Constitutional Document of Innovation Land – Iceland

Last friday was an important day for those of us who have been working on developing the startup community focused on new ventures and innovative companies in Iceland. The Minister of Industry and Innovation, Thordis Kolbrun Reykjord Gylfadottir and Gudmundur Hafsteinsson, the Chairman of the Steering Committee advising the Ministry announced the vision for Innovation in Iceland. Vision is important and it is exciting to see that Innovation and Startup thinking has permeated into every layer of the stack in Iceland. Looking forward to participating and contributing to this journey into the fantastic future. The document in Icelandic can be found here, I am going to do my best to translate this to English, of course with the help of Google Translate. So, if something sounds terrible it is Google’s fault, however if it sounds beautiful it is all because of yours truly This is not an official translation, I will share the official translated document if one is published.

Innovation is not a luxury but a necessity

The Minister highlighted the importance of new ventures and innovation for Iceland and it is not a luxury but a necessity. We all can relate to that as innovation, entrepreneurship and startup thinking is what pulled Iceland out of the financial collapse. It was the entrepreneurship of Icelanders which made Iceland step up to meet the demand of travelers coming to Iceland after 2010. It was the innovative thinking of startup founders that created breakthrough products and companies from Iceland ranging for utilizing the fish skin to do skin graft on humans to creation of one of the most popular massive multiplayer game. There are a number of startups that have been created and are winning in the global marketplace starting from Iceland since 2008. We have been seeing the maturation of the founders and the startup community in Iceland the last 10 years.

Here is the google translation with some updates by your truly of the message by the Minister of Industry in the report:

The innovation policy presented in this report is intended to make Iceland better able to meet the challenges of the future by building a solid foundation for innovation in all areas.

Innovation is not a luxury but a necessity. Innovation is not only the basis of economic success, but the key to solving the biggest challenges in the coming decades. Resourceful and creative people are the most important source of innovation. This is where we can expect to find the solutions and answers that will continue to make it possible to offer outstanding quality of life in a hard-to-reach country like Iceland.

The role of government innovation policy must therefore always be to find ways to allow our citizens and those who want to participate to create breakthroughs, find fruitful distribution channels, grow, prosper and develop in the open and free environment of international competition and co-operation under the auspices of the national government. It cannot be an exhaustive list of things to do now and for all. Direct actions, however, are obviously important factors in policy-making. I will continue to introduce some of those actions I believe have a decisive influence on Iceland’s innovation environment.

Innovation policies will never be finalized with a single report, a limited list of ideas, a single overhaul of institutional frameworks, or such universal solutions. The policy cannot be short-term focused and especially not for a single term of office. It has been gratifying to find a good consensus in the steering committee on the formulation of the policy, which included representatives from all political parties that are members of the Parliament as well as representatives of the business community and the academic community. I thank all participants for their contribution and especially Gudmundur Hafsteinsson, an entrepreneur who led the steering committee. I also thank the project management team and all the entrepreneurs, companies and other stakeholders in the startup community who helped us with this strategy and believe that the future is bright. We have all the capacity to be active and valuable participants in the fast-paced and ever-changing world of innovation and technology. This is a challenge we need to address in order to ensure excellent living conditions and prosperity in Iceland in the coming decades. The policy presented here, in my opinion, makes us more capable than ever.

– Þórdís Kolbrún Reykfjörð Gylfadóttir
Minister of Industry and Innovation

The three broad challenges that the innovation report tries to address are:

The committee also had developed 10 guiding principles for everyone who is a participant in the creation of this report:

1. Individual intelligence is the most important source of innovation
2. Innovation is interwoven with culture, society and the economy and thrives among individuals, different organizational units and diverse environments
3. Do not pretend to know the unknowable
4. Failures are inevitable, but submission to failure is unacceptable
5. No solutions are final
6. Innovation is not a linear process
7. Innovation is a prerequisite for a higher quality of life in the past, present and future
8. Funds for research and entrepreneurs, rather than for administration and superstructure
9. Emphasis on performance rather than expenditure and effort
10. When we look out into the world, the world looks to us

The framework of the approach

I am no graphic designer so I am just going to use the same image as in the report. The top of the structure is Quality of life, sustainability and well-being. Innovation needs to support the Icelandic way of life, sustainability and well being. The pillars to build an innovation economy needs are

• Mind set
• Finance
• Market access
• The Regulatory framework
• Human resources

The foundation is Iceland’s Natural Resources and Culture.

