‘Activities’ in innovation systems are the determinants of the development and diffusion of innovations. Examples are R&D, provision of organizations and institutions, financing of innovations, incubation, etc. These activities are partly performed by private organizations and partly by public organizations, the latter performing tasks that constitute innovation policy. As a basis for innovation policy, the problems (failures) in the systems must be identified. This paper focuses upon the design of innovation policy through diagnostic analysis; it provides a framework for identification of systemic problems (or failures) in innovation systems.