Switzerland, as a developed country, is faced with improving its productivity and competiveness. Innovation is more crucial now in the context of Covid-19, which has seen digital acceleration, (forced) adoption of digital channels and more data centricity. Innovation creates real value by discovering new commercially viable products and services whilst improving upon existing ones. By creating the necessary framework, setting new standards for data privacy and security and creating unparalleled open data collection, the government can secure Switzerland’s place as a leading innovative business location. Businesses need to innovate both in incremental and revolutionary ways, create a culture fit for innovation and manage their innovation portfolios to leverage ecosystems.

Our recommendations

Here are how policymakers and businesses can drive innovation and create value to power up Switzerland’s competitiveness and productivity.

Policymakers

    Provide the framework for innovation

    Provide the framework for innovation

    One key role for government in innovation is creating a framework that fosters business innovation. This in turn is crucial to lifting productivity growth. A framework of this kind involves several areas, such as taxation and regulation, and the fostering of entrepreneurship and talent. Taxation and regulation, key levers for the government, need to encourage business innovation, or, at least, not hinder it. Taxation can provide incentives for innovation, such as the patent boxes included in the recent corporate tax reform, which provide incentives for R&D, a key part of innovation. Regulatory examples include the Fintech sandbox, providing light-touch regulation for financial service start-ups. The burden of regulation for business in general should be lowered through a targeted approach that evaluates the costs and benefits of regulation. The SECO Bureaucracy Monitor 2018, for example, shows that companies find regulation especially burdensome in the areas of construction, food, trade, audit and value add taxes. Reforms should target these areas where possible and existing initiatives should be accelerated.

    Another key element is supporting entrepreneurship, start-up development and finance. The transition from small start-up towards mature, larger corporations is one to look at in particular. For example, it is easier to secure first-stage financing for smaller start-ups and more difficult to secure the larger sums required for second-stage finance for larger start-ups. Whilst financing should ideally be private venture capital, government or government-owned entities such as the cantonal banks could help.

    Talent is a third important area, including both domestic and foreign talent. Digital and entrepreneurial skills should feature more strongly in school curricula, without undermining essential underlying subjects, such as languages or mathematics. The framework for international talent mobility currently puts Switzerland behind other leading business locations. More emphasis needs to be put on attracting highly talented graduates, fostering international intra-company mobility, and digitalising and harmonising immigration processes.

    Government - the innovation leader

    Government - the innovation leader

    Innovation should be driven forward by the government itself – making the country a role model for an innovative, digital state. In doing so, government helps create both an innovation environment and generates demand for suppliers of innovation and innovative products and services. Government can foster innovation clusters and be an integral part of them. And by going digital the government enhances its ability to reach all segments of the population.

    Government services should therefore be digitalised wherever possible, especially at the back-end, the non-customer-facing processes, and gradually harmonised across Switzerland without undermining cantonal decision-making. One stop shops for both businesses and citizens, such as easy.gov, should be expanded. Hybrid services should be the aim, the seamless integration of digital and non-digital customer-facing processes, to address all citizens and allow them to interact with the government via their favourite channel. At the same time, there should be gradual digitalising and harmonising of back-ends, to increase efficiency and reduce costs and the scope for errors. Examples of non-digital administration and its disadvantages include manually inputting data into immigration databases and using a fax to record COVID-19 infections. As the pandemic has highlighted, digital services are more resilient and offer both short-term and long-term advantages.

    A lack of will, or rather the difficulty in coordinating different stakeholders, and a lack of resources can be obstacles to e-government. Coordination with stakeholders could, for example, be tackled by further centralising responsibility for digitalisation and cyber security within the government. To alleviate the lack of resources one area of increased government investment should be digital government services. Whilst the government must retain ownership, it should also benefit from private sector input and know-how when digitalising. New ways of public-private cooperation should be explored, such as with the proposed digital identity card (where the precise nature of public and private cooperation still needs to be defined politically).

    Government can encourage targeted innovation by bringing in companies to solve economic problems, in the form of collaborative national innovation contests.

    Become a preferred data custodian

    Become a preferred data custodian

    If data is the oil of the digital economy, Switzerland has the chance to become a commodity superpower – which it has never been in traditional commodities. First, Switzerland should utilise its reputation for security, reliability and data privacy to become a preferred data custodian and location for data storage, hubs and related services. Integration and seamless operation within the EU are important, in order to be part of a much larger market and reduce business costs. Thus recognition of equivalence to EU data privacy must be secured.

    Become a data superpower

    Become a data superpower

    The potential to create value from data is – still – vastly untapped. The Swiss government could influence the creation of shareable data sets to feed innovation. Switzerland should create a huge data collection ‘lake’ drawn from people and behaviour in Switzerland, whilst strictly adhering to data privacy and security. Public ownership should be combined with business innovation. This should be open data, with non-profit organisations as well as all businesses, including start-ups, enjoying equal access, thereby furthering business innovation and productivity growth. Open data would remove obstacles for start-ups, reducing the need to collect data for proprietary, perhaps overlapping data pools and instead putting the emphasis on using the available data for innovation. Health is an obvious area where a trusted data custodian could help drive data provision and related innovation, both on a long-term basis, such as in cancer research, as well as shorter-term, as in a pandemic.

