NESTA report calls for 'Total Innovation' to ensure UK firms compete internationally

Firms in the UK’s most important high-technology industries must radically re-think their approach to innovation or they will lose out to foreign rivals as international competition intensifies, according to a new report by the National Endowment for Science, Technology and the Arts (NESTA).

The report, which was released today at NESTA’s Innovation Edge Conference in London, says that some companies in sectors such as aerospace, pharmaceuticals and automotive are unprepared for the ways in which international competitors are becoming more innovative.

The increasingly distributed nature of innovation and the outsourcing of ever higher-value-added activities to firms in emerging economies is increasing their ability to compete with Western firms.

NESTA argues that to deal with the threat the UK has to harness ‘total innovation’  - integrating innovation in new technologies, products and processes with innovation in new services, business models and organisational forms.

The report acknowledges that the UK has world leading strengths in some high technology areas but companies need to take a broader approach to innovation because of the danger of becoming trapped in existing technologies and business models.

The danger is that established firms fail to respond quickly or radically enough to the increasing international competition. This is why radical innovation often comes from new entrants from other countries; they are freer to re-think how they serve their customers.

The ability of UK firms to develop new business models, organisational forms and processes therefore becomes even more important. This could help to free them to engage in new forms of technological development and to enter new markets.

The report also argues that innovation policy has to be more focussed on the types of innovation that actually contribute to business growth.

In the past, policy has focused on traditional innovation indicators such as investment in formal research and development and the number of patents registered.

The result has been a range of initiatives that have focused on support for technology-focused innovation. These have included Knowledge Transfer Networks (KTNs), Knowledge Transfer Partnerships (KTPs), and R&D tax credits.

But policy now needs to shift from supporting research to stimulating a wider set of innovative activities.

That means complementing R&D and technology with a focus on stronger and broader skills for business, using taxation, regulation and procurement to boost innovation and developing “Total Innovation Strategies” for the UK’s most important industries.

Commenting on the report, NESTA CEO Jonathan Kestenbaum said;

“This is a whole new ball game.  It’s not a question of simply being more efficient than low cost competitors from so-called ‘emerging’ economies.  Because of the rapidly changing nature of high-technology sectors they are now competing with us on an equal footing.

“To retain the UK’s competitive edge in those sectors we have to stop being linear in our approach and start integrating different forms of technologies and business models into ‘total innovation’.  Some established firms are already doing this but others must follow their lead if we are to protect our market position in these important industries.

Notes to Editors:

NESTA
NESTA is the National Endowment for Science, Technology and the Arts - a unique and independent body with a mission to make the UK more innovative. It invests in early-stage companies, informs and shapes policy, and delivers practical programmes that inspire others to solve the big challenges of the future.   

Total Innovation report
Download the report.