Innovation – the key to success

The UK is facing unprecedented economic turmoil over the next 12 to 18 months as the world economy continues to slow following the debt-driven boom of the past decade. The country, corporate Britain and individuals are all carrying a greater debt burden than ever before and, with diminishing revenues, corporations will be under pressure to use their resources wisely. Inevitably, the economy will recover at some time in the future, although no-one can predict exactly when. From a national perspective, it has proven unsafe to base an economy on the financial services industry which, in itself, is entirely dependent upon other sectors for its survival. The City of London has benefited for many years from the great swell investment bank led acquisition of UK companies by foreign corporations and, to a much lesser extent, the expansion of some UK firms through acquisition of UK and foreign enterprises. The City trades in the stocks and shares of other companies many of whom ‘make things’ for a living. Shares in engineering companies, construction firms and high tech companies are all bought and sold on a daily basis in what we simply refer to as ‘the market’ but, as recent events have proven without dispute, the financial services industry isjust as cyclical and volatile as any other industry and has been to some extent at least, built upon weak foundations. The national economy must be reconstructed on a firmer foundation than can be provided by the financial services sector. In the modern world, every industry sector is dependent, to some degree, on electronics and high technology. This electronics sector directly contributes 2.5% to UK GDP (information technology and communications taken as a whole is 10% of GDP). Indirectly, through its importance to the defence, aerospace and automotive sectors, electronics contributes considerably more – perhaps by a factor of ten. Without electronics, our defence, aerospace, automotive and engineering sectors would not exist in their current scale and there are very few products produced in the UK today that do not have some electronic content. This is the future. It is where innovation has the greatest opportunity to flourish and it is where the country must now focus. From a corporate standpoint, the most important thing is to emerge from the period of weakness stronger than before and in a position to drive strong growth as volumes increase. The companies that will achieve this best are those that innovate and invest during this period of weakness. It is not good enough for a company to hope to grow ahead of the market solely on the basis of old products. The companies that will show greatest growth in a recovery are those that emerge with new products. This is also vital from a UK macro economic standpoint as the economy must grow more quickly and strongly than its international counterparts. It is therefore in the Government’s interest to encourage innovation and investment in this period of economic difficulty and to support UK firms as they fight for survival and to emerge stronger and better equipped to address new opportunities. What exactly is innovation? In the past, innovation has been identified as the realisation of a market need and the development of a novel solution. Today, however, innovation is less based on identified need and more upon stimulating demand. There was no readily identified need when Sony first developed the Walkman but, by applying novel thinking and innovative technology, it created an entirely new market which is today worth billions per annum and which has led to the MP3 player, the iPod and a host of similar products. So innovation is based not only on applying technology in a novel way, but also about creative thinking. When Michael Dell developed his first products, his innovative idea was not necessarily product based; it was in his novel distribution methodology. This new approach allowed his company to quickly become market leader with a ‘me too’ product. Innovation is about total creativity, novel thinking, original design and often, but not always new technology.