Renewing Britain's Legacy of Innovation

The country that launched the Industrial Revolution may be falling behind the times, says a new study, which also proposes some fixes

From the Industrial Revolution to the jet engine and bagless vacuum cleaners, and from the World Wide Web to the iPod, British people can claim credit for scads of innovations throughout the ages. This tradition of invention carried Britain through the end of the manufacturing era and into the service economy a clear decade ahead of the U.S., and the country still boasts low unemployment and a high growth rate. But all isn't as sunny as it seems on the Sceptred Isle. According to a recent, groundbreaking report about design, Britain needs to pep up its creative punch.

With the ultimate goal of a more enterprising British economy, Finance Minister Gordon Brown commissioned the study in April this year. The resulting Review of Creativity in Business, published Dec. 2, was spearheaded by Sir George Cox, chairman of the publicly funded advocacy group the British Design Council and former director-general of the British Institute of Directors.

Cox and his team reviewed 300 companies, universities, and research and trade bodies over six months. Operating on the assumption that innovative thinking should be part of any company's strategy, Cox's group studied the creative clout of every major industry.


  The findings are worrying. Far from reassuring Britain that its creative edge is well-honed and immune to the global competition, Sir George discovered that the country needs immediate economic and academic support if it's to remain a creative leader. He noted that Britain's proportional R&D spending lags behind not only that of the U.S. but also France and Germany. Less than one-third of British companies have launched a new product or service in the past two years.

True, the land of tea and crumpets isn't without modern innovators. The flamboyant serial entrepreneur Richard Branson recently announced that he would be taking his successful Virgin brand into commercial space flight with Virgin Galactic, which should launch tourists into orbit within three years. Londoner Tim Berners-Lee invented the World Wide Web. And dynamic U.S. companies are filled with British innovators -- from Tim Brown, CEO of world-leading design agency Ideo to Apple Computer's (AAPL) Jonathan Ive, the brains behind the design of the iconic iPod.

But behind these pioneers trail a long line of small stick-in-the-mud companies that lack the cash, will, or knowledge to leverage the latest design thinking.


  To make matters worse, the report found that Britain has only 5 to 10 years to get its act together before Asia and Latin America threaten to dominate the world of innovation. In the past few years, Korea and Taiwan have built vast design centers to showcase national work and house creativity conferences.

In 2007, Singapore will open its $280 million, 1.2 million-square-foot Fusionopolis creative center, which promises to dominate the headlines as well as the city's skyline. Billed as a "city within a city," the government-funded edifice will bring together business and technology entrepreneurs in a creative, open-minded setting. And China has the fastest-growing R&D spending, which already makes up 1.5% of its GDP, vs. 1.9% in Britain.

So what's to be done? Thanks to support from Finance Minister Brown, at least three of Sir George's recommendations are being put into action immediately. One is a program to encourage businesses and design students to think and work together. The government is now helping to set up higher-education centers to create pilot courses that combine business, engineering, technology, and creative disciplines in a similar way to Finland's International Design Business Management program or the new Hasso Plattner Institute of Design at Stanford University in the U.S.


  Brown's second recommendation is to build a handful of publicly funded Creativity & Innovation centers throughout Britain. Like Singapore's Fusionopolis, the aim of these new, high-design buildings would be to spur constructive interaction between companies and provide a visible reminder of Britain's increased commitment to design excellence. Sir George's initial estimate is that the London building would cost some $8 million. Regional authorities are currently working on feasibility studies elsewhere.

The Finance Minister has also given the green light to extend the existing Design for Business initiative. The course, developed by the Design Council and first offered through local education authorities two years ago, teaches managers how to run innovation workshops and seminars at their companies. The 150 businesses that have taken part have seen a significant impact on their bottom line. Kitchen-furnishings maker Aga Rayburn was inspired to make a new line of utensils after taking the course, driving up sales in that product division by more than 200%, to $8.8 million.

"Though the report isn't filled with good news, it's a major step forward for a country to acknowledge that creativity isn't just limited to creative people. And another one for it to have practical solutions to address them," comments John Thackara, author of In the Bubble: Designing for a Complex World and a frequent organizer of design events.

This week, Sir George Cox spoke with BusinessWeek reporter Rachel Tiplady about the study. Edited excerpts of their conversation follow:

How did this report come about?

As recently as this spring, I was discussing the upcoming budget report with Gordon Brown, and we started talking about how to create a more enterprising economy. While we concluded that Britain is tremendously strong in creativity, we could certainly do more. The next day, he commissioned me to write a report, and my team spent six months talking to companies, trade bodies, universities, and arts organizations in order to find solutions that were both practical and scalable.

Your report cites the growing threat from burgeoning design nations in Asia and Latin America. How immediate is that threat?

I think there's only a small window of opportunity left for Britain to act. The indigenous design capability of China is growing rapidly and intelligently. We thought they would carry on bashing metal and weaving cloth while we got the plush jobs, but it's no longer like that. They're investing in high-end design and higher education.

A similar thing has already happened in India with the IT industry. Fifteen years ago, people outsourced to India because it was cheap. Now they outsource because it's where the capability is -- we're talking about very high skills and a low cost base. Imagine, GlaxoSmithKline (GSK) says it can get better quality of pharmaceutical research in India than in the U.S.

On the positive side, the situation isn't as urgent as some make out. The Chinese still need to gain experience on how to listen [to] and serve their customers. That may take a while, so I think our window is 5 to 10 years.

Explain your vision that innovation needs to penetrate every aspect of a company.

Innovation most definitely doesn't stop at product design. Think about it, for every bad product you and I could talk about, there are endless dire cases in the services industry. For example, cars today are wonderfully made and easy to run, but the process of buying a car is often hellish. Similarly, the doctors we have in this country are great, but the National Health System complicates things immensely.

If you want more proof, look at the Design Index we created recently. We picked a basket of 61 British companies from all kinds of industries that are publicly quoted and invest heavily in design. Over a two year period, they outperformed the FTSE 100 stock index by 200% (see BW Online, 10/12/05, "Using Design to Pick Stocks?").

So design touches everything we do, whether that's products, services, manufacturing, or marketing.

Why focus your report on small and midsize businesses?

Because they make up half the British economy. If you're a big company and you don't understand the importance of innovation, there's little chance you will at this point. Similarly, we aren't looking here to save struggling companies or to encourage startups. There's no silver-bullet solution in my review that will save a company from the brink of bankruptcy.

What we want is to help inject new spark into solid small companies of up to 500 employees. Our existing Design for Business program has been proven to work, so we're taking that up to a national scale. Also the government is already looking into ways to publicize and simplify tax credits for small companies that invest in R&D. We have ideas that are already being put into action now, then longer-term plans that will take a few years to bring to fruition.

Tiplady is a correspondent in BusinessWeek's Paris Bureau

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