UK companies fail to invest in innovation

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early a third of British companies (31.4%) spend absolutely nothing on searching for new ideas, services and products. That is the shocking finding of a new survey conducted by leading IT consultancy, Portal. The survey of 500 companies up and down the country found that only a fifth of companies spend more than five per cent of their revenues on research and development (R&D), despite the fact that nearly 52 per cent (51.8%) recognise that innovation is critical to maintaining, or growing, market share.

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1. Innovation: the first casualty of a downturnA whitepaper from Portal 2. Britains innovation historyFor centuries, Britain has had an enviable GDP on research and development, less thanreputation for innovation. Charles Babbage,Belgium and France in Europe and substantiallyAlexander Graham Bell, and John Logie Baird areless than the US and Korea while Israel leads thejust a few of the names known worldwide and in world, spending 4.86 per cent of its GDP.more recent times, James Dyson and Tim BernersLee have continued to cement the UKs reputation These figures are supported by research recentlyas a centre for innovation, helping the countryconducted by Portal which found that nearly 57achieve its position as one of the leading globalper cent of companies spend less than two pereconomies. cent of their revenue on innovating while nearly a third (31.4%) spend absolutely nothing on theIn his seminal book Innovation andsearch for new ideas, services and products.Entrepreneurship Peter Drucker laid out the,key elements of innovation. Famously, he saidThis lack of focus on innovation is one of theentrepreneurs innovate. Innovation is the specificreasons why the UK is ranked just 18th in theinstrument of entrepreneurship. It is the act that worlds innovation league .endows resources with a new capacity to createwealth. Twenty-five years after publication, it isSo how has a country with innovation at thestill a valid comment on the absolute need for very heart of its success over hundreds of yearsinnovation as a source of wealth creation. become so lackadaisical? And more importantly, in a climate where innovation is often the firstRecently, however, British businesses seem unablecasualty of an economic downturn, what can beor unwilling to invest in the innovation process.done to maximise corporate innovation?Currently, UK companies spend 1.88 per cent ofAs a percentage of your revenue, how much do you spend on innovation toidentify and bring to market new products or services?32%25%15% 21% 7%Five to tenMore than tenNone One to two Two to five percent percent percentpercent 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 http://www.worksmanagement.co.uk/article/18102/China-climbs-up-global-innovation-league-.aspx2 Innovation: the first casualty of a downturn 3. Has this figure changed since the start of the economic downturn? 61% 18%14%2% 5%Yes - Weve Yes - Weve cutNo - Its the same Yes - Weve Yes - Weve cut our increased itback a littleincreased it a little R&D enormously dramaticallyIts the economy, stupidThere is no doubting the effect which the of business investment more often than notextended economic slump has had on Britishbrings long-term positive outcomes. Take Nokiabusinesses desire to invest in innovation. as an example. While its current travails are wellThe recent Portal survey found that nearly adocumented, its history of innovation deliversthird (32.2%) of businesses had cut their R&D over $1bn a year in revenue as companies, mostexpenditure since the start of the economic notably Apple, pay the company for use of itsdownturn. Even more startlingly, only 16.8many patents. Companies that fail to pay heedper cent of companies plan to increase theirto this example and have drastically reduced theexpenditure over the next five years. It does not resources they allocate to innovation are storingbode well for British business, particularly if, as up trouble for themselves in the long term.Steve Jobs recently said innovation distinguishesbetween a leader and a follower. But cost alone is not the only reason forcompanies failing to invest enough in innovation.The lack of investment by British businessesPerceived difficulty of the innovation process istranslates into a real paucity of time given over todeterring some from applying sufficient resourcesinnovation. The Portal survey found that 82 per to the process. For a large number of respondentscent of respondents spend less than ten hours a in the Portal survey, there were three majormonth on the innovation process. Annualisingprocess challenges:this, and even with the most generous ofassumptions, companies are spending just half of1. Creating a collaborative environment one per cent of their time innovating. innovation does not just happen; it requires an environment in which it can flourish. CreatingThis approach to investing in innovation, wherethis environment is one of the major obstaclescompanies feel they can invest only if the futureto building an innovation process robustis rosy, is overly simplistic and denies a basic tenet enough to survive in the long term;3 Innovation: the first casualty of a downturn 4. 