Philippines. Moreover, Saudi Arabia is ranked 49th in the measurement of business-friendliness environment conducted by the World Bank.
Although the # Social Innovation Index does not assess the inputs of the private sector, which usually has great involvement, nor the actual achievements, the instrument can be considered a starting point and can draw the necessary attention on the subject.
Transforming Saudi Arabia into a Knowledge-based economy
Saudi Arabia is well-known as one of the largest oil exporters, but since the price of oil dropped all of a sudden, Saudi Arabia had to find other measures to support its development. One alternative for the country was to create a more knowledge and service-based economy, by stimulating innovation among its citizens, thus increasing entrepreneurial activities.
The potential for Saudi Arabia to do so is quite high as a there was a notable increase in Saudi applicants for the MITEF Arab Startup competition – a 15% increase, which was due to the fact that more than half of the successful entrepreneurs in the KSA are under 35 years old. Saudi Arabia has seen this opportunity and has integrated it in its ”National Strategy for Transformation into a Knowledge-based Economy by 2030”, taking additional steps for implementing the strategy, such as:
- Investing in education and research to foster innovation;
- Creating 40 business incubators;
- Developing a financing network for start-ups.
Although these measures are a good start, they only address the issue in a general manner. Our recommendation is to start addressing particular issues based on the sub-metrics of the Innovation Index. For example, Saudi Arabia could start working on creating a more streamlined manner to use the country’s legal framework and develop easier access to public financing for the general public.
These measures could support the other two goals of the country’s project for 2030, as it aims to improve its rank in the Government Effectiveness Index published by World Bank and the Global Competitive Index published by World Economic Forum.
One final aspect to keep in mind is that indicators measuring the risk-taking mindset, attitude towards entrepreneurship or civil society engagement should not be overlooked. This mindset is the basis for the actual development of entrepreneurial activities and will bring about the largest increase in growth.