A new book has been published Camels, Tigers & Unicorns: Rethinking science and technology-enabled innovation by Uday Phadke & Shai Vyakarnam. Popular enthusiasm for commercialising science and technology is unfortunately not matched by a clear understanding of the structures, processes and mechanisms which actually drive this transformation. This gap is serious because it affects all those involved in generating ideas, transforming them into viable products and services, and funding the process. The objective of this book is to directly address this challenge, using new data-driven concepts and analytical frameworks.
Innovate UK has provided guidance for business and academic organisations on what funding they can get to test ideas and develop innovative products and services. More details: https://www.gov.uk/guidance/innovation-apply-for-a-funding-award
On Monday 10th July, the Industrial Strategy Commission published its first major report Laying the Foundations. In the context of growing economic uncertainty, the report sets out the Commission’s view that now more than ever the UK requires strategic economic management – this is what is meant by industrial strategy.
There has recently been a revival in the idea that the UK should set a target of 3% of GDP spent on R&D. This is a bad idea for stimulating innovation. In this context, I use the definition of innovation as the creation of new value. More practically, innovation covers the implementation of a new or significantly improved product, process, marketing method, or organizational approach. This includes scientific, technological, organizational, financial and commercial activities which lead to the commercialisation of inventions and research.
In relation to the R&D as % GDP metric, we have been here before. In 2002 the EU Lisbon agreement and subsequently the 2003 “Barcelona target” set the target at 3%. In those days, R&D was mostly focussed on research as defined by Frascati. The UK government embodied this target (albeit at a reduced 2.5% level) in the 2004 Science and Innovation Investment Framework1 . Despite being championed by arguably the strongest Chancellor in the last 30 years, policies never achieved this target or even prior to the financial crisis any progress towards it.
So why doesn‟t this target encourage more R&D especially in business? There are several reasons but perhaps the most significant are:
- Companies do not measure their R&D expenditure against national GDP
- There is huge variation in corporate R&D intensity (R&D as % of sales) within sectors – clearly R&D investment decisions involve complex management trade-offs
- Pharma: GSK 13% v Astra Zeneca 23%
- Auto: Toyota 3.7% v VW 6.4%
- Software: Apple 3.45% v Microsoft 14%
- Many companies now capitalise R&D spend amortised as part of their intangible assets . This is not picked up in the analysis of company financial accounts for the R&D % of GDP statistics. So for example Rolls Royce report their research activity as R&D but capitalise the development. You can also see this in high tech companies such as BP (R&D intensity 0.19%).
- The statistic also misses huge technical spend/capability in software/ professional services companies. For example, WS Atkins, a high tech professional services company with turnover approaching £2 billion, adding significant value and with some the best and brightest engineers in the country, barely report „R&D‟ spend.
So is there a better way to focus Industrial Strategy? The key to policy actions in this area is to focus on the commercialisation of technology. A recent book by Uday Phadke based on extensive company research highlights some possibilities. 2 And there are signs that some of our large company CEOs are recognising this emphasis. For example, Emma Walmsley (GSK) recently demanded bigger returns from R&D, she said:
“The clear priority here is making the right choices to develop our pharma pipeline which is promising but unproven. We have a lot of work to do here to make sure our R&D and commercial organisations are partnering really effectively together.”
CEOs with a clear focus on adding value and growth can drive their businesses forward by focusing the whole organisation on the commercialisation process of new ideas.
On Monday 10th July, the Industrial Strategy Commission will publish its first major report Laying the Foundations. In the context of growing economic uncertainty, the report will set out the Commission’s view that now more than ever the UK requires strategic economic management – this is what is meant by industrial strategy.
A new book has been published Camels, Tigers & Unicorns: Rethinking science and technology-enabled innovation by Uday Phadke & Shai Vyakarnam
Popular enthusiasm for commercialising science and technology is unfortunately not matched by a clear understanding of the structures, processes and mechanisms which actually drive this transformation. This gap is serious because it affects all those involved in generating ideas, transforming them into viable products and services, and funding the process. The objective of this book is to directly address this challenge, using new data-driven concepts and analytical frameworks.
