Once again we're through the annual ritual of party political conferences and it's been interesting to note how the question of the faltering UK economy has been addressed.
Unsurprisingly, given that we are two and a half years from the next election, Labour is reluctant to make long-term commitments. Equally unsurprising is that the ruling parties, the Conservatives and Liberal Democrats will attempt to talk up their policies.
But what is really happening to improve the economy?
The ComRes opinion in Saturday's Independent will, however, not have been welcome news to the government. In particular, it showed that business leaders are pessimistic about the reality of economic growth returning to their sectors; 28% believing that it is, 32% saying it is decreasing and 37% suggesting that growth is flat.
This poll is backed up by a handful of industry-specific surveys, most especially from the services, manufacturing and construction sectors, all suggest that growth is, at best, sluggish.
Our current account balance is in deficit, some ?21 billion which means that we need to create growth to be able to pay our debts off.
David Cameron has warned that further cuts to welfare, some ?16 billion, are being considered to supplement the spending cuts and tax rises already in the pipeline.
As we can guess, things are not going to get better anytime soon and what does not seem to be emerging is the rise of private enterprise to create the growth that is desperately required.
Is there anything else that this, or any other, government can do?
The answer is yes. Look at other European economies and you can see that they have recovered more quickly than us.
In these economies, most especially Germany, we see that there is a very different approach to industrial policy and investment in supporting its ability to both survive and to develop through innovation which the strategic management academic and writer Richard Lynch define as the 'generation and exploitation of new ideas'.
Maybe we should consider emulating what has been done elsewhere to stimulate growth through innovation.
The trouble is, it will take investment to create the conditions for this growth and, of course, that will not be welcomed by the current administration.
But let's start consider the importance of innovation.
As is well recognised, in rich industrialised countries such as the UK, the majority of growth is through innovation.
NESTA (the National Endowment for Science, Technology and the Arts) has carried out research on innovation which demonstrates its importance (see Working Paper No. 12/09: UK Innovation Index: Productivity and Growth in UK Industries).
If you can work your way through the statistical analysis, NESTA show that investment in the UK's "knowledge economy" through ' knowledge/intangibles' is now 34% greater than tangible investment. Additionally, scientific R&D is about 11% of total intangible investment, software 18%, design 12%, and training and organizational capital 21% each.
Perhaps not surprisingly, the most 'intangible-intensive industry' is manufacturing.
In summary, innovation has been responsible for two-thirds of growth since 1990.
So innovation investment in innovation is, they say, "no brainer".
The reality is, of course, not as easy as that and is estimated that investment in innovation in this country has fallen by some ?24 billion since the onset of the global financial crisis.
That's not a surprise as in tough times companies will always tend to retrench in order to survive.
But in the tough economic times we are going through and, more crucially, in order to create the growth that will provide jobs we need to give even greater importance to the ways in which there can be a culture of creativity and ingenuity.
There is a belief that what we have seen so far in terms of development of IT is not played out and, according to seminal American economics and technology commentator Professor Brian Arthur believes that the digital revolution is creating what he believes to be a 'second economy' .
Writing in the October 2011 edition of the McKinsey Quarterly Arthur argues that every sixty or so years a technological innovation will emerge that will alter the economy in ways that, hitherto, would never have been contemplated.
Arthur believes that the current technological revolution, through IT, is creating a vast interconnected system of processes that allow us to communicate with one another, order goods, book airline tickets and so on.
But, as we know, this apparent freedom comes at the cost of the loss of jobs by people who used to carry out such processes. Indeed, by shifting from the physical to the virtual, he asserts that we are seeing a significant alteration from "producing prosperity to distributing prosperity," and that the reduction in employment may be greater that which is disappearing India and China.
More particularly, he contends that:
"The second economy will certainly be the engine of growth and the provider of prosperity for the rest of this century and beyond, but it may not provide jobs, so there may be prosperity without full access for many."
However, as history teaches us, with change comes opportunity for those willing to think creatively; a point that Arthur makes when he stresses that whatever the challenges, the good news is that we have "freedom to invest our energies in creative acts."
There is an issue of culture. In particular the ability to engender a sense that it becomes the norm.
Take for instance Apple which, as well being the world's most profitable company and, as I reported in last week's blog, the coolest, is probably the most reported upon.
It was the first anniversary of the death Apple's founder Steve Jobs last week and whatever criticism may have been made with respect to his obsession about detail, created a company that genuinely celebrated innovation and creativity.
Writing on the BBC website last Friday, Robert Scoble, believes that what still exists in Apple is the fact that it has the best design team in the business". Added to this, according to Scoble is that it also has the "best supply chain in the business".
Apple is doing fine; it has risen by 75% since Jobs' death last year.
Whilst Scoble is fairly sanguine about Apple's future under Tim Cook who took over from Jobs, others are not so confident. George Colony of Forrester Research thinks that Apple will like Sony after the death of its leader Akio Morita in 1999 when it declined.
Colony thinks that when Jobs died he took three things with him.
Firstly, Jobs had "singular charismatic leadership that bound the company together and elicited extraordinary performance from its people". Secondly, Jobs had an ability to take "big risks". Finally, and perhaps most importantly, Jobs had an unparalleled ability to envision and design products."
In what seems an overly pessimistic prediction, Colony suggests that Apple had no more than four years before its revenue growth and product innovation begin to would stall and which will cause a decline like that seen at Sony.
Clearly, Apple cannot take continued success for granted and in order to continue to be perceived as producing wonderful products will have to keep innovating through a culture of 'intellectual curiosity' (an expression I picked up from a presentation by management guru Tom Peters).
As we all know, if companies don't invest in innovation quickly become outdated and lose out to those that do.
