Innovation is so important to the UK economy that the government has named a
department after it. The Department for Innovation, Universities and Skills,
which is less than a year old, was forged out of the Department of Trade and
Industry and the Department for Education and Skills. John Denham, secretary
of state for innovation, says, “Successfully exploiting cutting-edge
innovation [is] at the heart of global success.”
It is an idea born out of the Cox Review of Creativity in Business, a 2005
report that looked into the need for innovation and creativity if Britain
was to remain a key player in the global economy. It argued that greater
creativity was a vital component of greater productivity. “Innovation and
creativity are big words,” says Ellie Runcie, national programme leader for
Designing Demand, a business support scheme developed by the Design Council.
“But they are business words. Ideas come from anywhere, not just from a
ghetto of creative people. It’s a way of thinking.”
Too many people still think of innovation in terms of products, says Carrie
Hartnell, programme manager for the Transformational Business programme at
Intellect UK, the trade association for the technology industry. “But if you
are improving speed of access to products or service, that’s just as
innovative as a new microchip. There’s a huge competitive advantage there
but it’s not recognised as innovation.”
The gap between the “light-bulb moment” and the first year to turn a profit
can be long and arduous. “To make money from an idea, you have to play with
three things: risk, return and control,” says David Molian, lecturer at The
Bettany Centre for Entrepreneurial Performance and Economics at Cranfield
Business School. “You can build a business and retain full control but take
100% of the risk, or you can do some kind of deal that gives you a licence
or a royalty, surrendering some of the control and sharing some of the risk.
The kind of idea you have will determine the way you develop it.”
An innovation that cannot be patented, for example, has to be developed fast,
preferably into a brand that will ensure customer loyalty even when others
copy it; you are unlikely to persuade an investor into a joint venture
because there is no protection.
But it is not only what you sell that determines whether your innovation will
be a success. “Building a business is partly about knowledge and skills and
partly about temperament,” says Molian. “People who don’t want to live with
uncertainty and ambiguity are unlikely to be entrepreneurs. You need
tenacity, persistence and a thick skin.” But, he adds, there’s a fine line
between self-confidence and a damaging inability to respond to criticism and
feedback.
Malcolm Buckler, chief executive of UK Business Incubation, which helps small
and start-up businesses to grow, agrees. “It’s very difficult to accept that
you are going the wrong way, and sometimes the best support we can offer is
to convince someone to listen to advice,” he says. “But often an idea can be
changed and moved into other areas that might be more profitable.”
Researching whether there is a market for an innovation is a critical part of
becoming a successful entrepreneur. “There’s no shortage of ideas, whether
for a new pizza parlour or a multi-patented product,” says Dr Tim Meldrum,
manager of the Entrepreneurship Centre at Tanaka Business School, Imperial
College. “But a lot are bad ideas that fail to create substantial amounts of
value.”
Successful entrepreneurs refine their concept to meet their market. “Think
about your market and understand who your customers are,” says Meldrum.
This is where designers can help, says Runcie. “Design is about testing and
filtering ideas, observing what’s working and not working. We have found
that every £1 spent testing saves £100 a unit at the development stage.”
Testing a product’s appeal has become easier with the arrival of eBay; one
can take small steps with lower risk. “The web is an enabler,” says Meldrum.
But while running feasibility studies – known as proof of concept – is
important, it is still only one part of the puzzle. “We find that most small
businesses suffer from a lack of knowledge of the skills needed to run a
successful business – from the back-office administration to the marketing
and the finance,” says Buckler.
The answer for many small and medium-sized enterprises is a business
networking group such as First Tuesday (www.firsttuesday.co.uk) which aims
to link entrepreneurs and investors.
Universities, meanwhile, have been setting up commercial departments to
develop companies spun out of academic research, many of which go on to a
flotation on the Alternative Investment Market.
“There are increasingly sophisticated networks to transfer knowledge,
experience and finance,” says Meldrum. “You need to build a team you can
trust – 60% of companies never get beyond being a one-man band. The key to
growing is building a team. That means thinking about your network and
mapping it; you know a lot more people than you think.”
What small businesses love, says Buckler, is being able to learn from each
other. “It’s about finding the right people to give the right advice. You
are more likely to hear advice from someone that is relevant to you, so
making sure the adviser is appropriate is part of the incubation process.
“What incubation is doing is saying, ‘Have you thought this through? What
about that aspect? Have you talked to this business, which is doing
something similar?’ It helps to identify solutions – one of the biggest
problems with a small business is knowing what the question is,” he says.
Television programmes such as Dragon’s Den and The Apprentice have made
entrepreneurialism so sexy that academic tutors now spend time explaining
that it may not be so easy.
“Entertainment is great if it elevates awareness of the opportunities and the
fact that it’s a level playing field,” says Molian, “but it doesn’t always
represent the work that has gone on in the background.” It can also foster
the idea that innovation and entrepreneurialism are about radical change –
the light bulb, the cathode ray tube, the MP3 player. But successful
businesses are more often built on incremental change – just as innovative,
but far less dramatic.
“Think of Cobra beer,” says Molian. “It’s been one of the great challenger
beers of the past decade. The point of innovation was to brew a beer in a
lager style but with qualities associated with ale, such as less gas. It’s
been hugely successful.”
Entrepreneurialism as entertainment can also disguise the failures. According
to Vat deregistrations, only about a third of businesses survive after three
years, says Molian, and even that figure may be optimistic since many never
make it to the Vat registration threshold in the first place. But failure
may not be all bad.
“Ask any venture capitalist and he or she will say that they are working on
the principle that out of 10 investments, only one will really thrive,” says
Meldrum. “There’s a spectrum of failure: most successful entrepreneurs have
failed at least once before they make any real money. The best learning you
can have is to fail, understand why, and do it better next time.
Increasingly, the UK is less scared of failure and the American ‘can do’
spirit is taking root.”
This is a necessary trend, because an estimated 80% of new jobs in the next 10
years will come from about 15% of new businesses. “We all need
entrepreneurs,” says Molian.
SpinVox
Innovation is not always well received. Sometimes poor precursors of a product
put people off, a problem faced by SpinVox, a company that has developed a
speech recognition system to turn voicemail into text messages.
“We went to venture capitalists and business angels but found they were not
listening because their experience of speech recognition systems had been so
bad,” says Daniel Doulton, above, co-founder of the company with Christina
Domecq.
SpinVox technology “learns” new words, and is able to ignore the “ums” and
“ers” that make up most voicemail messages. It can handle four languages,
and Doulton claims it can also cope with accents and cultural differences,
such as American or South African English.
The company, which now has more than 300 employees, has signed deals with most
big networks. “It changes the way people use mobile phones,” says Doulton.
“But we had to get the data to prove to the big companies that this would
help drive traffic.”
Disruptive
Not every business starts with a product invention. Sometimes the innovation
is personal.
“I had been selling software for eight years and was sick of travelling and
working for other people,” says Tom Dudderidge, left, CEO of Disruptive,
which makes and sells audio accessories. At a consumer electronics show in
America five years ago, he and his brother got talking to a Taiwanese
company that had invented an SMS transmitter for an iPod. “We took every
penny we had, bought our first consignment and sold them through eBay.”
The £20m-turnover business now develops products in a hugely competitive
market. “We can make decisions at top speed. Everyone in the team – the
business now has 50 employees – is a consumer of the products, and that
gives us a real feel for the market.”