Innovate UK has provides guidance for business and academic organisations on what funding they can get to test ideas and develop innovative products and services. More details: https://www.gov.uk/guidance/innovation-apply-for-a-funding-award
A new funding competition has been announced by Innovate UK for a share of £55 million on a connected and autonomous vehicles test bed. Closing date for registration is 12 July 2017.
INNOVATE UK 2014 – The global spotlight on UK innovation, November 5/6
Where can you meet the UK’s most inventive and creative companies, explore innovative ideas, discover new export opportunities and hear from some of the most original thinkers in the country, all at the same time? Hosted by InnovateUK & UKTI, Innovate UK 2014 brings all this together in a unique two day event that will provide networking opportunities, a whole host of fresh thinking and expert advice to help accelerate your company’s global growth. A major event that brings together the research base, business, UK and International investors, international buyers from 30 overseas markets and government organisations, to help fund and support your innovative ideas and make a real difference to your company.
For details: https://www.innovateuk.org/events.
Battle of Ideas 2014 – 18 & 19 October, London
Two days of high-level, thought-provoking, public debate organised by the Institute of Ideas at the Barbican. Sessions include: Judging History; The robots are coming: friends or foes?; What does literacy mean today?; Whose borders are they anyway? The nation state unravelling. For details http://www.battleofideas.org.uk.
Brunel University running seminar on Patent use
9 September 2013, 9:00am – 6:00 pm
Patents combine incentives for the production of technological knowledge (by granting temporary monopolies) with incentives for diffusion of that knowledge (usually through licensing). In recent years, questions have been raised as to whether patent regimes are paying enough attention to the latter objective. Their concern is without such diffusion patents represent a deadweight monopoly to the innovator which can be to the detrimental to growth and further innovation. Even as these concerns are being articulated and measured in aggregate terms there are new trends in technology management. New business models have emerged where patents are being used to underpin licensing and the use of open innovation methods is gaining popularity in a wide variety of sectors.
The Survey of Innovation and Patent Use (SIPU) in the UK economy was commissioned by the IPO, and administered by the Office of National Statistics (ONS) in order to evidence some of these trends for the UK economy and analyse the underpinning factors that make for greater patent use in the context of open innovation. In particular, the SIPU aims to provide a demand-based measure of technology licensing in the UK economy and provide a greater understanding of the determinants of the propensity of firms to patent innovations. The conference will present results from the SIPU survey.
For further information visit http://www.ipo.gov.uk/events-biginnov.pdf.
What are the implications for UK businesses of the emergence of the new knowledge driven economies of China and India? Damien McDonnell has a view
More recently we have seen the emergence of the new knowledge driven economies of China and India. Both have the potential to be massive economic powers in the near future and both are investing heavily in their scientific and technical infrastructures. They are now producing between them a staggering 5 million science and engineering graduates every year. The reality is that China and India will not be driven by low cost manufacturing for many more years but will, in fact, become high value added knowledge intensive economic giants. The expression “Thought of in Europe and made in China” will increasingly be:
Thought of in China and made in China.
The key challenge to address in accelerating innovation in the UK is to bring about a permanent cultural change in which the responsibility for leading the innovation agenda lies with business and not government or academia. In order to compete effectively then market-led, cross-sector and multidisciplinary innovation must become at least as important over the coming decade as technology-led innovation was in the past. Professor Henry Chesbrough from University College Berkeley has described and advocates a new approach, which he calls ‘Open Innovation’.
This approach recognises that business enterprises cannot remain competitive drawing exclusively on their own research and technology but need to adopt practices which repurpose technologies across market sectors through partnerships. In this approach to innovation the risk and the tension between ‘technology push’ and ‘market pull’ can be better managed to achieve greater benefits to their customers and hence sustain their competitiveness. However, three typical challenges face businesses as they strive to innovate in this manner:
- How do they gain awareness and access to technologies unknown to them but which could solve their problems?
- How can they achieve effective technology insertion?
