Innovation: the first casualty of a downturnA whitepaper from Portal
Britain’s innovation historyFor centuries, Britain has had an enviable                                                    ...
Has this figure changed since the start of the economic downturn?                                                         ...
2. Finding the right people – for many companies,         organisations understanding who knows what is a   particularly t...
3. When you look at your R&D process, what is the biggest pain?         38%                      35%                      ...
ConclusionWhether your company is involved in the                allowing employees to collaborate easily andmanufacture o...
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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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UK companies fail to invest in innovation

  1. 1. Innovation: the first casualty of a downturnA whitepaper from Portal
  2. 2. Britain’s 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 are less 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 UK’s reputation These figures are supported by research recentlyas a centre for innovation, helping the country conducted by Portal which found that nearly 57achieve its position as one of the leading global per 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 and search for new ideas, services and products.Entrepreneurship” Peter Drucker laid out the ,key elements of innovation. Famously, he said This lack of focus on innovation is one of the“entrepreneurs innovate. Innovation is the specific reasons why the UK is ranked just 18th in theinstrument of entrepreneurship. It is the act that world’s innovation league .endows resources with a new capacity to createwealth.” Twenty-five years after publication, it is So 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 unable casualty 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 of As a percentage of your revenue, how much do you spend on innovation to identify and bring to market new products or services? 32% 25% 15% 21% 7% Five to ten More than ten None One to two Two to five percent percent percent percent¹ chapter/factbook-2010-54-en&containerItemId=/content/serial/18147364&accessItemIds=&mimeType=text/html² Innovation: the first casualty of a downturn
  3. 3. Has this figure changed since the start of the economic downturn? 61% 18% 14% 2% 5% Yes - We’ve Yes - We’ve cut No - It’s the same Yes - We’ve Yes - We’ve cut our increased it back a little increased it a little R&D enormously dramaticallyIt’s the economy, stupidThere is no doubting the effect which the of business – investment more often than notextended economic slump has had on British brings 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 a documented, 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 16.8 many patents. Companies that fail to pay heedper cent of companies plan to increase their to 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 for companies failing to invest enough in innovation.The lack of investment by British businesses Perceived difficulty of the innovation process istranslates into a real paucity of time given over to deterring 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. Annualising process challenges:this, and even with the most generous ofassumptions, companies are spending just half of 1. 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, where this environment is one of the major obstaclescompanies feel they can invest only if the future to 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. 4. 2. Finding the right people – for many companies, organisations understanding who knows what is a particularly those with multiple sites, knowing major challenge. what skills the workforce has, whether they are Technology 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 Welsh language 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 a keeping them collaborating is another major multitude of backgrounds. headache and one which technology can help solve:Taken with the constant scrutiny of costs, thesethree challenges have led companies to cut back Social business tools are a really effective waytheir innovation in the belief that it is too difficult for 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 of Keeping 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 these While basic, file sharing is another vitallyis to consider whether technology can play a part important aspect of effective helping to manage the innovation process. Taken together, these tools can really helpRight at the heart of simplifying the innovation companies 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 had impossible without their use.the right skills was a relatively easy matter but intoday’s complex, diversified and multi-centred4 Innovation: the first casualty of a downturn
  5. 5. 3. When you look at your R&D process, what is the biggest pain? 38% 35% 12% 15% Creating enough Keeping people The process of Understanding what time outside of our focused on the task getting everyone to skills and knowledge ‘day’ jobs for R&D to in hand collaborate is way we have inside our be effective too 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 world’s 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, extreme Element Six chose Portal because of its deepperformance solutions which exploit the unique ties with IBM and its outstanding track record ofproperties of synthetic diamonds. developing complex social business solutions where, 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 Centre to 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 closely collaboration processes it is better able to bringmatched its needs while also fitting into the new solutions more quickly to market, helpingcompany’s existing IT infrastructure. maintain its global market leadership.5 Innovation: the first casualty of a downturn
  6. 6. ConclusionWhether your company is involved in the allowing employees to collaborate easily andmanufacture of synthetic diamond supermaterials effectively. 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 thriving the support and expertise of an implementationbusiness both in the short and long–term. Failure partner, 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 needs help 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, can some of the great British innovators.provide the tools to create that right environment, 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 For additional information visit