What Every Manager Should Know About Innovation

Innovation has become an every-day ‘Barnum’ word in today’s workplace, if PR is to be believed everybody seems to be doing it - and doing it well, but how true is this?  The fruits of innovation are easy to identify, like improving consumer goods and medical treatments but, at the same time, there is a lack of general understanding about how people engage with the process of innovation.  Misconceptions exist about innovation and invention, and what innovation activity is.  Moreover, the value of innovation (both in monetary and organisational terms) and the management factors that enable innovation are also not generally understood.

What is Innovation?  - Isn’t it another word for inventing?

The good news is that you don’t need to invent a new vacuum cleaner to be innovative; a broad definition of innovation is ‘the successful exploitation of new ideas’.  The innovation doesn’t have to be a thing, it can be a new way of organising or doing things.  The National Endowment for Science, Technology and the Arts (NESTA) sees innovation encompassing the “exploitation of technologies, organisational innovation and innovation in services”[1]

Can a Business Case be made for Innovation?

Innovation has undoubted commercial value.   Around two thirds (63%) of UK labour productivity growth since 2000 has been gained through workplace innovation[2].  Moreover, in firms profit-margin is the most common business driver of innovation, followed by sales/turnover growth[3].

NESTA reported that innovating firms in the UK tend to grow more rapidly, and averaged four times the sales growth of their peers.   Recession resilient high-growth companies exemplify this effect, these firms average 20% or more annual growth and innovation has been identified as the driver of their growth[4].

How widespread is Innovation in the UK?

The UK Innovation study 2009, carried out by the BIS, estimated that in the period 2006-08 around 58 per cent of UK enterprises were ‘innovation active’, a fall from 63% in the previous study based on 2007.  Just under a quarter (23.9%) of the surveyed firms had undertaken product innovation (over 40% of these new-to-market goods), and one in eight firms (12.6%) process innovation[5].

The survey also looked at innovation focusing on strategy, management methods, organisational structure and marketing.  The BIS reported that around a quarter (26.5%) of all surveyed firms had undertaken these activities during 2008, amongst medium and large firms this rose to nearly 40%[6].

Learning and Innovation Management

Innovation skills and experience is an increasingly important part of life-long learning and an individual will make use of these throughout their career.  However, the UK compares poorly against other leading nations in terms of workforce innovation capability.  An IMD survey rated the UK joint bottom of nine nations in terms of ‘Extent of staff training’ and within the bottom three for ‘Employee’s ICT skills’[7].  Individual and organisational learning is a central pillar of effective innovation and organisations need to demonstrate that they “are always willing to learn”[8].

Click here to see the full report.

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[1] (p6) Hidden Innovation, NESTA, June 2007

[2] (p10) 2010 Annual Innovation Report, BIS and NESTA, 2011

[3] (p6) UK Innovation Survey 2009, BIS, December 2010

[4] (p3) The Vital 6%, NESTA, October 2009

[5] (p7-8) UK Innovation Survey 2009, BIS, December 2010

[6] (p23) UK Innovation Survey 2009, BIS, December 2010

[7] (p74-79) The Wider Conditions for Innovation in the UK, NESTA, November 2009

[8] (p6) Excellence in Service Innovation, CBI, 2008

UK Renewable Energy Association report: too much good news for its own good?

This week the Renewable Energy Association (REA) published the report "Renewable Energy: made in Britain".  The association represents the interests of renewable energy sectors including biomass, geothermal, energy from waste, hydro, solar and wind power.  The report presents encouraging and optimistic statistics of the renewable sector, its findings include:

• Turnover in the UK renewable sector was approximately £12.5bn in 2010/11[A].
• The renewable sector (including its various supply chains) is now estimated to employ more than 110,000 people in the UK.  The wind and bio-energy sub-sectors are each estimated to employ over a quarter of all people involved in the renewable sector - just over 31,000 a piece [B].
• Within the sector the biggest performer was wind power (onshore & offshore) recording the greatest turnover (£4bn) and exports (£500m) [C].

The publication of rosy figures should not be a surprise from an industry representation body, what is interesting is to see how well these figures are corroborated by data collected by the UK Government.  The Department for Business, Innovation and Skills (BIS) classifies renewables as part of the LCEGS sector (Low Carbon Environmental Goods & Services) made up of Environmental, Recovery & Recycling, and Low Carbon activities (the last of which includes nuclear power).  The BIS report "Low Carbon and Environmental Goods and Services" report, published in 2011, found that:

[A] In 2009/10 the combined UK LCEGS sector achieved £116bn of sales; the largest sub-sectors being alternative fuels (£17bn), building technologies (£14bn), wind (£13bn), alternative vehicles & fuel (£12bn)  and geothermal (£10bn).
[B] '914,273' people were employed in the UK LCEGS sector (and supply chains) in 2009/10.
[C] UK LCEGS exports totalled £11.3bn in 2009/10.  The five largest exports being alternative fuels, building technologies, photovoltaic, wind and water/waste services; totalling £6.7bn

UK Comparative Performance

Though the above figures are encouraging, the REA makes a sober comparison of the UK to that of the continent.  It reports that, renewable energy supplies 12% of European consumption, in Germany renewables supply 11% of energy needs (just as well - as it appears that its nuclear energy sector will be phased out).  In the UK, the renewable sector supplies just 3% of energy.

