Innovation: Are we running out of good ideas?

Whether you're adding an extra blade to a razor or working at the cutting edge of science, innovation is vital.

It drives brand growth and, by extension, the UK economy. But how good is UK plc at innovating? Are brands doing enough to keep the nation competitive? We asked four industry experts for their thoughts - from the government,

Ian Pearson MP, minister for science and innovation; from an innovation consultancy, Stephen Castens, managing partner at Eureka Inventing; from the world of big brands, Troy Warfield, general manager UK and Ireland at Kimberly-Clark; and from the SME arena, Tom Kay, founder of ethical surf clothing brand Finisterre.

- How important is innovation to UK businesses?

Stephen Castens: Hugely. As technologies converge and major players become more concentrated, innovation will be the major discriminator between firms. But, increasingly, companies based in the UK are not looking to the UK as a driver of innovation. In our experience, companies are innovating for driver markets, such as the US and China, leaving the UK to pick up some of the benefits.

Ian Pearson: Innovation is vital for business to achieve higher and more sustainable profitability, compete globally and provide higher value to customers through better products and services. With the formation of the Department for Innovation, Universities and Skills (DIUS), innovation now has a direct voice in the Cabinet.

Tom Kay: There are two types of innovation within the product and service sector: unsustainable and sustainable. There is the type of innovation that happens every year - current model with a few extras - to push sales and create demand. This type of innovation is usually unsustainable, quickly rendering many products and services obsolete. The other is sustainable innovation, the type of designs and concepts that are so ground-breaking and well planned that they see many years of success.

Troy Warfield: Without innovation, consumer goods suppliers and retailers would fail to grow and improve shareholder value. Innovation is the lynchpin of Kimberly-Clark's strategy, enabling us to drive category growth and become an indispensable partner to the major retailers.

- How does UK innovation compare with overseas?

TW: Because of the sophistication of the UK market it is often this country where true innovation is uncovered. Our Huggies Sleep Shorts brand was an innovation that was jointly developed for both the US and the European markets, and launched in the UK first.

SC: We are definitely leaders in architecture but, arguably, it's like being a gold medallist in cycling when the attention of the world is on athletics. We have some strong brands, such as in the drinks industry, but we are increasingly being challenged. There is an assumption that we are world leaders in innovation, but it is coming under increased scrutiny. Cheaper labour, lower welfare and tax costs overseas, allow more money to be channelled into R&D. Developing markets are increasingly able to leapfrog established ones.

IP: It is important that UK brands continue to embrace innovation so they can successfully compete with overseas brands. But with successful companies moving to a more open, inclusive process of innovation, collaboration with overseas partners has become even more important.

TK: International markets see innovation in different ways. Within the outdoor apparel industry, the UK claims innovations in fabrics on an annual basis, but many of these are little different from existing products, just marketed differently. In Western and Northern European Markets, consumers are less tolerant of marketing gimmicks.

- How easy is it for UK brands to innovate?

TK: Unsustainable innovation is very easy - come up with something that is a bit different from last year, then get someone to endorse it and market it with a few topical buzzwords. This is especially true at the moment with brands jumping on the green 'bandwagon'. Sustainable innovation - the type that is deep-rooted in a brand's psyche - is much harder and takes years to create. But it has true longevity and is consistent throughout the entire business.

TW: It's not about it being easy - you have to innovate to stay ahead of the game. The challenge for all stakeholders involved in the creation, nurturing or implementation of innovation is to create the environment in which the innovation is given its best chance of success. Studies have suggested that lack of belief in innovation among those involved in the process can lead to failure.

SC: It's hard, as we are tied up in red tape, health and safety, bureaucracy of all sorts and restrictions on communication. Any company is going to seek out a market where the cost of goods is less and there is the freedom to experiment in the market and marketing arena.

IP: Like so many things in business and life, it is not easy, but the rewards of innovation can justify the efforts.

- How can UK brands keep up with advances in science and technology?

IP: Ensuring highly qualified science and technology graduates work with business is key to nurturing innovation. The government has doubled the number of Knowledge Transfer Partnerships to bring businesses and scientists together.

SC: Government invests a lot of money in grant funding for innovation in technology, which is welcomed. Similar support would be welcomed in mainstream industry, if we are not to allow innovation at this level to go overseas.

TW: Organisations should look to form strategic partnerships with universities, government and technology companies to ensure this is part of the organisation's innovation process. Kimberly-Clark has formed these partnerships to create both programmes and innovation on the Kleenex brand.

- What support is there for UK brands looking to develop new products and services?

