As the businessman and Harvard professor Clayton Christensen wrote in 1997, and this is still true today, a successful company with established products will eventually get out-innovated unless it understands how and when to abandon its traditional business and explore new paths or at least augment existing products with innovation that will keep the company ahead.

That’s where research and incubation labs come in.

When climate change, artificial intelligence (AI), and other emerging technologies are driving a need for more intense creativity and focus in developing products that meet evolving customer requirements, innovation is percolating up from companies’ R&D units. 

They are the prime pump.

Saudi Arabia is transforming its economy and investing in innovation at the IT, energy, food, agriculture, and finance nexus. 

Robust business models are being developed to bring non-polluting, non-emitting energy sources to households and businesses in the kingdom while creating robust infrastructure. Food crops are grown in commercial ways that also enable ecological, landscape-wide diversity, resilience, and health. Water is used in ways that are consonant with local availability.

“Saudi Arabia is indeed ramping up its investments in R&D labs, reflecting a strong commitment to research and development of its economic diversification strategy,” says Ian Campbell – Vice President of the National Transformation Institute, KAUST. “This expansion is evident in creating specialized research facilities and centers of excellence that focus on critical areas like energy, health, and technology, aiming to transition the kingdom into a knowledge-based economy.”

TESTING NEW IDEAS

Several multinational companies and major local companies have dedicated innovation labs to address key issues and test new ideas—advances in areas ranging from quantum computing and sustainable semiconductors to clean energy and electric vehicles.

Saudi Arabia offers many opportunities for new development and business expansion, driven by Saudi Vision 2030. As CEO of Alat, Amit Midha says he’s witnessed how accelerators, business incubators, and research hubs are all growing in Saudi Arabia. 

“Saudi Arabia is becoming an attractive home for new businesses seeking to grow through numerous funding opportunities available in the Saudi landscape, including but not limited to KAUST, Lab7, and Misk Accelerator. The available funds are more than several billions of dollars,” adds Midha.

Vibrancy-oriented innovation centers that foster and pressure test new ideas, collaborations, and business models are, in essence, what Saudi Vision 2030 aims to achieve in the coming decade and beyond. The country mainly focuses on clean energy, AI, and smart infrastructure.

This national vision necessitates and provides a playground for business accelerators, incubators, and research hubs to contribute to building sustainable economic and industrial foundations, according to Thomas Altmann, Executive Vice President – Innovation & New Technology, ACWA Power. “As is often seen in more developed markets, hubs and incubators provide the necessary funding, resources, and skill development to create innovative solutions and boost entrepreneurship.” 

“Their role as catalysts for enterprise and invention in the kingdom attracts domestic and international SMEs and innovators whose solutions align with wider national goals,” he adds.

Saudi Arabia has also fostered a supportive environment for the rapid advancement of clean technologies, which will be critical to its diversified economic future and play an important role in the global energy transition. 

Shaping the future of clean energy in the kingdom, Neom Green Hydrogen Company (NGHC) is creating a brand-new industry at Neom, the $1.5 trillion project on the Red Sea coast that will serve as a testbed for technologies that could revolutionize daily life. 

“Our green hydrogen, set to be exported globally, is putting Saudi Arabia at the heart of an emerging sector and laying the foundations for economic growth,” says Wesam Alghamdi, CEO of NGHC.

The country aims to become a global center for emerging clean energy developments, and in recent years, there has been massive growth in emerging green technology and research hubs. Neom is right at the forefront of this, with NGHC’s project being one example of innovation in the kingdom. 

NGHC will be the world’s largest producer of green hydrogen when we reach full production by the end of 2026, producing up to 600 tonnes of green hydrogen per day, providing the blueprint for the expansion of the green hydrogen industry globally, says Alghamdi “This is possible due to the vision and expertise of the three shareholders – ACWA Power, Air Products and Neom and as well as the technology and innovation partnerships that have been essential to producing green hydrogen at scale.”

Later this year, NGHC will start operating its first 20MW electrolyzer at Neom, within Enowa’s Hydrogen and Innovation Development Center, located at Oxagon, Neom’s home to advanced and clean industries. 

GROWTH IN ACCELERATORS AND INCUBATORS

Saudi Arabia has experienced substantial growth in accelerators, business incubators, and research hubs, largely due to investments in university-affiliated incubators like Riyadh Valley Company, Makkah Valley, and Dhahran Techno Valley, as well as The Garage in Riyadh, which is affiliated with King Abdulaziz City for Science and Technology (KACST). Campbell says, “These entities support innovation by offering comprehensive services such as training, mentorship, office space, and funding, which equip entrepreneurs with the necessary tools to develop and commercialize innovative technologies.”

Startup incubation programs are crucial pillars to boost entrepreneurship and innovation, supporting business owners to hone their skills, bridging gaps between ideas and reality, and spurring innovation. “They help shape solid businesses by enabling entrepreneurs to verify their ideas, develop strong business models, and cultivate essential skills. Essential skills that organizations such as Alat will require,” says Midha.