Mentality – An attitude that is prevalent in the community towards innovation, in particular research, development and start-up activities. The spirit of innovation in society has an impact on its ability to innovate.

Funding – Funds spent on research, development, innovation and start-up activities. The amount, source, and distribution of funds in the innovation environment has a significant impact on its scope and nature.

Market access of innovative companies. The larger the market that Icelandic entrepreneurs and investors have access to for goods and services and financing, the more diverse innovation activities are likely to be able to thrive in Iceland.

Regulatory Framework in the form of support agencies, legal frameworks, infrastructure and co-operation. The support environment for innovation, along with general rules of innovation and business operations, must always be competitive with the best in the world.

Human resources available to Icelandic innovation companies. Iceland must develop and invite people who have the knowledge and skills needed to face international competition and Icelandic companies need to be able to attract specialized foreign staff to the country.

Innovation is Icelandic Society – 2030

Willingness to innovate is built into Icelandic society, culture and business. Innovation is seen as a prerequisite for a thriving culture and human life and to be able to meet societal challenges as well as to ensure continued welfare and value creation in the country. 

• Innovation is in constant evolution in the Icelandic society, regardless of elections, government or temporary changes in the economy. The emphasis on innovation is reflected in all policy-making and government actions
• In the community there is respect for all kinds of innovation, entrepreneurship, start-up activities and creative industries
• Entrepreneurship and jobs in innovation and start-ups are seen as an interesting and realistic option
• In Icelandic society there is an understanding of the uncertainties and risks inherent in the innovation process, whether in society, culture or the economy

• Innovation will be part of educational policy so that students acquire skills to work in an environment that requires innovation
• Promote or create competition in innovation in all areas, such as within the school system, among the public and within public workplaces
• Experience and knowledge of public sector innovation projects effectively disseminated
• Knowledge and skills in innovation in the selection of public sector managers

Innovation is in constant evolution in Icelandic society regardless of elections

• An Innovation and Entrepreneurship Council will be set up to advise the government on issues related to innovation and entrepreneurship
• A collaborative group on innovation across ministries and administrations will be established
• Data collection and analysis of the state of the innovation environment will be an important part of the government’s dashboard and economic policy
• Emphasis will be placed on increasing the number of Icelandic patent applications and intellectual property registrations

In society there is a dominant respect for all kinds of innovation

• Discussion of innovation and its importance will be part of the teaching material in Icelandic schools
• A collection of innovation and technological development in Iceland will be established (for example: Experimentarium in Copenhagen)
• Fab-labs strengthened and promoted across the country with tools and knowledge that foster creativity and practical skills. It should be emphasized that students in primary and secondary schools have access to such workshops and access to them will be part of school activities
• Emphasis will be placed on supporting Icelandic design and designers where possible, both in public procurement and with other support

There is an understanding of uncertainty and risk in Icelandic society

• Emphasis will be placed on understanding the importance of entrepreneurs and business founders being able to initiate new experiments, even if they have failed
• The investment and risks associated with innovation will be placed in the normal context, bearing in mind that innovation projects that require patient capital and can lead to uncertainty
• Understanding that a failed attempt in the operation of an innovation company can result in a number of successful and lucrative projects
• Understanding that innovation is a marathon and not a sprint and that it can take years or decades to achieve the desired results, both in terms of individual companies and the innovation environment as a whole

Established innovative companies enjoy competitive operating conditions

• Governments are always vigilant in ensuring the overall competitiveness of Iceland for innovative and intellectual property companies
• Tax reimbursement for research and development costs will continue to be considered as an incentive for Icelandic innovation companies and other actions to support innovation and intellectual property activities, e.g. patent boxes, so that incentives for innovation, research and development are comparable to the countries around us
• The government could support it in a targeted way and Iceland will not withdraw from other areas

Effective investment in scientific research, practical research and technological development

• Public investment in innovation takes place through a competitive funding processes which are efficient, simple and transparent. Rannís will be considered to transfer the management of all such funds
• Iceland will achieve the goals set by the Science and Technology Council on the proportion of GDP spent on research and development.
• Promoting public entities to enter into contracts with companies for new products or services based on innovation
• Tax incentives will be used to facilitate individuals and companies to fund research positions and academic projects in universities

Scientists and entrepreneurs in Iceland have good opportunities to participate in a variety of international projects

