South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

5.4 Innovation and Creativity

5.4.1 Innovation

Innovation supports economic competitiveness, growth and regional prosperity by acting as the ‘transformational element’ in the economy. Key routes to innovation are the exploitation of an invention, adaptation of a technology or idea from another sector, reconfiguration of existing products and services or a completely new business approach.

It is both the stimulus to, as well as the consequence of, competition. The digital communications age has ensured that the competitive arena is now worldwide – global markets, global operations, and also global threats as well as opportunities. “Only those companies that constantly seek to improve and innovate will be in a position to grasp the major opportunities that increasing globalisation offers,” asserts the DTI’s Innovation Report (2003)(96). Global competition is a major driver of business innovation through new technologies, products, ways of doing business, and forms of organisation. Employee skills are the foundation stone of innovation, and are essential to the creation of competitive advantage.

A report for the DTI(97) asserts that innovation is defined as the development and commercial exploitation of a new idea for a product or process that contributes to wealth creation and profitability.

The barriers that detract from innovation success, or limit the ability to innovate, are significantly composed of skill-related factors. Skills that underpin innovation include:

• Entrepreneurship skills: encouraging creativity, risk-taking and an innovative ‘ideas culture’;
• Leadership skills: the motivation, inspiration and empowerment of others; championing change; change agents;
• Multi-skilling: people becoming adept in a range of roles, adaptable to changing circumstances and open to new ideas;
• Creativity: which is based on openness to new thinking, an unconventional but results-driven approach, the sharing of knowledge and an effective flow of information;
• Skills in networking and collaboration.
• The labour pool and workforce’s calibre; skill development, retention; HR management processes and skills;
• Motivating and involving workforces; giving opportunity;
• The ideas culture at all workforce levels;
• Organisational responsiveness and change; dismantling silos, sharing not protecting knowledge;
• Communication, upwards, downwards and horizontally, also two-way externally.

A high value added, high performance work context which is conducive to innovation activity is characterised by:

• Greater employee involvement;
• Improved skills, motivation and ability, and
• More trust, loyalty and identity.

The current Regional Innovation Strategy (RIS) was published in 2001 and evolved from an earlier Innovation and Technology Regional Framework for Action. These set out the region’s aims to increase quality, effectiveness and coherence in its work to promote innovation and improve the competitive position of South West England. The RIS is underpinned by a wide range of projects covering skills and business support. One of its objectives is to strengthen the skills and capabilities of businesses, especially within the priority sectors, to operate in an innovative manner.

5.4.2 Creativity

The Cox Review(98), commissioned by the Chancellor of the Exchequer during the 2005 Budget, sought to address the question of how to exploit the nation’s creative skills more fully. The emphasis is on the use made of creative skills by smaller businesses, with particular concern for manufacturing.

The Review defined ‘Creativity’ as the generation of new ideas – either new ways of looking at existing problems, or of seeing new opportunities, perhaps by exploiting emerging technologies or changes in markets - and ‘Innovation’ as the successful exploitation of new ideas.

The review was triggered by concerns about how UK businesses can face up to the challenge of a more competitive world. Whilst various government initiatives have looked at related areas like technology and enterprise, it recognised that the connecting thread of creativity had not received the attention it warrants. Creativity, properly employed, and managed, is seen as a key to future business success. To take advantage of the opportunities afforded by globalisation and to create a viable future, UK companies and industries will need to produce innovative, high-quality, high value-added products and services, and bring them quickly and effectively to market. This applies to companies of every size, in every sector. It is particularly relevant to SMEs, which account for 50% of UK Gross Domestic Product (GDP) and provide much of its entrepreneurial base.

As well as being the path to new products and services, creativity is also the route to greater productivity. A parallel study by the Department of Trade and Industry (DTI), Economics Paper No.15, Creativity, Design and Business Performance(99), provides compelling evidence of the impact that creativity can have on business performance.

When asked about barriers to creativity in small firms, business leaders felt that one of the greater barriers was lack of skills in house and lack of access to design and creativity skills. The Review concluded that the issue needs to be tackled by a range of solutions but in terms of developing appropriate skills in support of creativity, it was important that HE broadens its understanding of the skills required of tomorrow’s business leaders, creative specialists, engineers and technologists .

The Review recommended that:

• Creativity needs to be part of technological and scientific learning, and also of management or business studies;
• Encourage universities and SMEs to form stronger links - only 14% of students gain a place on a graduate training scheme with a blue chip employer; this implies that a large number of graduates need to find employment in smaller companies. SMEs not only make up around half of the economy, but they contain many of the most entrepreneurial ventures. Graduates taking placements or permanent jobs with such companies can often apply their skills with much more impact than they could with larger organisations. Links developed between business and academia are largely confined to engineering and science schools and faculties. The Review felt that there is significant potential for similar links to be established between design schools and business.
• Ensure that HE courses do more to prepare students to work with, and understand, other specialists - obtaining the benefits of design depends on managing its integration in a structured and systematic fashion. The Review also found that few business schools address the issue of creativity and its management.
• Establish centres of excellence, combining creativity, technology and business teaching - here the review recommended running masters programmes that bring together the different elements of creativity, technology and business.

Conclusions

It is important that the ESP considers how its members might contribute more fully to this agenda. This might include:

• The development of innovation and creativity skills;
• The encouragement of graduate employment opportunities;
• The encouragement of a greater take up of maths and sciences in the region, reversing recent trends.

The ESP should also consider how to advance the recommendations of the Cox Review.

(96) DTI, Innovation Report: competing in the global economy: the innovation challenge, December 2003, www.dti.gov.uk/innovationreport/innovation-report-full.pdf
(97) Tether B, Mina A, Consoli D and Gagliardi D, Centre for Research on Innovation and Competition, University of Manchester, A Literature Review on Skills and Innovation. How Does Successful Innovation Impact on the Demand for Skills and How Do Skills Drive Innovation? Report for the DTI, September 2005, www.dti.gov.uk /training_development/DTI_Report_Final_8_Aug_2005
(98) Cox Review of Creativity in Business: Building on the UK’s strengths, HM Treasury, 2005
(99) Department of Trade and Industry (DTI), Economics Paper No.15, Creativity, Design and Business Performance, DTI, 2005