2. Finding the right people for many companies, organisations understanding who knows what is a particularly those with multiple sites, knowingmajor challenge. what skills the workforce has, whether they areTechnology can play a real part here, allowing part of current job descriptions or not, is an employees not only to advertise their work skills almost impossible job. The result is that skills but also skills they may have acquired outside that could easily be applied to the innovation of their professional careers. It means that if, process are simply not harnessed;for example, you need someone with Welshlanguage skills not something that might be3. Keeping the team collaborating we all know readily apparent from a CV or job description how our day jobs get in the way of special the technology offers the opportunity for you to projects so keeping everyone focused and find that person if they exist in your organisation. collaborating on the innovation process is a major challenge for many companies, Once the right team members have been found, particularly when teams come from akeeping them collaborating is another major multitude of backgrounds.headache and one which technology can helpsolve:Taken with the constant scrutiny of costs, thesethree challenges have led companies to cut backSocial business tools are a really effective waytheir innovation in the belief that it is too difficultfor team members to collaborate quickly andand too expensive, at least for the time being.easily;The consequence of these decisions, though,is likely to be dramatic with over 50 per cent ofKeeping team members in touch with eachrespondents to the survey recognising that there other irrespective of time zones is a role foris likely to be an impact on their market share as unified communications technologies;result.Collaborating on documents or multiple documents can be done via Wikis;What can be done to help Teams can relay their expertise internally via blogs and keep others updated oncompanies that want to their progress;innovate? Technology can be used to collect and shareWhile time may be the only way for companies individual and team tasks, helping keep workto feel more optimistic about the economy, there on track;are steps they can take to overcome the processchallenges many experience. Prime among theseWhile basic, file sharing is another vitallyis to consider whether technology can play a partimportant aspect of effective collaboration.in helping to manage the innovation process.Taken together, these tools can really helpRight at the heart of simplifying the innovationcompanies collaborate and deliver effectiveprocess is to facilitate the process of finding the business outcomes in a way that is almostright people. Fifty years ago, knowing who hadimpossible without their use.the right skills was a relatively easy matter but intodays complex, diversified and multi-centred4 Innovation: the first casualty of a downturn 5. 3. When you look at your R&D process, what is the biggest pain? 38%35% 12% 15%Creating enoughKeeping people The process of Understanding what time outside of our focused on the taskgetting everyone toskills and knowledgeday jobs for R&D to in handcollaborate is way we have inside ourbe effectivetoo difficult companyInnovation through collaboration Element SixOne company that has taken a creative and It also recognised that it needed a technologydynamic approach to driving innovation is partner who not only understood the technologyElement Six. With sites worldwide, Element Six is complexities but the challenges of implementingthe worlds leading manufacturer and supplier a social business solution in a company that wasof synthetic diamond supermaterials and its not used to working together collaboratively.core business aim is to find high value, extremeElement Six chose Portal because of its deepperformance solutions which exploit the uniqueties with IBM and its outstanding track record ofproperties of synthetic diamonds. developing complex social business solutionswhere, according to Gartner, the failure rate canDelivering on its aim requires the company to be as high as 70 per cent.take an innovative approach to collaborationand one of its key goals was to make sure its While still in the early stages of the project,multi-discipline teams, which often include Element Six is already reaping significant rewards.representatives from sales and marketing, legal It has been able to use the new collaborationand production as well as R&D, could easily and processes to set up a Group Innovationeffectively work together.Community and build an Information Centreto help researchers find out about new andRecognising the role technology could play, existing resources which enables it to betterElement Six chose IBM Connections, social manage its innovation projects. Through its newsoftware for business, since it most closelycollaboration processes it is better able to bringmatched its needs while also fitting into the new solutions more quickly to market, helpingcompanys existing IT infrastructure. maintain its global market leadership.5 Innovation: the first casualty of a downturn 6. ConclusionWhether your company is involved in theallowing employees to collaborate easily andmanufacture of synthetic diamond supermaterialseffectively. But for the tools to truly take holdor is involved in something a little more mundane, and support the innovation process, it requiresinnovation is critical to creating a thrivingthe support and expertise of an implementationbusiness both in the short and longterm. Failurepartner, one who understands that a one size fitsto invest properly in research and development all approach will stifle rather than encourage.may the first step along a path to business failure. With its track record, Portal is well-positioned toBut innovation does not simply happen; it needshelp its clients rediscover the power of innovation,the right environment in which to flourish.and with it help set them on the road to joiningTechnology, and particularly IBM Connections, cansome of the great British innovators.provide the tools to create that right environment, About Portal Portal helps some of the worlds 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. Portals 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

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