Business innovation is key to manufacturers’ success at home and overseas, and is seen as a critical part of their growth strategies, according to a new survey published by EEF and Santander.
Business innovation helps manufacturers to do things better; it also helps them to enter new export markets, as well as to seek new domestic markets. It’s about much more than new products and new markets; and as a result, the breadth and focus of manufacturers’ business innovation activities have changed significantly in recent years.
Confirming the dominance of industry research & development (R&D) spend, the survey highlights the on-going prioritisation of investment on innovation in the past three years.
While the development of new and improved products remains critical in meeting customer requirements and cementing manufacturer’s position in global value chains, process innovation is becoming even more important.
A balance of 37% of companies agreed that process innovation is more important than other forms of business innovation.
This growing importance is being driven by the need for complementary innovation to deliver leading edge production techniques in support of new products, the need to increase the flexibility of product processes and the increasingly pressing need to improve productivity.
Key findings:
- Almost all (95%) manufacturing respondents engaged in some form of innovation in the past three years, unmoved from the 2015/16 results
- Three-fifths of manufacturers reported introducing a new or improved product in the past three years
- But a balance of 37% of companies agreed that “process innovation is becoming more important than other forms of innovation”
- Positive outcomes from process innovation are widespread with reduced production costs (72%) and higher productivity (70%) topping the list of cited benefits;
- Not all companies are making the most of process innovations; less than half (45%) report that process innovation involves the use of new ICT to improve product processes;
- Industry-academia interactions on process innovation are low with only a sizable proportion of companies never involving universities (43%) or Catapult centres (90%)
- Propelling more companies towards the productivity frontier requires policy to help manufacturers overcome certainty, capability and cash barriers to more effective process innovation.
The research clearly shows that there are no downsides to process innovation, but it is also clear that not all manufacturers are making the most of their efforts.
Concerns that there is a chasm opening up between companies at the innovation frontier – investing on multiple fronts, including digial technologies – and the less-productive majority, are confirmed.
With innovation and science set to be a centrepiece of the government’s forthcoming Industrial Strategy White Paper, it is vital that policy makers also recognise the value of process innovation to drive productivity.
Support for innovators needs to be broader than help with new product development, it also needs to help manufacturers bridge the gaps to the adoption of new technologies and modern manufacturing techniques.
Chief economist at EEF, Lee Hopley explained: “Manufacturers are continually having to broaden their horizons when it comes to innovation and investment priorities. It’s hugely encouraging that we see productivity-enhancing process innovations become more widespread in their adoption across manufacturing, in addition to companies retaining their focus on new and better products for customers.
“But not all companies are moving forward at the same pace, with many constrained by access to the right people and overcoming uncertainties about the returns from their innovation efforts. While our message to industry is to cast their net wider, particularly to build more collaborative partnerships, it is also clear that support for the spectrum of innovation – including modern processes – should be centre stage in the government’s forthcoming industrial strategy.”
Head of Manufacturing at Santander UK,Paul Brooks commented: “It is great to see the manufacturing sector leading on many forms of innovation and accounting for 70% of all R&D in the UK. Innovation is a cornerstone of many businesses future success and is something that every business should be looking to embrace.”
