CONNECTING FOR INNOVATION A View from North East Business · CONNECTING FOR INNOVATION: A View from...

CONNECTING FOR INNOVATION: A View from North East Business

IN PARTNERSHIP WITH

NECC5386 Innovation Report.indd 1 03/07/2015 12:06

The North East has a proud history of innovation,

incorporating Swan’s light bulb, Armstrong’s

hydroelectricity, and Walker’s safety match. Fittingly,

Teesside University’s own Darlington campus is

located adjacent to the site of the world’s fi rst railway.

However, innovation is by no means just a part of

the region’s past. It is embedded in our present

economy, through world leading facilities such as the

Centre for Process Innovation as well as the constant

development of new products, processes, services

and technology in businesses across our region.

It must also be part of our future if we are to continue

to thrive as a globally competitive economy. The

businesses we have worked with as part of this project

give us great confi dence that our region will meet that

challenge.

Teesside University is playing its own part in backing

innovation in the region, through its provision of

research and innovation services to hundreds of

companies. These services are now available via its

dedicated ‘front door’ for business, ‘The Forge’ which

is housed in a state of the art building in Darlington.

The Forge will provide a single point of contact

for businesses and triage them according to their

innovation and skills needs.

The other NECC Partners involved in this project –

Bond Dickinson, BT, Gateshead College and Virgin

Money – are both innovating themselves and backing

others in the North East to do so. We hope this report

will help catalyse the broader support required to

maximise the North East’s undoubted potential.

ForewordProf Cli� Hardcastle, Teesside Universi�

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Teesside Universi�


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The North East Chamber of Commerce (NECC) has

teamed up with some of the North East’s leading

businesses to produce this report. They have helped

steer a series of focus groups as well as desk based

research to bring us to where we are now and for this

NECC is hugely grateful.

The report aims to build on the opportunities identifi ed

within the North East. What we have sought to achieve

is a series of recommendations to help refi ne the way

businesses are assisted to improve competitiveness

and produce sector or society changing inventions. We

welcome the fact innovation is receiving a strong focus

from our local enterprise partnerships; enhancing our

focus on these issues will ensure the maximum number

of businesses can contribute.

We hope that this short report will off er a useful

intervention for policy makers but we have also

concluded it is up to many organisations, including

NECC, to foster innovation within our economy. We

have much good work to build on in this regard; a study

by the Enterprise Research Centre placed Tees Valley as

the overall top performing local enterprise partnership

(LEP) area in the North of England for innovation, while

the North East was the North’s best for new to market

innovation. The North East LEP is the fi rst to appoint

an Innovation Director to drive this issue forward and

has an innovation strategy that is achieving national

recognition. Additionally, there are four Catapult centres

with North East locations.

However, on an issue that is by defi nition constantly

improving, and where competition is global, this cannot

be cause for complacency. The North East, partly

because of its location, is to some extent removed

from main funding bodies and not always viewed as

an innovation hub, despite these huge assets and

successes and the ambition for it to be an exemplar.

This can only be addressed by a coherent and

coordinated approach to improve and to promote

what we have beyond our region.

Making the North East more competitive will

require a team eff ort. We can look at innovative

businesses as the goal scorers, but a range of other

players is required to make this possible including

support networks, agencies, funders and education.

Innovation should be a concern for all businesses,

public sector and third sector bodies in order to

nurture the culture we need for the long term. In

order to improve competitiveness we have concluded

the following:

1. WE NEED BETTER NETWORKS

• Innovation Forums/Hubs: a place is required

to facilitate discussions between innovative

businesses. This could stimulate discussion around

ideas and issues and improve in solution fi nding

while also networking businesses of all sizes.

• Improved Guidance: bigger businesses can

support smaller organisations to help demystify

and therefore stimulate innovation processes and

further encourage greater levels of innovation.

