Download - UK companies fail to invest in innovation
A whitepaper from Portal
Innovation: the first casualty of a downturn
2 Innovation: the first casualty of a downturn
Britain’s innovation history
For centuries, Britain has had an enviable
reputation for innovation. Charles Babbage,
Alexander Graham Bell, and John Logie Baird are
just a few of the names known worldwide and in
more recent times, James Dyson and Tim Berners
Lee have continued to cement the UK’s reputation
as a centre for innovation, helping the country
achieve its position as one of the leading global
economies.
In his seminal book “Innovation and
Entrepreneurship”, Peter Drucker laid out the
key elements of innovation. Famously, he said
“entrepreneurs innovate. Innovation is the specific
instrument of entrepreneurship. It is the act that
endows resources with a new capacity to create
wealth.” Twenty-five years after publication, it is
still a valid comment on the absolute need for
innovation as a source of wealth creation.
Recently, however, British businesses seem unable
or unwilling to invest in the innovation process.
Currently, UK companies spend 1.88 per cent of
GDP on research and development, less than
Belgium and France in Europe and substantially
less than the US and Korea while Israel leads the
world, spending 4.86 per cent of its GDP.
These figures are supported by research recently
conducted by Portal which found that nearly 57
per cent of companies spend less than two per
cent of their revenue on innovating while nearly
a third (31.4%) spend absolutely nothing on the
search for new ideas, services and products.
This lack of focus on innovation is one of the
reasons why the UK is ranked just 18th in the
world’s innovation league .
So how has a country with innovation at the
very heart of its success over hundreds of years
become so lackadaisical? And more importantly,
in a climate where innovation is often the first
casualty of an economic downturn, what can be
done to maximise corporate innovation?
¹ http://www.oecd-ilibrary.org/sites/factbook-2010-en/07/01/01/index.html?contentType=&itemId=/content/chapter/factbook-2010-54-en&containerItemId=/content/serial/18147364&accessItemIds=&mimeType=text/html
² http://www.worksmanagement.co.uk/article/18102/China-climbs-up-global-innovation-league-.aspx
As a percentage of your revenue, how much do you spend on innovation to identify and bring to market new products or services?
Five to ten percent
None One to two percent
Two to five percent
15%
7%
32% 25% 21%
More than ten percent
3 Innovation: the first casualty of a downturn
Has this figure changed since the start of the economic downturn?
Yes - We’ve increased it dramatically
Yes - We’ve cut back a little
No - It’s the same Yes - We’ve increased it a little
Yes - We’ve cut our R&D enormously
61%
5%2%
18% 14%
It’s the economy, stupid
There is no doubting the effect which the
extended economic slump has had on British
businesses’ desire to invest in innovation.
The recent Portal survey found that nearly a
third (32.2%) of businesses had cut their R&D
expenditure since the start of the economic
downturn. Even more startlingly, only 16.8
per cent of companies plan to increase their
expenditure over the next five years. It does not
bode well for British business, particularly if, as
Steve Jobs recently said “innovation distinguishes
between a leader and a follower.”
The lack of investment by British businesses
translates into a real paucity of time given over to
innovation. The Portal survey found that 82 per
cent of respondents spend less than ten hours a
month on the innovation process. Annualising
this, and even with the most generous of
assumptions, companies are spending just half of
one per cent of their time innovating.
This approach to investing in innovation, where
companies feel they can invest only if the future
is rosy, is overly simplistic and denies a basic tenet
of business – investment more often than not
brings long-term positive outcomes. Take Nokia
as an example. While its current travails are well
documented, its history of innovation delivers
over $1bn a year in revenue as companies, most
notably Apple, pay the company for use of its
many patents. Companies that fail to pay heed
to this example and have drastically reduced the
resources they allocate to innovation are storing
up trouble for themselves in the long term.
But cost alone is not the only reason for
companies failing to invest enough in innovation.
Perceived difficulty of the innovation process is
deterring some from applying sufficient resources
to the process. For a large number of respondents
in the Portal survey, there were three major
process challenges:
1. Creating a collaborative environment –
innovation does not just happen; it requires an
environment in which it can flourish. Creating
this environment is one of the major obstacles
to building an innovation process robust
enough to survive in the long term;
4 Innovation: the first casualty of a downturn
2. Finding the right people – for many companies,
particularly those with multiple sites, knowing
what skills the workforce has, whether they are
part of current job descriptions or not, is an
almost impossible job. The result is that skills
that could easily be applied to the innovation
process are simply not harnessed;
3. Keeping the team collaborating – we all know
how our ‘day jobs’ get in the way of special
projects so keeping everyone focused and
collaborating on the innovation process
is a major challenge for many companies,
particularly when teams come from a
multitude of backgrounds.
Taken with the constant scrutiny of costs, these
three challenges have led companies to cut back
their innovation in the belief that it is too difficult
and too expensive, at least for the time being.
