Innovation Policy: Innovation Must Start with the Way Funding Is Designed
Investing in innovation does not always require massive budgets or cutting-edge technologies. What truly determines success lies in how funding mechanisms are designed—and this requires a fundamental shift away from traditional research funding logic. Instead of starting from laboratories, innovation funding must begin with the end goal: real users and real-world problems.
At the panel discussion “Funding for R&D and Innovation: International Practices and the Vietnamese Context” held on November 27 by Tia Sáng / Science for Development, Ms. Nguyễn Hương Thảo, Innovation Financing Component Manager of the Aus4Innovation Program, and Ms. Nguyễn Đặng Tuấn Minh, CEO of KisStartup, shared practical insights into how innovation funding can be rethought.
Starting from needs, not from technology
Innovation is often simplistically framed as:
Innovation = research + advanced technology + large budgets.
In reality, successful innovation usually begins with asking the right question—not with new technology.
Ms. Tuấn Minh shared the story of old tea leaves in the northern highlands. In Bản Liền commune (Lào Cai), farmers routinely cut and discard mature tea leaves to nurture younger ones. KisStartup asked a simple question: What can be done with old tea leaves? That question—not a technological breakthrough—opened an unexpected path.
A scientist suggested a basic de-astringency technique—well known in laboratories but never tested in this remote area. Farmers experimented, and the result was a new type of tea without bitterness, appealing to female consumers and immediately marketable. What was once agricultural waste quickly became a new source of income.
This case illustrates that innovation does not necessarily stem from large funding, but from how funding is designed: asking the right questions, testing solutions directly with users, and ensuring that the final product is accepted by the market.
Research ends with new knowledge; innovation begins only when that knowledge is used.
Designing funding to reach users
Vietnam aims to increase spending on science, technology, and innovation to 2–3% of GDP—four to five times the current level. However, as speakers emphasized, pouring more money into research does not automatically generate innovation. Funding design matters even more.
Innovation projects succeed only when knowledge reaches users. This requires funding mechanisms that prioritize solving real problems, not just producing laboratory results. Innovation must revolve around societal needs—not technologies or researchers. If funding continues to focus on research inputs rather than usage outcomes, results will remain confined to labs.
Key questions must be asked upfront: Who will use this solution? Do users actually need it? How will they use it? What benefits will they gain? What barriers might prevent adoption? These seemingly simple questions are still missing from many Vietnamese projects.
User-centered innovation
When funding shifts toward user needs, it becomes clear that markets often need not new technology, but appropriate and commercially viable technology.
The pangasius by-product challenge in the Mekong Delta under Aus4Innovation illustrates this. Each year, nearly two million tons of pangasius are produced, yet up to 60%—including heads, bones, fins, and especially blood—is discarded, causing severe environmental problems.
Vacuum-drying by-products into fishmeal sounds simple, but the real challenge lies in market requirements. Feed manufacturers demand a stable protein content of around 60% with minimal variance—something difficult to achieve due to differences in farming conditions and harvest timing.
This is not merely a technological challenge, but a funding design challenge: helping projects iterate, test, standardize, and refine solutions until they meet market acceptance. With the right design, even simple technologies can create significant impact.
Funding as a matchmaker in the innovation ecosystem
Even this approach is insufficient without partnerships. Universities cannot cross the “valley of death” alone. They need businesses, local governments, social organizations, and risk-tolerant public agencies willing to pilot new technologies. Innovation is a network effort.
According to Aus4Innovation’s experience, effective funds act as matchmakers—connecting stakeholders, aligning expectations, and clarifying roles. When properly connected, even simple technologies can generate major socio-economic impact.
Phenikaa Group exemplifies this. It has successfully created seven spin-off companies from early-stage technologies because it operates a complete internal ecosystem of universities, scientists, and enterprises. This allows research results to progress from prototype to pilot, small-scale production, and mass production—a journey many public projects fail to complete.
Research and innovation differ in their destination
A common misconception in Vietnam is treating research and innovation as interchangeable. Research ends with new knowledge; innovation begins only when that knowledge is applied. Innovation funding systems must accept risk, allow experimentation and iteration, and measure success through user adoption—not publications.
Vietnam is establishing new innovation funds, from a national fund of VND 2,000 billion to provincial-level funds. But more money with outdated mechanisms will yield old results. To turn innovation funding into a true growth engine, funding structures must change.
Models like DARPA (USA) and programs such as Aus4Innovation demonstrate that effective innovation funds are designed to force projects toward end users, rather than stopping at research inputs or final reports.
Lessons from Aus4Innovation: Four Key Factors Behind an Effective Innovation Fund
Based on insights shared by the Aus4Innovation Program at the recent forum, four core lessons can be drawn for the design and operation of effective innovation funding mechanisms:
1. Ask the right questions from the start.
Every project must begin with a real-world need, guided by fundamental questions such as: Who will use the solution? What level of adoption can be expected? Are the implementation conditions suitable? If research questions are not grounded in actual demand, projects are likely to stop at the laboratory stage and never reach the market.
2. Build the “right and sufficient” partnerships.
An innovation fund should go beyond providing grants. It needs to act as a network builder, connecting the right partners—research institutions, businesses, public agencies, and other stakeholders—so that projects can be implemented end to end.
3. Ensure rigorous, transparent, yet flexible management processes.
Projects require clear KPIs, regular monitoring mechanisms (such as review meetings every six weeks), and consistent progress reporting. Innovation inherently involves risk, but strong oversight helps detect misalignment early and enables timely course correction.
4. Plan for handover and adoption from the outset.
An innovation project only becomes truly meaningful when there is a receiving entity—whether a business, an operating agency, or a defined market. Early preparation for transfer, including business models, operational capacity, target markets, and maintenance costs, helps prevent solutions from “dying” once funding ends.
Bảo Như – Ngô Hà
Khoa học & Phát triển, Issue 1374 (No. 50/2025)
Source: Tia Sáng.