• Challenge Preconceptions:innovation is often

perceived as ‘something that others do’ and this

should be challenged. Furthermore, the sentiment

that if a business is looking to innovate it will lead to

job losses needs to be tackled to help create a more

open innovation culture – innovation will ultimately

lead to more high skilled and better paid jobs.

Execu� veSummary


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• Universities & Colleges: Further and Higher

Education establishments act as connectors and

nurture innovation with just under half of North

East innovation spend coming from universities

alone. Policy must be designed to support this.

2. SUPPORT AGENCIES MUST IMPROVE

• Business Support: assistance for innovation needs

to match better the needs of various sectors and

sizes of business; the current approach isn’t fi t for

purpose.

• Support agencies: need to be able to react faster

to the needs of innovative businesses without

being bogged down in bureaucratic processes.

• Signposting: a central point to signpost regional

businesses to support is required – especially to

help SMEs. The new growth hubs established in

each LEP should address this.

• Skills: skills development to grow the capacity for

innovation and enterprise are critical enablers to

meeting these challenges.

3. SIMPLER AND INCREASED FUNDING

• Innovation Funding Review: a review of

existing public funding arrangements should be

conducted to identify fi nance gaps, barriers to

securing funding and regional take-up. As part

of this process, current funding pots should be

rationalised and application processes and lending

terms changed to better match the needs of SMEs.

• Government Support: this must recognise that

recoverable investments are not always guaranteed

when exploring innovation. Risk and innovation go

hand in hand and government can be more willing

to support risk taking via a mixture of the reforms

suggested above and improved fi nancial support.

• Better access to alternative fi nance sources:

public funding and traditional bank lending will

not always be appropriate for innovation projects.

North East businesses need more awareness of

and better access to alternative sources of fi nance,

including private equity and crowdfunding.

4. WE NEED TO RECONSIDER THE WORD ‘INNOVATION’

What do we mean by innovation? In essence

we want two things when we say we want more

innovation: more enterprise and productivity making

better use of available resources; and more ground-

breaking invention. Policy must be clear what it

is intending to stimulate – attempting to do both

through the same mechanisms can confuse and put

off businesses.

The recommendations set out above provide

the opportunity to enhance North East and UK

competitiveness by improving the ease with which

businesses rationalise processes, services, product

development or technological innovation. This

could be key to attracting inward investment while

also fomenting enterprise within the region. The

North East is well on its way, and we hope to bring

the largest possible part of our business community

along on this journey.


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Processin partnership with

Bond Dickinson is one of the leading FTSE advisors outside London advising in excess of 40 FTSE 350

companies and many of the largest businesses in the country. With a unique footprint of eight offi ces across the

country, we are on the ground in key industry locations, including a long-standing presence in the North East of

England.

We are passionate about innovation, and helping our clients to maximise the value of their inventions, creations

and expertise. We also have a specifi c sector focus on the chemical industry, and are therefore passionate about

supporting process innovation, not least in the North East.

In this region, the process sector is a huge contributor to the regional economy, generating 190,000 jobs and

£26bn annual sales, much of which is export. Continued innovation in the sector is vital to maintain this success,

as the sector has faced high energy prices, increased competition from the East and a resurgent USA, tougher

industry standards and increased regulation.

However, process innovation is not limited to the process sector, with all areas of business facing a challenge to

improve their processes in order to strengthen their competitiveness. We are pleased through this project to

make a contribution to this issue.


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With process industries representing one of the

most successful clusters in the North East economy,

this is clearly an area with great opportunities

for the region. Indeed, the Centre for Process

Innovation contains many of the region’s exciting

innovation assets, with the new National Biologics

Manufacturing Centre the next to be added.

However, businesses across a variety of sectors

face constant challenges of how to improve internal

processes to make their businesses more effi cient

and better able to compete.

To transform processes across a business, the wide

involvement of staff is crucial. Driving innovation from

the top is important, but not enough to truly deliver

change. Businesses that are successfully renewing

their processes challenge managers to continually

come up with fresh ideas. It is important to generate a

culture in which there is not pressure for every idea to

be successful, to encourage more to come forward.