• Systematic efforts will be made to link the Icelandic financing environment in innovation and growth companies with larger financing markets, such as in the Nordic countries, the United Kingdom and the United States
• Initiatives will be undertaken to link Icelandic innovation and growth companies in a targeted manner to the financing market elsewhere in the Nordic countries through Nordic co-operation, e.g. Nordic Innovation, Nordforsk and the Nordic Investment Bank
• Continued participation by Icelanders in foreign fund schemes, such as EU funding for research, development and innovation, will be encouraged
• The authorities are aware that the instability of the króna, together with recent experience with foreign exchange controls, can negatively affect the potential of Icelandic innovation companies to make business plans and compete for international capital

Market Access to Icelandic Companies – 2030

• Access to the international market is open to Icelandic businesses and entrepreneurs and Icelandic companies have easy access to a large market for their products and services
• Icelandic companies in innovation can attract international capital. Icelandic investors in innovation, including institutional investors, also have the opportunity to invest in innovation outside of Iceland and international investors look to Iceland as an exciting option
• A strong international network supports successful Icelandic innovation. Icelandic intellectuals, companies and investors benefit from the connection, experience and knowledge of the international innovation and business environment

Access to the international market is open to Icelandic business

• The Icelandic government is making an effort to expand the domains of Icelandic innovation companies so that opportunities for marketing and financing good ideas are not limited to the Icelandic economy
• The Icelandic government continues to safeguard market access through the Agreement on the European Economic Area
• Increased emphasis on Icelandic innovation in all international marketing activities based on the needs of the business community
• Emphasis is placed on promoting Iceland internationally as an innovative country

Icelandic innovation can attract international capital

• Reasonable and effective rules apply to the transfer of capital and intellectual property rights in and out of the country
• Icelandic start-ups and innovation companies will have easier access to capital and settlement in currencies that are eligible for international trade
• Icelandic companies can submit initial documents and annual accounts in English

A strong international network supports Icelandic innovation for success

• Icelandic companies need to have access to international experts in various areas of business, such as law, marketing and financing. It is necessary to ensure that information about such knowledge is accessible and kept available, e.g. within institutions in the support environment or accessible electronically
• The environment for start-up and innovation companies will become increasingly embedded in larger networks, such as in the other Nordic countries, with mutual access to experts and business relationships around the world
• Icelanders have the opportunity to work internationally

Regulatory Framework in Iceland – 2030

• The Icelandic regulatory framework promotes competitiveness and innovation. Both start-up and innovation companies have an efficient and fast-paced environment that enables Iceland to implement rapid technological innovations. Regulators operate efficiently
• In Iceland there are excellent infrastructure for transport and telecommunications. Icelandic innovation and culture are based on good and solid infrastructure in all areas. This is especially important given the country’s location
• The public support environment for innovation is efficient and the division of roles and activities are clear. Support processes are simple and fast. Public sector bodies engaged in innovation-related projects are equipped with adequate facilities and their roles are defined in a sensible way, for the benefit and needs of business and the innovation environment

The Icelandic regulatory framework promotes competitiveness and innovation

• Establishing a business needs to be as easy as possible whether it is domestic or foreign, e.g. with a special legal entity for start-ups
• Corporate and entrepreneurial property rights over intellectual property and trade secrets will be protected in all respects
• Icelandic legal frameworks take into account technological changes and care must be taken that Iceland can be one of the first countries to implement technological innovations
• Access to public-owned data will be open and anyone can use it, taking into account privacy considerations
• It is intended that entrepreneurs and business founders can get all the necessary information, e.g. on licensing, in one place

Iceland has excellent infrastructure

• Iceland is a leader globally when it comes to speed and security of data transport. These infrastructures are accessible to all people regardless of residence
• Reliable transport routes to the main market are a prerequisite for an international business environment, and it will therefore be ensured that there are adequate infrastructure, such as ports, roads and airports
• Individuals and businesses need to be able to ship products and receive goods through postal services. Management time and the cost of such services will be competitive with other areas
• Icelandic pioneers and inventors have access to digital labs (“Fab-labs”) and provide them with facilities for making prototypes and experimenting with production ideas. Such facilities are available to most people, regardless of their place of residence and where there are qualified instructors

The public support environment for innovation is efficient and the division of tasks clear

The Science and Technology Council Act will be reviewed to increase flexibility and efficiency in support systems and policies and the public support environment will be reviewed with a view to strengthening specialization.

