We hold these truths - LIVE

Last week, I was the proud recipient of a Frost & Sullivan Award for Growth, Innovation and Leadership.  I had to give a 15 minute acceptance speech, so I raided past blogs and produced a sort of "greatest hits remastered" talk.  This is it...

As Director of Innovation Programmes at the Technology Strategy Board, the UK government’s innovation agency, I get asked about innovation all the time.  Although I am now a public servant, I have spent most of my career in industry, and most of that working for large global corporations.  This has coloured my approach to innovation.  To me, innovation is all about making money.  However, I realise that, like all totemic words, it can have many meanings and normally has whatever definition the user wants to put on it.

When I worked for companies, even the large ones, the breadth of innovation available to us was limited by what we were.  We could service the markets we knew – or perhaps the ones adjacent to them.  We had factories that made certain things, although we could consider making similar things, providing the extra costs weren’t too much for the chosen market to bear.  I suspect that we even had limitations in the minds of our leaders, but we didn’t ever think we could do really hard things in a commercial context.

What I have learned from my 5 years in a government agency is that you need to think big and bold if you are to achieve anything at the national scale.  I hope over the next 10 or so minutes I can convince you not only why that is so, but how we are at least making a reasonable job of it in the Technology Strategy Board!

Growth

Like innovation, we all talk a lot about “growth” these days.  It is a word used to justify a lot of things, but I will give you an extreme view.  Growth only comes from doing something you weren’t doing before – it doesn’t come from “modifying” or “evolving” things, it comes from radical change.  However, that change can be in any part of the commercial process.  It can be a wholly new product or service, it can mean a wholly new marketing campaign or price structure, it can mean a new means of manufacture or something else.  It is only through sizable change that growth can come.  This scale of disruption brings with it a whole range of risks.  The risk can be technical – you might not be able to make that perpetual motion machine you “know” will sell.  It might be that no-one sees the value of the product or service – at any price point.  It might be that it takes more to make or deliver than customers think it is worth.  It might be that the return on the necessary investment is no better than putting your money into a bank (although these days, this is not usually a problem!

Both in business and at the Technology Strategy Board we ask 3 questions to test whether an idea can lead to growth.  Because of the “big and bold” requirement and the fact that we are using taxpayers money, there is an extra question that we need to ask from the government point of view.

Market

The absolute truth of business is that if no-one buys your product or service, you are not actually “in business”.  Coming from a technology background, I learned the hard way that just because it is new or interesting it doesn’t have a right to be commercially successful.  Commercial success is much more complicated.  Over my time in industry, but probably more so since I have seen a huge range of projects through my role at the Technology Strategy Board, this is the area where the really clever moves are made.  Everyone looks at the markets.  Most people have access to the statistics and analyses of the markets.  It is the person or company that sees something different that has the edge.  Obviously, it can go wrong, but if you can look at what everyone else is looking at and see something different, you have already differentiated yourself from your competition.

Markets are not static either.  They change – in what customer wants, in what they think is an acceptable price, in what level of service they want wrapped around the product, and so on.

The competition is not standing still either.  They have been encouraged by their shareholders and leaders to grow, so they are trying to adjust their focus and see something different that they can sell.

Lastly, and often forgotten or not recognised, governments change markets.  By the use of standards, regulations, tax measures or what they buy, they change the shape of the markets both now and in the future.

Now I work for the government, I have learned to consider a different set of markets.  These are the big ones that drive economies and really come at two levels.  The first group derive from the basic needs of human beings.  The sorts of things we expect governments to look after for us.  We expect easy access to healthcare, we expect to be able to get all the affordable energy we need, we expect to live in houses and eat food, we expect to be safe both locally and as a nation and – although it is perhaps not so vital as the others – we expect to be able to travel, both locally and internationally.

The second group derive from the need to make these happen.  We have to have the business infrastructure that supplies the components and systems that make all these things work and the means to develop the products and services that deliver them in useable forms.  We are used to the idea that manufacturing is a bridge between basic technologies and markets, but more and more, digital services are what translates, combines and present data in a form that people have value for.

These markets scale with population and desire of all human beings to better themselves.  They also are where governments like to regulate and buy!  This means that, as a government agency, we can uncover and communicate the policy goals of government in business language.

Capability

Having decided what would make money, the next question is whether you can deliver it.  This is not just about the physical side of business, although that might be where you start.  If you have a factory that makes one thing, it is not always easy to make something else – even something similar!  Factories usually evolve over time, but their primary driver is often to lower the cost without sacrificing quality.

But where does the idea come from?  You have to have the capability to imagine what the answer to the market need looks like.  If you are in a company, you therefore need a product development or research laboratory.

Business is more than just ideas and factories, and a company needs to understand its markets and to position its products and services in the mind of the customer as desirable and value for money.  This is where design and marketing fit into the mix.