Other fi rms spread this challenge throughout the

organisation so all employees have opportunity to

develop new ideas. Creating confi dence that this will

not lead to job losses has been important in some

cases to getting more input. Some businesses

have identifi ed the hindrance that is caused when

staff teams are allowed to become silos, and have

attempted to bring cross-disciplinary teams together

more often to create a culture of sharing ideas.

Many fi rms crave bigger networks in order to share

ideas outside of their own business. This is not

limited to networks within particular industries, with

many believing there is a desire to learn from what is

happening in other sectors that is currently not being

met. The ‘Super Network’ proposed in the North East

LEP innovation strategy is a welcome attempt to

address this.

Developing this further will require greater willingness

to engage in open innovation. Businesses may need

to be less protective about aspects of intellectual

property, particularly if they want to keep pace with how

ideas are developing. This is an area in which a relatively

tight-knit region like the North East could develop a

real advantage. However, online tools including social

media are making exchange of ideas easier still and it is

anticipated the trend towards open innovation will only

accelerate in the coming years.

Finance was an issue raised among this group. SMEs

should be seeking to use their competitive advantage to

innovate as they are not subject to the same budgetary

timeframes that can constrain projects in bigger

businesses. However, external fi nance also needs to

adapt in order to support innovation. Banks need to

be easier to engage with and more fl exible, or they risk

being bypassed by newer models such as peer-to-peer

lending.


8

in partnership with

It was important for Gateshead College to support this research recognising the key role we play working alongside

employers to ensure the skills to implement innovation are in place at the right time. Our work with Nissan is well known

and the collaboration between us to forward plan for new developments in electrical vehicle production perfectly

illustrates this. We also have a role to play in creating the best conditions to stimulate innovation making sure that we

continue to create jobs in the North East and develop and retain talent.

This includes co-ordinating eff orts to secure funds to support innovation. As one of the only colleges in the country to

secure Regional Growth Fund investment of £6.29m, we developed the Future Technology Centre – a focus for Low

Carbon Vehicle development and innovation. Managed by the college, it houses a cluster of innovative companies

working in electric vehicle technologies, infrastructure, consultancy and training.

We were also able to establish the Low Emission Transport Collaborative Projects Fund to provide accessible grant

funding for R&D, near market collaborative projects between SMEs and research or technology partners based in the

North East. To date nine projects have been supported.

Zero Carbon Futures, a wholly owned subsidiary of Gateshead College, works extensively with partners both in the UK

and internationally on innovative solutions to many aspects of emerging low carbon technologies.

It’s only by working together that we can promote what we are doing in the North East, our ambition and aspirations

and harness our collective potential to secure more investment and more jobs in the future.

Product


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The North East’s strong manufacturing sector and

connections into global markets mean opportunities for

product innovation are plentiful within the region. However,

it is critical to be clear on what these opportunities are

and how the region will seek to exploit them. It is also vital

to do this with a commercial focus. Customers are not

interested in innovation for its own sake – they need to see

products that perform better, are cheaper or are more

attractive. The focus for both product development and

marketing activity needs to refl ect this.

There are a number of core capabilities within the region

that should be given focus within innovation strategy.

These include the automotive sector, chemicals, off shore

and low carbon technology. The identifi cation of strengths

and the design of support structures to maximise

them – through what has become known as ‘smart

specialisation’ – is vital for the region and endorsed by the

LEPs. Investments should be prioritised on those areas

where the North East business community is (or could be)

demonstrably globally competitive. However, this must be

done with suffi cient fl exibility to ensure new companies

developing diff erent products can be backed where they

have scope to make a signifi cant economic contribution.

This should be developed within an innovation strategy

that can be identifi ed and supported as widely as possible

across the business community. Communication

of strategies by Local Enterprise Partnerships, and

opportunities to engage with those leading them, are

essential elements of making this work.

