Transcript
Page 1: UK companies fail to invest in innovation

A whitepaper from Portal

Innovation: the first casualty of a downturn

Page 2: UK companies fail to invest in innovation

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

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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;

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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.

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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%

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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

Follow Portal on LinkedIn

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.


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