• Innovation-related funds will be integrated and merged to simplify management and increase efficiency. Software and automation solutions will be implemented that manages the entire government funding system and data bases on government operations will be improved
• In a single office, the parties responsible for the promotion and management of foreign grants should be combined, such as the Horizon grant system, the European Development Fund, NEFCO and NOPEF
• Public entities in the innovation support environment do not, as a rule, have a direct stake in start-up and innovation companies and ensure that public funding agencies are not in any way a stakeholder in the distribution of grants
• Emphasis will be placed on shaping and developing science parks in order to become a viable alternative for start-up companies
• Work will be undertaken on review and policy on the activities of the Innovation Center of Iceland in order to define its role and focus in the innovation support system

Talent and Human Resource in Iceland – 2030

• Iceland is a diverse community of welfare, security and equal opportunities. Diversity in experience and skills of the population and a strong network with other nations enhance the international competitiveness of the country
• Iceland has the talent pool and human resource that has the ingenuity, the tools and the customer needed to create economic and cultural value in an international knowledge society and to face future societal challenges
• Iceland is internationally competitive in terms of research and technology development facilities and Icelandic entrepreneurs and innovation companies are attracting employees from all over the world. It is desirable for Icelanders to return home after studying abroad

Iceland is a diverse community of welfare, security, equality and opportunity

• Quality of life, welfare, security and equal opportunities are essential prerequisites for Iceland’s potential for fostering a strong and sustainable innovation environment
• Iceland has a flourishing cultural life and a humane society. Iceland will nurture those values so that living in Iceland will continue to be desirable
• Encourage mobility and initiative of individuals in all areas. Individuals enjoy freedom of employment that is not limited by burdensome obligations, e.g. anti-competitive provisions in employment contracts, with exception for special reasons
• Respect is given to the education, knowledge and network of immigrants and new Icelanders and their value added in order to strengthen Iceland’s competitiveness internationally

Iceland has talent pool and human resource that has ingenuity, tools and customer focus

• Increased emphasis is placed on the knowledge and skills in the school system that are likely to be used in the future business environment, such as STEM articles, design, language and practical knowledge
• Training in innovation and entrepreneurial thinking, along with critical thinking and emotional intelligence, will be among the main goals of the education system
• Rules on student loans for study abroad will be accommodated so that as many people as possible can apply for education abroad, in part or in whole. Student exchange and scholarship schemes are short for students who go to study
• Emphasized diversity of skills, continuous knowledge search and artistic development in Icelandic education system and society
• Icelandic companies have the opportunity to hire staff with the expertise they need in their operations, and that applications for work permits on that basis are simplified and the process sped up

Iceland is internationally competitive in terms of research and technological development facilities

• Employees of universities and research institutes have the potential to start a business on the basis of research and development projects and well-defined intellectual property created in research, with a view to utilizing them to create economic value
• It is easy and fiscally advantageous to provide employees in stock and innovation companies with shares and stock options as part of their remuneration

The steering committee’s response towards several questions about innovation:

1. Does the government have a role in innovation?

Yes. Governments and the public sector are part of the innovation value chain, from policy, education and infrastructure, to the shaping of the business environment, including financial and tax frameworks. The steering committee considers it important that the government support research and the first steps of innovation and that the support, legal and operational environment in Iceland offer the establishment, growth and operation of internationally competitive innovative companies. The steering committee generally believes that direct government support is appropriate as innovation moves from a level of uncertainty to a level of risk.

2. Should the government choose specific issues, sectors or businesses to support or focus on the general environment?

The government’s most important approach to innovation is to ensure that the general environment is favorable for innovation and business operations. If the government wants to influence the development of innovation in specific areas or in the context of societal challenges, this should take place through competitive funds (or other comparable transparent and professional actions). Such support primarily applies to the early stages of research, technological development and innovation. The steering committee does not recommend that the government decisively direct funding and support to specific industries or companies

3. Should the government focus on specific size of companies?

It is important to look after the operating and operating environment of those companies that form the basic innovation environment in Iceland in terms of their size, resources, knowledge and experience. The Steering Group considers it desirable for Iceland that the innovation environment be capable of producing many internationally competitive companies, even though some of them will relocate part of their operations and even headquarters to other countries when their growth demands it.

4. Should the government compete to attract foreign innovation companies here?

The steering committee emphasizes that Iceland needs to be a desirable place for the establishment and operation of innovation and knowledge based companies when it comes to the general legal environment, access to qualified staff, quality of life and technical infrastructure. The group does not recommend that the government use special concessions in order to attract foreign companies to the country. However, foreign companies should be welcomed on an equal footing with other business operations in this country. It is important to present adequate knowledge dissemination in English to foreign companies interested in setting up operations in Iceland.

Featured image by Iurie Belegurschi