    At the same time, a large, high-quality and free data pool would give greater incentives for international digital companies to offer their services in Switzerland and pioneer and beta-test them here. A small, but digitally surveyed market would be the ideal testing ground for new digital products and services, increasing digital innovation in Switzerland.

    Create a digital twin of Switzerland

    Create a digital twin of Switzerland

    The idea of becoming a data superpower could be driven ahead further by creating a digital twin of Switzerland. Digital twins are digital replicas of physical assets, processes, people, places, systems and devices, using real-time sensors. The digital twin adapts and changes as the physical one does, providing both real-time updates on what is happening as well as highly realistic simulations. All data collected would have to be non-personal data. This could include long-term benefits such as providing data for the future of mobility, as well as real-time monitoring during a pandemic. Given the scale involved, an iterative process would be appropriate, starting with one set of sensors (such as non-personal mobile phone location data) and/or starting with smaller locations, such as a smaller city.

Business

    Create a company culture fit for innovation

    Create a company culture fit for innovation

    Make innovation a strategic priority at all levels in the company. A company culture fit for innovation is one of the most important success factors. Senior management buy-in and sponsorship are vital. Embrace agility and learn from failure, aligning rewards and promotions accordingly. Foster talent willing to learn and adopt constantly. Adapt to exponential growth where disruption can happen in a short amount of time. Initiate digital maturity assessment (DMA) to enable a broad digital transformation. A DMA provides guidelines for a clear path through the transformation by covering five core business dimensions.

    Balance the innovation portfolio

    Balance the innovation portfolio

    Balance a company’s innovation portfolio between core, adjacent and transformational innovation. Core innovations are incremental improvements in existing products and services, which are typically more certain to succeed, though with limited benefits. At the other end of the scale is transformational innovation, which has the opposite risk-benefit outlook: less likely to succeed, but with a potential transformational effect if it does. Having an innovation portfolio allows a strategic innovation strategy across all dimensions and avoids wavering from one strategy to another. Companies should go for incremental improvements, but not limit themselves to such as strategy and also aim for transformational change. Core innovation is vital to keep a product or service competitive provided no transformational change occurs. But a transformational change may make the product or service and all previous core innovation associated with it obsolete.

    Leverage ecosystems

    Leverage ecosystems

    Partner with others to become more competitive together. This can take the form of specialising on part of the value chain instead of trying to stay competitive across the entire chain. It could also involve offering external services in addition to the core service provided. For example, a bank might offer external insurance services in addition to its banking services. A vital aspect of working with an ecosystem is cooperating with start-ups by using their innovation without hindering it. Working in an ecosystem can also allow companies to reach towards transformational innovation and entirely new products or services. For example, a retailer might partner with an IT company to offer healthcare services, with each contributing their skills and access to customers.

    Make cyber security integral to everything

    Make cyber security integral to everything

    Make cyber security a strategic priority, not an IT problem to be solved by IT alone. First, cyber security is as much a people issue as a technology issue, as employee mistakes can provide entry points for attacks. Cyber security must be part of the business culture. Second, cyber security should not be treated as an isolated afterthought, figured out after the product or service is developed. Security must be an integral part, perhaps even one of the selling propositions. Cyber security offers a growth opportunity, as trust and security become ever more important. This is even more critical during a pandemic, as more services are digitalised and therefore more potential entry points for cyber attacks are created.

    Embrace mobile solutions

    Embrace mobile solutions

    Mobile technology still has great potential for businesses, as well as for overall productivity growth. It has made huge advances both in hardware and software and enjoys nearly universal consumer usage. Businesses can make still more use of mobile technology as a customer channel. Whilst services such as mobile shopping or mobile finance are on the rise, there remains potential for suppliers to improve their offering. Even greater potential lies in the application of mobile technology as a business tool. Administrative tasks could benefit from the ease of use of mobile solutions, whilst real-time updates and end-to-end digitalisation could benefit many customer or non-customer-facing business processes. A client adviser could, for example, use mobile devices to advise clients, display information during client conversations, document interactions and initiate next steps, such as starting customer onboarding processes.

Why business ecosystems are crucial for driving innovation

Business ecosystems call for a new mindset. For many companies in Switzerland, thinking in terms of business ecosystems can open up opportunity for growth and drive innovation. In our upcoming study, Deloitte and the University of St. Gallen have taken the pulse of several Swiss companies, to measure how far they are along this evolutionary journey.

Dare to think big, and then dare to think bigger

"If there has ever been a year showcasing why we need to be innovative, then is has been this one. Companies had to adapt to the pandemic, and fast."

Full interview
Antonio Russo, Deloitte Partner and Innovation Leader

Antonio Russo, Deloitte Partner and Innovation Leader

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Contacts

Antonio Russo
Antonio Russo

Innovation Leader and Partner

+41 58 279 7441

Dr. Daniel Schlegel
Dr. Daniel Schlegel

Partner

+41 58 279 6770

Michael Lewrick
Michael Lewrick

Head of Innovation Labs

+41 58 279 7509