If you are dealing at the national level, you need a strong research base that is linked into the business community.  You need a supply of good people – technologists, engineers, designers, marketeers – even accountants – to make the business process run smoothly and effectively.   The path from concept to commercialisation is rarely smooth and never predictable.  The belief that simply investing more in research will lead inexorably to growth has been shown over and over again to be a mirage.  You need the strong research base to be linked to the different set of skills that make for successful business.  The translation from idea to product places new requirements on those involved and the effective exchange of knowledge is a prerequisite for effective translation from the research base to business.  The risk is less about whether you have access to the right skills and amore about whether you can coordinate what you have.

Timing

One of the aspects often forgotten in the innovation journey is that of timing.  As an idea evolves towards a new product or service, it requires an immense amount of support.  Very few products are the result of one innovation being taken to market.  They mainly consist of a whole series of innovations being combined with existing technology to answer a newly understood or articulated need of the market.  All this takes time and effort (which takes money!) and, in our competitive global business world, others are on a parallel track.  Being late to the market usually results in a lower share, the need to charge lower prices to gain share or just getting ignored by the customers!  Whatever happens, not getting the timing right can lose money – which has to be set against the initial investment.  However, since not being able to sell counts as failure in this scenario, being too early and trying to sell a product or service that no-one sees any need for is just as much failure.  Businessmen who boast that they were years ahead of the market still fail.  The trick is to hit the peak of market requirements and realise as much of your investment early on.

Once again, as a government agency, we might have an edge.  If we understand the goals of policy in these societal markets, we can help companies develop products and services that satisfy the evolving regulatory framework, or that hit the procurement timetable.

Government activity

If the market, capability and timing are right, then why should the government get involved?  Why doesn’t business see the opportunity and seize it – using normal business practices?  The truth is that the answers to the previous questions are not simple yes/no ones.  All of the above scenarios are nuanced and involve risk.  As I said, we at the Technology Strategy Board have focused on markets where the government is thought to have some responsibility and therefore tend to have policies – that get translated into standards, regulations, tax measures and what they buy.  Since these markets have long-term drivers and impacts, the policies (at least the successful ones) tend to be long term.  One thing I learned in business was that the clearer and longer-term your view of the future markets needs was, the better you could answer them – and succeed in your chosen business!

The big question here is therefore why government should help and what form that help should take.  Because governments usually give out money in this area, many think that that is all they do.  Indeed, the sort of partial funding grants we (and other national innovation agencies around the world) give out do go some way to offset the financial risk associated with developing the sort of disruptive products and services that we need to drive growth.

But this money has another effect.  Because the problems are multi-disciplinary and often multi-business, the success in addressing them can be improved by companies working in collaboration.  Government agencies can convene this sort of collaboration – I have never had so many “friends” as I have these days as a public servant responsible for a funding programme!

Also, since we work across industries and see both the evolving capability of UK companies and the goals of government policy, we can start to address the business risk of not developing the right products and services.

Conclusion

Being successful in business is not easy.  Having worked at the business unit level, the corporate level and (over the last 5 years) the national level, what I have observed is that – at each level – you have to get everything right to succeed.

1. You have to understand the market you want to address, its evolving needs, the value it places on having those needs answered, the competition and what governments are doing to influence it.

2. You have to have the whole capability to address those needs and deliver the product or service in a cost effective manner.

3. You have to understand the timing of both the market evolution and technology development.

4. And, if you work in government, you have to understand how you can persuade businesses to take more risk than they are set up to handle.

Get all this right and you will get the growth everyone desires.  Miss out any aspect and success will elude you.  However, I hope I have given you the evidence that the involvement of government in supporting commercial growth can be positive.  We can give companies help with understanding the future needs of government, we can build communities to address those needs and we can help companies minimise the risk of going for disruptive growth.  And, if all else fails, we can give companies money!

 


 

Last updated on Sunday 13 May 2012 at 18:04

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  • Dr Efim Rabinovitch|02/06/12 at 11:17 AM

    It is rare to find such an excellent presentation on the topic of the requirements for a business growth. I am wondering if I can be guided to find a similar quality guidance to overcoming the obstacles and blockages to innovation faced by SMEs in the UK.

    Tony Smee|14/05/12 at 1:15 PM

    Hi David,
    Congratulations on this award, I'm struggling to say something positive, I think I'm in a negative spiral like the UK economy!!

    In fact things are looking up on several fronts, rail, robotics, marine and oil and gas. I've cc'ed you on the RIA unblocking innovation scheme as it does seem to recognise the obstacles and blockages to innovation faced by SMEs in the UK rail industry. Unfortunately as a lone inventor I need a commercial company and the only company interested at the moment is Knorr-Bremse in Germany.

    The details of the idea are there in the e-mail, it does fit all the "something different that has the edge" criteria you list in your speech. More so than perhaps Coressence spending £246,000 proving that an apple a day keeps the doctor away. I thought it was a joke but they got £123,000 from TSB.

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