New business models for public innovation intermediaries supporting the digital transition

Over the last two decades, policymakers have invested increasing resources in creating public innovation intermediaries specifically dedicated to supporting innovation and technology transitions. These intermediaries are expected to help firms and other organisations to develop and adopt emerging digital technologies, such as the Internet of Things (IoT).

To suit their new role in the context of the digital transition, public innovation intermediaries need to design new business models for their activities, or reconfigure their existing business models. While research on IoT has examined the business models emerging around this technology, studies in this stream of literature have focused on firms rather than intermediaries. Conversely, research into innovation intermediaries’ business models has focused either on a specific type of private intermediation, such as crowdsourcing platforms, or on specific aspects of the business model, such as the value proposition or target segments.

To fill this gap, we address the following research question: How do public innovation intermediaries adapt their business models to support digital transition towards IoT?

We address this research question through a multiple case study research design, studying four public innovation intermediaries that work partly or totally in the area of industrial IoT: two in the French Pôles de Compétitivité network, which was founded in the mid-2000s with a specific mandate to support innovation within their regions, each pôle focusing on a specific sector or technology; and two in the UK’s Technology Catapults network, which was founded in the early 2010s, with a mandate to support innovation at national level in specific technologies.

Our data reveals that the four intermediaries have adapted their business models to the requirements of the emerging technology, so as to support firms and facilitate the digital transition. Since their creation, all intermediaries have performed traditional functions of supporting business innovation and upgrading (often for SMEs), transferring research results to firms, and helping various types of networks to spread the use of digital technologies in business. This activity has helped them greatly to understand the players in the system they are endeavouring to change. Over time, they have all expanded their activities, encouraging the transition towards a new innovation system around industrial IoT. These are more sophisticated activities where they bring together technology providers, help companies to articulate their demand for technology and sometimes to find the best technological solutions, organise networks to address technological needs, and even take a lead in the development of proof-of-concepts.

Target segments have expanded. Intermediaries increasingly target all kinds of organisations, including large firms, SMEs, and firms that were not previously members of IoT innovation systems. At the same time, several intermediaries have stated that they have narrowed the range of application sectors they focus on. This is consistent with their role of building new innovation systems. Application sectors involve different characteristics and actors; to build systems effectively, intermediaries need to know the current or potential system agents, with their skills and knowledge, and since this is a resource-intensive process, they need to focus their efforts.

In order to adjust their business models, intermediaries have relied on several key tangible and intangible resources.

Knowledge of the technologies, and of the industries they are applied in, is an important resource. Intermediaries have taken different approaches to securing access to technology and industry knowledge: some have recruited additional staff with knowledge and competences in target industries, while others have mainly relied on their external networks in order to access technological knowledge, and their size has remained stable.

Knowledge of the innovation system context – its important actors and their mutual relationships – has also proved crucial. Knowledge of the local and especially regional context, is particularly important for pôles with an additional local development mandate. To build such knowledge of their context, the intermediaries’ networking, mapping, and service provision activities, in which they had been engaged for some time before taking on their new role as innovation system builders, have proved very helpful.

Legitimacy is another important resource. Public innovation intermediaries enjoy legitimacy because it was formally conferred on them by the public policy that created them. This formal legitimacy has helped them gain the informal legitimacy conferred by other system stakeholders, because it has favoured the development of trust in the intermediary as an impartial, neutral player in the innovation system.

Finally, secure, long-term public funding has proved important to allow intermediaries to align with emerging technology. This is for at least two reasons. First, they needed a sufficiently long decision-making horizon that encouraged them to plan strategically and respond to changes in their environment by investing in necessary organisational change processes. Second, they needed time to develop the intangible resources underpinning their new activities and roles in line with the new emerging technology.

The table summarises how the intermediaries’ business models have changed over time, focusing on the five dimensions of value proposition, organisation of activities and their structuring, target segments, key resources and competences, and cost/revenue structure.

Based on this evidence, public innovation intermediaries are advised to pay particular attention to: (i) having a sufficiently long decision-making horizon underpinned by sufficiently long-term resources; (ii) having adequate formal and informal legitimacy;  (iii) building the appropriate knowledge resources in relation to both the relevant technologies, industries and innovation system context.

Business model componentsChanges from earlier business models
Value propositionIntermediaries propose to create/shape the system rather than simply providing innovation support services
Organisation and structuring of activitiesGrowing commitment to activities promoting organisational forms (networks, temporary associations, consortia) that solve problems arising from application of new technologies or exploration of new areas of application
Target segmentsIntermediaries support a wider range of businesses (SMEs, large businesses, other organisations)
Key resources and competencesAbility to rely on: technological knowledge acquired through recruitment of specialised personnel and/or outside experts
Industrial knowledge acquired via recruitment of specialised personnel and/or outside experts
Context-specific (territorial) knowledge obtained from earlier activities
Formal legitimacy conferred by the policymaker
Informal legitimacy gradually developed through successful flagship projects, long-term membership, transparent and codified procedures
Secure, long-term public funding that allows PIIs to change and to align with emerging technology
Cost/revenue structureReduction in public funding and adoption of market-based activities

Policy should design tools that allow intermediaries to preserve their distinctiveness in innovation systems, stimulating them to be competitive at the same time. Additionally, public funds are very important to allow intermediaries to experiment with new technologies, learn how best to adapt their business model to the new context in order to provide an effective service to firms.

The full paper is available as: Rossi, F., Caloffi, A., Colovic, A. and Russo, M. (2021) New business models for public innovation intermediaries supporting emerging innovation systems: the case of the Internet of Things. Technological Forecasting and Social Change.