How a small, landlocked country can serve as a global model for innovation

It is becoming increasingly apparent that technological innovation will be central to tackling climate change, hitting net-zero targets and repairing the planet. It makes sense therefore to take lessons from the world’s leader in innovation.

Stunning Alpine passes, skiing, clockmaking, chocolate, fondue, Heidi, neutrality, banking, and of course, Davos. These are some of the things that come to mind at the mention of Switzerland. Less well known is the fact that it has, for 12 years in succession, topped the Global Innovation Index.

Produced by the World Intellectual Property Organization (WIPO), the index ranks countries in areas like the number of patents they register annually, the amount of money as a percentage of GDP that goes into R&D, and the robustness of their education systems. Switzerland has shown unwavering consistency in these aspects and more, ploughing funding and focus into areas as diverse as fintech, pharmaceuticals and food systems.

As a result, hubs – or rather more aptly given its topography – ‘valleys’ have sprung up throughout the country, where innovation in a particular area is fostered and supported. Switzerland also has a dedicated agency – Innosuisse – whose remit is to fund science-based innovation, and the work of its universities frequently helps to create start-ups. Among these is Climeworks, the world’s first commercial carbon removal technology, a spin off from one of the main technology universities. The company scales up carbon capture solutions, has announced plans for a second commercial plant in Iceland, and aims to remove 1 billion tons of CO2 from the atmosphere a year by 2050.

On the face of it, Switzerland doesn’t have many advantages. It is physically small, mountainous and landlocked, has a limited population of just 8.7 million, and is surrounded by larger, influential countries. It has, however, turned what some would regard as disadvantages to its favour.

Education is fundamental to its success. It has a strong system of learning from early childhood through to post-graduate level. It has the world’s highest density of Top 500 universities in per capita terms, led by global luminaries, the two Swiss Federal Institutes of Technology, ETHZ in Zurich and EPFL in Lausanne. Here research is both fundamental and applied, thereby supporting the pursuit of knowledge as well as solutions to societal and business problems. Unsurprisingly, this results in considerable collaboration between universities and the country’s industry. This is formalized in the network of the eight Swiss Universities of Applied Sciences and the Arts, which acts as a bridge between the fundamental research taking place in the larger institutions and industry, notably SMEs.

This robust grounding in study and application provides Switzerland with a skilled workforce, and one that rewards hard work and initiative. For those individuals who don’t pursue higher education there is a well-developed apprenticeship alternative, with reskilling and upskilling options available throughout an individual’s career. Alongside this, government policy further shores up the workforce through its support for international workers with sought-after skillsets.

This dynamic and the country’s small size has helped develop thematic areas of innovation. Among these are the Crypto Valley Association, which originated in Zug, and focuses on international blockchain development; Drone Valley, with its dual bases in Lausanne and Zurich, and focus on developing drones that have application in areas like solar energy and environmental protection; and the Swiss Food and Nutrition Valley, which strengthens food system innovation.

Funding is another important aspect of Switzerland’s success. The country spends more than 3% of GDP on R&D (amounting to $25.5 billion in 2019), with the private sector accounting for approximately two-thirds of this. An indication of the beneficial effects of this are the number of patents that Switzerland registers annually. On a per capita basis, it has registered the most globally for years; 8,442 in 2021, with a focus on medical technology.

No country can afford to be complacent, particularly given the extent of the global challenges that humanity faces. Switzerland is no exception. As its ranking in the Global Competitive Index highlights, the country is facing increasing competition at the top table from long-standing counterparts like Sweden and the US, big hitters such as China, and regional stars like South Korea. In the 2012-2013 index, Switzerland ranked first, praised for its almost universal strong performance in terms of innovation, education provision, labour market efficiency, the sophistication of its business sector, the strength of its research institutions, R&D spend, effective and transparent public institutions, and strong rule of law. By 2019, it had slipped to fifth place, notably lagging in areas like business dynamism.

The government has responded, for example, reducing bureaucracy to make the process for start-ups more streamlined, but the lesson that other nations should heed is the need to maintain strong fundamentals, be they education or the rule of law, while also keeping up with the changing business and investment landscape. This nebulous element creates new challenges and areas that require development, demanding agile decision-making.

A second challenge that is more difficult to address, but again is instructive for other nations, is the country’s mentality. In another trope, the Swiss are not regarded as risk takers. This is interesting given the focus on innovation, but dig a little deeper, and it’s apparent that the Swiss mentality is one that favours perfectionism over failure. There is social stigma attached to failure, particularly issues like personal bankruptcy. In an era of start-ups, which emerge and fail with unerring regularity in other parts of the world, the Swiss mindset will have to shift towards one that encourages risk-taking, tolerates failure and is prepared to offer financial backing to new ways of doing and thinking about business.

History shows that radical innovation typically contributes to higher living standards and improved productivity. We are in an era of radical innovation, with technological change ushering in huge changes, and if we’re lucky, offering the solutions to our most pressing problems. How countries navigate this turbulent outlook with vary, but the model created by one of the world’s smallest, resource-poor, landlocked nations could offer valuable insights.

This article originally appeared in Handelszeitung.