The consequence of these decisions, though,
is likely to be dramatic with over 50 per cent of
respondents to the survey recognising that there
is likely to be an impact on their market share as
result.
What can be done to help
companies that want to
innovate?
While time may be the only way for companies
to feel more optimistic about the economy, there
are steps they can take to overcome the process
challenges many experience. Prime among these
is to consider whether technology can play a part
in helping to manage the innovation process.
Right at the heart of simplifying the innovation
process is to facilitate the process of finding the
right people. Fifty years ago, knowing who had
the right skills was a relatively easy matter but in
today’s complex, diversified and multi-centred
organisations understanding who knows what is a
major challenge.
Technology can play a real part here, allowing
employees not only to ‘advertise’ their work skills
but also skills they may have acquired outside
of their professional careers. It means that if,
for example, you need someone with Welsh
language skills – not something that might be
readily apparent from a CV or job description –
the technology offers the opportunity for you to
find that person if they exist in your organisation.
Once the right team members have been found,
keeping them collaborating is another major
headache and one which technology can help
solve:
Social business tools are a really effective way
for team members to collaborate quickly and
easily;
Keeping team members in touch with each
other irrespective of time zones is a role for
unified communications technologies;
Collaborating on documents or multiple
documents can be done via Wikis;
Teams can relay their expertise internally
via blogs and keep others updated on
their progress;
Technology can be used to collect and share
individual and team tasks, helping keep work
on track;
While basic, file sharing is another vitally
important aspect of effective collaboration.
Taken together, these tools can really help
companies collaborate and deliver effective
business outcomes in a way that is almost
impossible without their use.
5 Innovation: the first casualty of a downturn
One company that has taken a creative and
dynamic approach to driving innovation is
Element Six. With sites worldwide, Element Six is
the world’s leading manufacturer and supplier
of synthetic diamond supermaterials and its
core business aim is to find high value, extreme
performance solutions which exploit the unique
properties of synthetic diamonds.
Delivering on its aim requires the company to
take an innovative approach to collaboration
and one of its key goals was to make sure its
multi-discipline teams, which often include
representatives from sales and marketing, legal
and production as well as R&D, could easily and
effectively work together.
Recognising the role technology could play,
Element Six chose IBM Connections, social
software for business, since it most closely
matched its needs while also fitting into the
company’s existing IT infrastructure.
It also recognised that it needed a technology
partner who not only understood the technology
complexities but the challenges of implementing
a ‘social business’ solution in a company that was
not used to working together collaboratively.
Element Six chose Portal because of its deep
ties with IBM and its outstanding track record of
developing complex social business solutions
where, according to Gartner, the failure rate can
be as high as 70 per cent.
While still in the early stages of the project,
Element Six is already reaping significant rewards.
It has been able to use the new collaboration
processes to set up a Group Innovation
Community and build an Information Centre
to help researchers find out about new and
existing resources which enables it to better
manage its innovation projects. Through its new
collaboration processes it is better able to bring
new solutions more quickly to market, helping
maintain its global market leadership.
Innovation through collaboration – Element Six
3. When you look at your R&D process, what is the biggest pain?
Creating enough time outside of our ‘day’ jobs for R&D to
be effective
Keeping people focused on the task
in hand
The process of getting everyone to collaborate is way
too difficult
Understanding what skills and knowledge
we have inside our company
12%15%
35%38%
About Portal Portal helps some of the world’s best known
brands transform the service they provide
to their customers. With over 50 technically
accredited consultants and partnerships
with major technology companies such as
IBM, Microsoft and Amazon Webservices, it
builds solutions that help its clients to deliver
improved customer acquisition, customer
retention, increased customer satisfaction
and long-term customer loyalty. Portal’s
experience spans all industry sectors but it has
particular expertise in Public Sector, Banking
and Financial Services, and Manufacturing/
Industrial/Transport sectors. Portal is privately
owned and based in Bracknell, Berkshire.
Follow the debate on Twitter #ukinnovation
Follow Portal on Twitter @chooseportal
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www.linkedin.com/company/portal
For additional information visit
www.chooseportal.com
Conclusion
Whether your company is involved in the
manufacture of synthetic diamond supermaterials
or is involved in something a little more mundane,
innovation is critical to creating a thriving
business both in the short and long–term. Failure
to invest properly in research and development
may the first step along a path to business failure.
But innovation does not simply happen; it needs
the right environment in which to flourish.
Technology, and particularly IBM Connections, can
provide the tools to create that right environment,
allowing employees to collaborate easily and
effectively. But for the tools to truly take hold
and support the innovation process, it requires
the support and expertise of an implementation
partner, one who understands that a ‘one size fits
all approach’ will stifle rather than encourage.
With its track record, Portal is well-positioned to
help its clients rediscover the power of innovation,
and with it help set them on the road to joining
some of the great British innovators.