Innovation – the power of three

Lee Hopley, Chief Economist at EEF, the manufacturers’ organisation, on why innovation matters

As a representative body that is embedded in the UK manufacturing sector, EEF sees, day to day, the importance of industrial innovation.

Seen from the ground, growth in sales and profits, rewarding careers opportunities, exploitation and dissemination of new technologies are just some of the obvious consequence of companies’ innovation efforts. And in their own words, manufacturers who participated in some recent EEF research told us why innovation matters to them…

“Innovation helps us remain technologically relevant in the face of new and emerging technologies and competition”

“Innovation shows our customers that we are working to improve their businesses for future market requirements”

“Innovation enables the development of improved product and services which gives us access to more market opportunities”

While it’s clear to EEF and a no brainer for companies, the next round of government belt-tightening means EEF and manufacturers must continue to spell out why innovation matters and why everyone is better off if government, industry and science the base work as partners.

1.     Innovation matters for the economy

EEF’s last Innovation Monitor survey showed that manufacturing is a highly innovative sector and companies are using innovation to deliver productivity improvements and export growth. Given the wider economic challenges facing the UK – comparatively weak productivity growth and little or no contribution to growth from net trade – these innovation-related priorities across industry are exactly what’s needed.

Critically, innovation also ensures manufacturers are nimble in the face of changing demand conditions. Industry has seen good times and bad over the past five years and for companies linked to oil and gas activity, the current environment can certainly be characterised as challenging. These manufacturers aren’t just riding out the low oil price, they are innovating to diversify into new geographical markets and industry segments, which means continued investment and employment.

2.     The benefits of the power of three

Industrial innovation is extremely resource intensive – people, money, equipment – some of which will be on hand within companies’ own factories, but more often than not, there is always something missing.

Our research showed that when manufacturers come up against a shortage of skilled people or when they don’t have access to the right facilities or equipment, success rates are affected. This is particularly the case in tricky or more open ended projects that companies hope will lead them into new technology sectors or markets.

Some of these resource gaps can be plugged. And collaboration is a big part of the solution. In some cases government support can facilitate this collaboration and help manufacturers’ access expertise and specialist equipment. Key schemes, which are frequently used include Knowledge Transfer Partnerships (KTPs) and the new Catapult Centres. In our latest survey 30% of manufacturers had or were considering a KTP and one in ten were looking at opportunities with the Catapult network or were already working with one of the centres.

Outreach from the science base and universities is also making a difference. EEF’s Innovation Monitor surveys suggest this university-business collaboration has grown in recent years: in 2009, 37% of manufacturers said they had worked with a research institution, by 2013 this had risen to 62%.

3.     Propelling the UK’s knowledge based innovation industries to the top of the pile

So, we have more ambitious businesses, but sub-optimal outcomes. We have resource gaps, but the building blocks of the right infrastructure to start plugging them more systematically. And we have government considering where it will prioritise its resources over the next three years.

The messages from industry on these decisions are straightforward:

• The UK is a good place to innovate and no one should be content with standing still. It will require government and industry to make real terms increases in investment to get ahead.
• The Catapult Centres are gaining brand recognition and they work in the sweet spot of manufacturers’ innovation challenges. They must have an adequately resourced future.
• The UK must get a handle on its longstanding skills problem – innovative businesses can only thrive and expand with access to a pool of talented people with STEM skills.