The REA also states that the German Renewable sector employs over 370,000 people; more than three times that of the UK.  The German economy also receives additional benefit from expenditure in its renewable sector, as these monies recirculate within its industries (unlike purchases of oil and gas).

UK Renewable Sector Risks

The major hazards the REA identifies as endangering the UK Renewable sector are structural and political rather than technological:

1. A lack of recognition and championing of the benefits of Renewable Energy
2. The shortage of 'acute skills', which needs to acted on as a national opportunity
   

The UK Government "Skills for a Green Economy" report of 2011 tends to agree with these findings.  It also considers that a 'green economy' will require skills in the following areas:

• Resource Efficiency
• Low Carbon Industry
• Climate Resilience 
• Managing Natural Assets

A Rosy Renewable Future?

The REA estimates that the achievement of the EU legislated target of 15% renewable supplied energy by 2020 might see 400,000 employed in the UK renewable sector and supply chains.  This figures is roughly comparable to the sector employment in Germany, quoted by the REA, where 11% of energy is renewable-sourced in a country with a population of just over 80 million.
What is more, the REA suggests that UK turnover might also increase by a similar scale to around £50bn per annum - much of this from the recirculation within the UK.

What does it take to look into the future?

Hello World,
At the start of the year the BBC news site reported on the century predictions made by John Elfreth Watkins Jr.,  an American civil engineer.  In 1900 he wrote an article "What may happen in the next hundred years" published in the Ladies Home Journal speculating about the impact of technology in the year 2000, some of these predictions turned out to be extraordinarily perceptive.

Among the predictions that stand out are descriptions of:
-A wireless telephone service which supports global communications (reflected in today's mobile telephone network)
-The electrical transmission of camera images around the world (today's TV network)
-150mph Train travel (even in 1900 possibly no one in history had travelled at 100mph in any mode of transport)
-Home heating, free of smoke and without the need of a furnace (gas and electric central heating)
-Refrigerated transport of food (a visit to a supermarket reveals foodstuffs from around the world)

There were a number of things he did get very wrong like suggesting that people would walk 10 miles a day and that mosquitoes and flies would be eradicated!  In any long view prediction these misses are to be expected, but even taking these into account his overall perceptiveness is impressive.

What I think is most interesting about Watkins is not what he got right but his way of thinking about future technology.  I think his success is based on an approach characterised by:

1. A sense of what people really want technology to do for them Watkins had an insight into the burdens and chores of everyday life that people would gladly be free of - like storing heating fuel and shovelling it into a fire, or eating only local seasonal foods.
2. The view that markets shape and influence technological development. This is perhaps a consequence of Watkins living in an industrialising democracy with a growing consumer base.
3. A historical sense of the role of technology. As an engineer in a young nation he may have been acutely aware of how technology had shaped its development.  For example the role the printing press played in enabling the revolt in the Revolutionary War (being the social media of the day).  The American Civil War demonstrated the use of the telegraph and photography.  Being perhaps the first media war, the Union Army had to work with the newspapers, and reporters telegraphed their reports to their editors in the cities. And the Union Pacific railway line completed in 1869 linking the Eastern US with the Pacific Coast, less than a hundred years after the declaration of independence.

The predictions that Watkins got right appear to be tempered by these considerations.  His predictions also assume the invention of supporting technologies that enabled these to become reality (for example fibre optics, digital systems and computers).  This reinforces his attitude that what people really want drives and shapes technology.

It is tempting to dismiss the many features of today's world that Watkins completely missed, for example movies,the air age, rocketry, and plastics.  But these perhaps give us a handle on the difficulties he faced looking into the deep future:

• Living in an age of specialisation. The scale of 19th and 20th century science required scientists and engineers to specialise, and the volume of new knowledge made it impossible for anyone to keep completely abreast of progress.
• The limits of imagination.  When Watkins predicted television he possibly did not imagine that a popular use would be to watch pre-recorded acted stories (movies).  This is not to say that he couldn't have conceived what became perhaps the defining creative form of the 20th Century.  Similarly, I have little doubt that in the 22nd century there will be forms of entertainment that will make today's 3D movies and video games seem as quaint as silent movies seem to us.  It's just that I just can't imagine it.

Welcome to the Leapfrog Blog and thank you for taking a 'leap' to this site! My name is Patrick Sim and I am fortunate to have a personal and professional interest in innovation and technology.
Am I alone in thinking that we live, perhaps, in the most interesting of times?  In terms of our knowledge of the Universe and the world we inhabit, we have never known so much.  In addition, the capabilities of technology are astounding, one bound on what is possible seems to be the limits of human imagination.  But this age is counterbalanced by a mood of uncertainty, about climate change and the condition of our planet, about what the future holds - both good and bad, and the place of people and technology in this complex, changing world.
So, the intention of this blog is to pick up a few choice pebbles on the long shore of knowledge and endeavour.