IP: Government funding is important, but it is often best done in partnership with business. For example, the Technology Strategy Board will develop and lead a national technology strategy worth £1bn over three years with the Research Councils and Regional Development Agencies. The strategy will provide business with a package of technology and innovation support, helping companies to turn good ideas into new products and services.

SC: In reality there is precious little support, yet these brands are the drivers of the UK economy. Many brands are under pressure from own-label and increasing global competition on an uneven playing field.

- Is this enough to keep the UK economy efficient?

SC: Not really, there is a strong feeling that the government needs to go into battle to support British business and brands to recreate the level playing field.

TW: The UK must continue to invest significantly to improve productivity, and invest in capital, be it physical, scientific, intellectual or human. While the UK has the fastest-growing business investment in the G7, more needs to be done. The government provides incentives for businesses to invest in R&D, but the more they incentivise businesses, big or small, the greater the motivation will be to invest in R&D.

IP: There is always more that the government and industry can do. However, the 2007 Value Added Scoreboard showed that, over the past four years, big UK companies have had consistently higher profitability, faster value-added growth and created more value per £1 of staff and depreciation costs than their French and German equivalents. Wealth creation and profitability for UK companies both increased 12% over the past year.

TK: There are loads of brands that are leading the way. They tend to be the smaller, riskier outfits but they are willing to take a chance. Bigger companies see a big change as so daunting that the innovations are never really that sincere.

- Is there enough support for innovative SMEs?

TK: If the brands have a sincere interest in innovating, finding the resources to propel things forward is easy. If you're not really trying to change the product or the service, just the way it's sold, then finding real help is difficult.

IP: In an evolving market there are always new areas of demand. For people who are keen to innovate there is a lot of support from both public and private sector providers. Collaborative R&D projects offer the opportunity for SMEs to work with other businesses and organisations. About 80% of Knowledge Transfer Partnerships involve SMEs. Knowledge Transfer Networks also offer the chance for SMEs to get involved in initiatives that stimulate innovation.

SC: Recent taxation policy shows that small business is increasingly seen for its potential squeeze value rather than as an asset to be nurtured. Small business grants and training are skewed toward compliance rather than encouraging good practice in sales, innovation and production.

- How well does the UK balance long-term scientific development with the current needs of business?

IP: The government is working hard to ensure we have the balance right, but we can do even more. Nobody knows the innovation needs of business better than business people themselves. That is why DIUS is committed to an inclusive approach to the Science and Innovation Strategy, to be published next spring. We want to hear from key partners, businesses, academics and anyone that can inform our thinking and enhance policy-making in innovation.

SC: The government is doing a good job of supporting innovation in high-tech industry, and it would be welcome if this could also be the case with mainstream business.

- What more could be done to boost innovation?

IP: We want businesses and universities to develop their collaborative partnerships even further, with higher education expanding and integrating skills development into its employer engagement strategies. We need to create the environment, and provide the means to allow creative collaboration between businesses and higher education. We have terrific universities and businesses, so let's get them working together to tackle the challenges of the future.

TW: This begins with the culture and mindset of the organisations. Industry needs to make innovation part of its DNA. Setting ambitious challenges, such as ensuring that a significant amount of your turnover can be attributed to innovation, helps to focus the business on both the necessity and the financial benefit of innovation. Ensuring investment in R&D and technology, in physical and human terms, at levels that can drive that ambition, is also critical.

SC: More investment and encouragement to invest for the long term. This can be done through the corporate tax regime, as in Germany and Japan.

DATA FILE - THE EXPERTS

- Stephen Castens

Castens is managing partner of innovation consultancy Eureka! Europe, which advises companies on how to expand revenues through new ideas. Previously a global account director at McCann Erickson, Castens has worked on brands such as Reckitt Benckiser, Unilever and Interbrew.

- Tom Kay

Kay is founder of surf brand Finisterre. The Cornish company was launched in 2002 to pioneer ethical products in its sector. It has developed its own waterproof fabrics and sources products from facilities that are run along ethical lines, including a factory that is run by nuns.

- Ian Pearson

Pearson has been MP for Dudley South since 1997; this year he became minister for science and innovation at the Department for Innovation, Universities and Skills. The department was set up to deliver the long-term goal of turning Britain into a world leader for science, research and innovation.

- Troy Warfield

Warfield has been general manager of Kimberly-Clark, UK & Ireland since October last year, following 18 years at Unilever. Kimberly-Clark's innovation programme included the 2007 launches of Andrex Longer Lasting and Kleenex Ovals. This year, the Andrex Quilts launch won a Product of the Year award.

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