I have used the word culture a couple of times. If you have a chance, have a look at a new book by Christopher Bonanos, Instant: A Cultural History of Polaroid, published by Princeton Architectural Press.
It's fascinating to consider the parallels that some have made between Apple under Steve Jobs and Polaroid which was led by its founder Edwin Land.
As Bonanos describes, Jobs recognised much of what drove him in what he knew about Lands:
"Jobs was a marketer who knew his science; Land was a scientist who was never happier than when he was in the lab [...] they shared the same relentless perfectionism, though Land was a kinder person than Jobs. People may have found him professionally exasperating, but his old colleagues still talk about him with love, which is remarkable given he's been dead for 20 years and gone from Polaroid for 30."
For the younger readers who are used to digital photography it is hard to overstate how revolutionary a Polaroid was. The concept of a hand-held device capable of producing instant photos was amazing (this only happened in the photo booths that, strangely, are still with us for the likes of passport applications).
Land was a driven and visionary CEO who as serial inventor. As well as inventing the world's first instant camera in 1943, he held 535 US patents in his lifetime and is given credit for helping to bring about 3D films, developing polarised car headlights and the U-2 spy-plane.
It was not until the 1970s that Polaroid launched its revolutionary product, the SX-70, onto the market. It was spectacularly successful through the decade but what many see as the beginning of its demise was Land's retirement in 1980. Polaroid did not recognise digital photography (resonance with Kodak) and in 2001 filed for bankruptcy.
Eerily, Polaroid enjoyed a market position similar to Apple's current dominance in phones. Similar to the battle between Apple and Samsung, when Kodak launched its own instant camera in 1976 Polaroid sued for patent infringement which took ten years to reach a conclusion in its favour. Even though Kodak had sold sixteen million cameras it was ordered to discontinue making its version of the instant camera and film and made to pay $909 million in damages to Polaroid.
Polaroid was utterly dominant because of the strict patent system which meant that only they could make the film for a Polaroid camera which had a 60% profit margin. When they were developing the SX-70 they could afford to spend seven years and $2bn on it because it had the market to itself.
In what is a mirror image of Kodak, Polaroid failed to see that innovation in digital technology would have such a dramatic impact on its product.
Clearly, Apple cannot take continued success for granted and in order to continue to be perceived as producing wonderful products will have to keep innovating through a culture of intellectual curiosity (an expression I picked up from a presentation by management guru Tom Peters).
As we all know, if companies don't invest in innovation quickly become outdated and lose out to those that do.
So back to what the current (and future) government should do?
I attended an event on Tuesday organised by my BCU colleague and fellow Blogger Beverley Neilsen at which a report 'Sack the Economists, Hire a Designer, Creating Economic Value through Design' was launched.
The accepted view was we can expect no support from government to assist in innovation. Their priority is in bringing down spending not adding to it.
However, the government can assist in creating a climate (culture) on which innovation is embraced and supported through, for example, tax breaks.
A good place for our government ministers to start would be to look at countries where innovation is positively encouraged through investment in education and research; Finland, South Korea, Israel and Taiwan.
Even the US government spends billions of dollars on technological development and innovation by investing in institutions including the National Institute of Health and the Defense [sic] Advanced Research Projects Agency.
As has been pointed out, innovation requires fertile ground and this requires investment.
Given that it has been estimated that investment in innovation in this country has fallen by ?24 billion since 2008 it is legitimate to ask how much healthier the economy would now be if the money we have given to bailing the banks out had instead been spent on supporting innovation.
'Sack the Economists, Hire a Designer, Creating Economic Value through Design' and is based on research carried out on behalf of Idea Birmingham.
Idea Birmingham's goal is to highlight the contribution of the skills and expertise of designers based in industry of every variety, including and creative arts, throughout the Midlands.
As the report detailing the research shows, there is a challenge in supporting the work that goes on within the region and ensuring that design talent and creativity is sustained within this area.
What is absolutely significant is that the research carried out by survey and interview of 24 leading Midlands businesses found that:
? 87% get their competitive edge from innovation
? 87% of businesses rank innovation as one of their top business priorities
? 82% of business are increasing their investment in innovation
? Over ?3bn is being invested in new product design by the firms surveyed, averaging 14% of turnover
? 94% said design enables them to fulfil their customers' needs
? 71% have found a direct link between profitability and design
As the last point emphasises, the data elicited shows a direct correlation between the commitment to design and growth and that this is assisting in development of new products that can be exported.
What does emerge is a sense that there is a need for the Midlands to more proudly proclaim its innovation eco-system which will builds on the region's reputation for design and innovation and which will become a 'unique identifier'.
The report contains three recommendations:
1. The Launch a design-led strategic marketing campaign for Birmingham, the gateway to the Midlands in which Birmingham is a design and innovation hub; the Milan of the UK which would continue to support an annual Birmingham Made Me Design Expo (held earlier this year), to provide a showcase for Midlands talents and products and enable businesses, universities and government to meet in order to identify talent and opportunities for future development.
2. The creation of an Innovation and Design Leaders' Network (IDLN) by which to foster a strong design and innovation eco system for Birmingham and the Midlands with entrepreneurial, collaborative, multi-disciplinary culture at its heart.
3. Support to be provided for new business formation, drawing on multi-disciplinary, collective learning activity which ensures that business, technology, engineering and entrepreneurship is achieved.
These recommendations would seem to provide the basis for talent development and will support those with creative talent to flourish.
Given the urgent need for economic revival, and with explicit localism in mind, would be a great place to start. The trouble is the apparent dogma for austerity seems to be blinding our politicians to what is really needed for future growth through innovation.
Source: http://blogs.birminghampost.net/business/2012/10/supporting-innovation-and-crea.html
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