Innovating has occurred in countless home offices, garages and living rooms as it has in corporate meeting and board rooms. Yet, given the need for more and more rapid, large-scale innovation as we face climate change and other issues, there are many other startup incubation programs. 

The Badir program, established by the KACST, supports and provides opportunities for technology—and innovation-based business enterprises and facilitates funding by providing a platform for connecting investors and entrepreneurs. Wa’ed Ventures, Aramco’s venture capital fund, is designed to support the startup ecosystem in Saudi Arabia by investing in local startups and localizing pioneering global innovation. Another one is Venture Lab, which represents the incubation arm of Prince Mohammed Bin Salman College of Business & Entrepreneurship.

“Belonging to one of the largest and most innovative universities in the Arab world and a partner to Alat, the KAUST innovation program rightfully earns its spot on this list,” says Midha. 

COLLABORATION IN R&D

Alat is collaborating with global technology leaders, like Lenovo, to bring technology manufacturing to the kingdom and with KACST to develop a sustainable semiconductor manufacturing hub in the kingdom. This collaboration includes the National Semiconductor Hub (NSH), which is focused on incubating early-stage semiconductor startups. The NSH is one of the Research, Development, and Innovation Authority (RDIA) initiatives that foster innovation and entrepreneurship in the tech sector. 

Many large corporations in KSA have established R&D partnerships and R&D centers with several high-quality STEM research programs in local universities.

Like other major players, ACWA Power also has a strategic partnership with KAUST to advance Research in renewable energy, water desalination, energy storage, and green hydrogen – in addition to projects for hydrogen electrolyzer technologies. Its innovation roadmap encompasses energy transition, renewables, storage and green fuels, and water desalination technologies. 

“Our goal is to work with our research partners to develop practical, market-ready solutions to address commercial needs with agility and innovation while contributing to the local research and innovation ecosystem,” says Altmann, adding that the company has invested in R&D labs, including in KAUST, KACST, Shanghai Innovation Center. 

Successful lab team members don’t just grow on trees; they must have certain qualities, such as an entrepreneurial spirit, a desire to take risks, and the ability to collaborate well with others.

Emphasizing cross-disciplinary collaboration isn’t just a buzzword; it’s the formula behind successful innovation management. Midha says, “Research shows that projects involving diverse teams are 1.5 times more likely to successfully outperform competitors.”

He continues, “At Alat, we now have over 200 employees of over 25 nationalities, and we have a diverse base of staff skills comprising specialists in everything from AI to supply chain management. In addition, I have selected business presidents across our nine business units with a wealth of industry and sector business experience and an executive management team with remarkable global strategic business expertise.” 

It is commonly recognized that being outside of one’s normal circumstances can draw people out of their usual thoughts. In addition, an innovation team that understands how to integrate multiple disciplines can greatly enhance the potential for breakthroughs, says Campbell. “By combining expertise from different fields, these teams can tackle more complex problems and create more comprehensive solutions that meet market needs and societal challenges, thus driving successful innovations from concept to commercialization.”

Altmann says ACWA Power’s strategy is based upon an Open Innovation model based upon collaborations with local and international bodies with whom it shares resources, knowledge, and efforts towards our shared, common goals.”

“In the face of increasing global challenges associated with climate change and water scarcity, the convergence of expertise from various sectors, including government authorities, research institutions, private industries, and startups, can drive innovation and accelerate the development and deployment of cutting-edge solutions,” he adds.

Alghamdi says that collaboration between education and industry will be essential as Saudi Arabia develops and diversifies its economy. 

IMPACT OF RESEARCH AND INCUBATION LABS

These accelerators, incubators, and research hubs contribute to economic diversification, creating jobs and attracting foreign direct investment. “They also deliver multiplier effects across new and evolving value chains by providing funding and mentorship for entrepreneurs, local companies, and private sector innovators to develop and test industry-oriented solutions,” says Altmann. 

These hubs are actively shaping Saudi Arabia’s future, says Campbell, cultivating innovation and ambitious infrastructure, such as its giga-projects. 

“The result is economic diversification and digital transformation. The hubs are poised to have a significant economic impact over time by fostering an environment that nurtures startups and facilitates the commercialization of new technologies, thereby creating jobs, a workforce with the needed skills, and contributing to GDP,” he adds.

Unsurprisingly, all these have contributed to making Saudi Arabia the fastest-growing economy in the G20. 

“Government data showed that the net inflow of foreign direct investment in Saudi Arabia increased by 5.6% to $2.53 billion in the first quarter of 2024 compared to the previous year,” says Midha. “All these factors collectively attract investment and promote innovation.” 

RDIA and Fast Company Middle East will release a report on Saudi Arabia’s innovation efforts, focusing on key sectors of national priority. The report will feature survey insights and interviews, highlighting advancements and opportunities driving growth. Participate here.