The Local Innovation Partnership (LIP) model was conceived as a catalyst for exploring great ideas, developing and testing innovative solutions and launching new ventures in mainstream markets and used to support stakeholders striving to reduce the environmental impact of creating value for society. The LIP model is based on establishing Innovation Partnerships with key stakeholders keen to capture the creativity of Entrepreneurs and Innovators and to accelerate the development of new ventures by placing values-driven Innovation at their heart.
A LIP is a Charitable Incorporated Organisation (CIO) established to manage an incubation framework with the financial, human and physical resources needed by Entrepreneurs and Innovators seeking support to commercialize their ideas. Through the support given to Entrepreneurs and Innovators in their endeavours to develop new ventures, a LIP helps to improve the welfare and prosperity of communities, whilst offering Investors an opportunity to generate market rate returns from de-risked new ventures operating in mainstream markets.
Collectively, LIPs will crystallize an Innovation system with the capacity to catalyze Innovation at the scale and pace needed to meet the global demand for well governed businesses that strategically manage their social and environmental impacts and offers investors an opportunity to align their portfolios to these values.
Critics of the mainstream markets have long maintained that it is the negative consequences of conventional economics and its impact on local communities, society at large and on the wider environment where the need for reform is most acute. Consequently, LIP’s are needed to help create new ventures that adopt a much more holistic approach and recognise the essential interdependence between the Economy, Society and the Environment.
Concern for the long term resilience of our economies is compounded by macroeconomic factors such as the Covid pandemic, the challenges of global warming, biodiversity loss, land use, water scarcity, income disparity, social unrest and extreme poverty. These are all indicators of systemic failure of our businesses, innovation systems and the resultant economies to create value at the scale required to overcome these challenges. Innovation decisions must be carefully considered if we are to foster businesses that aim to mitigate or adapt to these challenges and given the scale of the challenges, and the scale of the investment needed to overcome them, it is clear that:
- Current National Innovation Systems architecture (i.e Innovation Centres) is inadequate and failing to create value at the scale and pace needed to overcome global challenges.
- Financial returns must be seen to match market rates if the scale of investment required to overcome global challenges, is to be met.
These are the principles that underpin the LIP model and are based on the conviction that the transition to a resilient economy must inevitably be led by well governed businesses striving to reduce the environmental impact of creating value for society.
From the outset LIPs brings together Stakeholders seeking solutions and Entrepreneurs with great ideas for solutions. Consequently, the Innovation Pipeline is established by exploring with key stakeholders the value of ideas introduced by Entrepreneurs and Innovators, and also by launching Themed innovation challenges in response to clearly defined problems.
Right from the start the approach is focused on building partnerships around potential solutions. This is achieved through structured stakeholder engagement aimed at clarifying ‘needs‘ with regional stakeholders and world class clients, and exploring innovative ideas and business models with Entrepreneurs and Innovators. This pre-incubation Explore phase aims to bind problem solvers to stakeholders searching for solutions. The best ideas are selected based on a plausible business case and with the support of stakeholders keen to see the solution succeed, a burgeoning Venture enters the incubation process.
The incubation framework is broadly divided into stages with each step punctuated by a decision to proceed to the next stage based on clearly defined criteria. The framework gives Entrepreneurs and Innovators the freedom, support and resources needed to develop their ideas and a platform to build and justify the case for continuing support.
The initial flurry of incubation activity occurs during the ‘Develop’ stage, which is used to build prototypes and facilitate the Minimal Viable Proposition (MVP) needed to test the solution. With an acceptable MVP the next step is to ‘Test’ the solution within the context of the business model and build the business case for the Venture. With a verifiable business case the next step is to ‘Launch’ the Venture and with evidence that the Venture is generating cashflow and meeting Key Performance Indicators (KPI’s), the final step is the ‘Exit’ stage where support is given to raise the series A funding needed to scale the Venture.
LIP Financial Model
The financial resources of a LIP are sourced from key stakeholders such as commercial and public sector partners and Investors. Finance can take the form of long term loans, grants, Gift Aid as well as contributions from Donor Allocated Funds (DAF’s).
A LIP is operated as a not-for-profit and funds raised are used to finance the resources needed to incubate new Ventures. The cost of incubation is added to the balance sheet of each Venture and on Exit, this expenditure is recovered as either debt, equity or a blend of both. Financial sustainability is reached as the number of successful Ventures grows.
Throughout the incubation process, the Innovation Partnership’s key stakeholders have an opportunity to evaluate the investment potential of emerging Ventures and for those that successfully exit the incubation process, priority is given to them when sourcing Series A funding.
The governance structure of a LIP includes a board of Trustees and a management team supported by a non executive Steering Committee and Investment Panel. The management team reports to the board of Trustees, which has overall responsibility for the culture and activities of the LIP. To maintain the integrity of the LIP model and its culture, new LIP’s are formed as subsidiaries of first LIP.
The Steering Committee is formed to represent the key stakeholders and an Investment Panel is established to represent the LIP’s financial sponsors. The role of the Steering Committee is to clarify the aims of the LIP, whereas the role of the Investment Panel is to approve the use of its financial resources. Members of the Steering Committee and the Investment Panel also provide high level support to the management team.
Guided by the Steering Committee and the Investment Panel, the management team implements the innovation strategy for the LIP. The innovation strategy, developed by the LIP, is designed to achieve the aims of the partnership as set out by the Steering Committee. The innovation strategy will include launching Thematic challenges to explore problematic areas of strategic interest to committee members as well as identifying and incubating prospective solutions approved by the Investment Panel. The LIP steering committee and Investment panel will augment the services needed by the management team to implement the innovation strategy.
Frequently Asked Questions
Want To Get Involved?
The LIP model is seeking advocacy and critical review from stakeholders interested developing the concept albeit with a view to launching a trial LIP and this website was developed to explain to readers, the purpose, activities and motivation for establishing LIPs.
We welcome your feedback; so please add your comments below or write to [email protected].