- How can they anticipate technology-related threats and opportunities?
The evidence is now overwhelming that to compete in the modern world businesses must raise their game in harnessing science and technical skills into greater value addition and productivity in all that it does. The Scottish entrepreneur, Sir Tom Hunter, put it very simply:
If we always do what we have always done, then we will always get what we have got!
In order to embrace open innovation practices there is a knowledge integration conundrum that has to be overcome namely:
How do we get what we know to where in the business we need to know it, particularly when that knowledge is not explicit to us because it is tacit knowledge or it is from another sector? It is difficult to ask for something if you are not aware of its existence. Moreover, it is often the case that an owner of a possible solution is unaware of the question or the need. While invention is the work of an individual or a few individuals, innovation is the work of a community that can harness all the skills necessary to realize the successful commercial exploitation of knowledge.
The Quantum Innovation Centre will play a key guiding role to business, enabling open innovation, signposting the route to better exploitation of their R&D and making better use of the science base, with all the rewards that this will bring in terms of:
- increased profits;
- more rapid company growth;
- increased opportunities for overseas partnerships & investments; and
- more and better value added employment.
The UK is not starting from a low base, and we already have some of the best, R&D in the World and we can point to some truly outstanding academic work underway in fields as diverse as ICT, nanotechnology and advanced functional materials, aerospace, environmental energy technologies, and world leading health research and medical applications.
Damien McDonnell, Quantum Innovation Centre
Embracing an Enhanced Open Innovation Strategy by David Hughes
David Hughes argues that the current economic recession provides an ideal opportunity for CEOs to outperform hesitant competitors by embracing an enhanced Open Innovation Strategy.
Allianz Insurance has recently reported on a survey they conducted with 500 UK CEOs. The good news is that innovation is seen as a key factor in business success the vast majority of UK business leaders. They believe that innovation is the source of higher profits and growth, greater competitiveness and a means to engage the whole workforce in the company aims.
However, while recognizing that innovation pays off and improves performance, the challenging economic climate means that innovation is not immune from cutbacks. Nearly a quarter of the CEOs reported that the recession has impacted their innovation programmes with the research suggesting that over the past year, innovation spend has been reduced with this downward trend set to continue over the next few years. Prime reasons cited for this decline are a lack of money and a focus on near term profits.
But the dilemma facing CEOs is how to ensure that in focusing the innovation effort, they do not jeopardise the innovative capacity of the organization for when the upturn comes. Certainly just battening down the hatches is unlikely to achieve the growth that so many companies need. So how can CEOs square the circle? There are two simple questions that can provide answers.
- First question – is the whole organization engaged in innovation? Is it the work of every employee, every day? Executives who ask that question soon realize that most of their employees have had little or no training in innovation which is a bit like putting someone who has never driven before behind the wheel of a racing car – the result is likely to be horrendous. But training is only the start, management needs to provide the environment and support (time and money) to enable the whole organization to feel responsible for innovation. One way to get a fix on how ready your organization is for innovation is to use the QIC Innovation Framework model. This is used in a series of structured interviews to establish where an organization is in relation to leadership, strategy, people, resources and processes products and services. This can then be used as a plan for action in developing the organisation
- Second question – are we doing the right things at the right pace to be competitive? This involves aligning the innovation strategy to key business activity, sustaining organization capacity and focusing on future opportunities. It starts with a full analysis of customer needs and then reviewing how well these needs are met by competitor and own offerings. Unmet needs which are important to the customer provide fertile ground for innovation and if solutions are found this can result in customer loyalty for years ahead. The next step is to see what capability exists in house and what could be sourced more effectively from outside the company. To bring objectivity to this analysis, QIC provides independent experts to work with the in-house teams to complete the analysis and develop a forward product/service roadmap. This can involve technology, supply chains and organizational development.
It’s been our experience that the recession presents a great opportunity to outperform hesitant competitors with new creative ideas that have the potential to change the game. Please call to set up a discussion on how QIC can help your business grow through innovation.
David Hughes. Quantum Innovation Centre