The investment of approximately EUR 180 million into the forest industry’s first real, self-developed product of innovation was naturally a risk, but a risk that was taken. If all went well, the company would get a return on the investment made during the innovation phase — maybe even with interest. However, there were no guarantees.
Innovations are the pet projects of companies, politicians and think tanks. They are surrounded by great expectations for the future, and great risks too. That is why public funds are also used to support research and product development.
Research, product development and innovation are essential to companies. They create the conditions for growth and transformation, as well as streamlining existing operations and enhancing competitiveness.
Research and product development are usually done by a large group of partners, so the operations of big companies have a great spill-over effect on public research units, SMEs and start-up companies.
From the perspective of a big company, public funding is only a small portion of the total investment that goes into the innovation. However, Finland needs business-orientated applied research to maintain and increase its competitiveness. Strategic cooperation between companies, universities and higher education and research institutes binds companies to Finland. This is vital.
It can easily take ten years to complete the innovation chain, which consists of developing, piloting and commercialising the technology. To the company, this means a negative cash flow and expectations for repayment that lie far in the future. This applies to the Lappeenranta Biorefinery as well.
The economic added value is marginal to both the company and society at this stage. Spaces are possibly rented, a small number of pilot machines and equipment are ordered, raw materials are bought for testing purposes and salaries are paid to a limited group of highly educated developers. The expectations lie in the future.
The actual economic added value to the company and society comes from scaling the innovations to production activities. At this point, investments, construction, machine orders, and raw materials purchases begin on an industrial scale, a workforce is hired, services are bought and production activities are set in motion, and the innovation products are taken to market to be sold. A few developers are no longer enough; the spectrum of professions is multifold and the number of personnel is on an entirely different level.
This is the desired phase, where money is made by both the company and society. This phase can last for decades — in the forest industry, about 30 to 40 years. That’s why I think it’s odd that so many decision-makers think the innovation phase is more desirable or glamorous than the production phase. After all, both are essential parts of one value-adding process. Without innovation, the industry does not evolve together with the market, but without a competitive and profitable industry, there is no income and thus no money for new innovations.