Support should be applicable to all types of

manufacturers. Bigger investors need to be able to work

to long-term plans. Stability over a 5-10 year period

is needed to match product development lifecycles

and ensure innovations can be supported from idea,

to prototype, to market. In other cases, businesses

have returned to familiar support structures only to

fi nd they have been reorganised, as in the case of

the Manufacturing Advisory Service and North East

Productivity Alliance.

There are concerns that the right type of investments

and funding bids have not been prioritised within

the region. Some members believe that too much

focus has been placed on investing in buildings and

infrastructure rather than going directly to the fi rms

that need help in developing products. There is also

a feeling that opportunities such as the Advanced

Manufacturing Supply Chain Initiative have been missed

because of a lack of focus across the region on what

the priority projects should be.

The role of universities in innovation is recognised, but

the skills required to implement innovation are often

overlooked. Where innovation is attached to timely skills

development there is a direct benefi t to communities

as we are producing a talent pool vital for inward

investment, raising our competitiveness and retaining

talent in the region.


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in partnership with

At Virgin Money, our ambition is to build a bank that makes everyone better off : customers, colleagues, communities,

corporate partners and our company. With a powerful brand, strong balance sheet, customer-focused culture and

experienced executive team, we continue to positively disrupt UK banking in the best interests of customers.

There are many diff erent defi nitions of what great customer service is. In general, they centre around the act of taking

care of the customer’s needs by delivering professional, helpful and high quality assistance, before, during, and after

performing a transaction for the customer. While this is certainly true, delivering customer service can come in many

diff erent forms.

At Virgin Money we believe in creating a culture where customer service is a priority, and our philosophy is being

rewarded with growth in customer satisfaction and improved customer retention. Our aim is to be positively diff erent

from the incumbent banks, by off ering straightforward products with fair and transparent pricing, supported by

outstanding customer service.

And we strongly believe that great service should be delivered outside of the simple transaction. A symbol of Virgin

Money’s commitment to delivering diff erentiated customer service is our network of Virgin Money Lounges. Our

Lounges deliver a unique customer experience in UK banking as well as creating valuable opportunities for both

customer retention and recommendation. They are designed to be stylish, comfortable places where customers and

local communities can come together. They are free to use for customers and off er tea, coff ee and snacks as well as

newspapers and wi-fi , all in a transaction-free environment.

We think this is a great example of being positively diff erent, and illustrates perfectly that innovations in service can be

linked to the transaction, but added value can also come through concentrating on the customer themselves and your

relationship with them.

Service


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Service innovation involves continually improving the

way business to business, or business to consumer

interactions occur. This might involve transactions but is

fundamentally about developing better relationships.

There is a perception that service innovation is not the

subject of suffi cient focus whether from businesses or

policy makers in spite of clear North East strengths in

this space. The North East has a strong service culture

and competitive advantages to build on – for example,

through North East accents consistently polling as among

the most friendly in the country, encouraging national

organisations to locate contact centre operations in the

region.

Members have questions regarding how far policy can

directly stimulate service sector innovation. There is a view

that the will to innovate must come from within and be a

core company value. Perhaps more than any other area of

innovation, its success derives from a blend of managerial,

cultural and personal characteristics that are nurtured by

the businesses within the areas in which they are located.

The internal culture and conditions within businesses

are therefore essential elements in fostering service

innovation. Innovation needs to be identifi ed within

strategic business plans, and it is imperative that

organisations have a vision, which is shared with all

employees.

As service innovation is so clearly linked to interactions with

customers, both end consumers and business partners,

involving teams who are directly customer-facing in

continuous service development is important. Because of

this customer focus, it is also important that the customer

is put at the heart of service innovation and that due regard

is also paid to social innovation and the opportunity to

deliver sustainable community benefi t.

Within the service sector, the term ‘innovation’ can put

people off . Businesses, and particularly employees often

see what they do as problem solving, providing day-to-day

support and making changes with a positive impact – but

they do not necessarily see this as innovation. Yet even the

smallest steps taken to improve a service can represent

‘innovation’. The defi nition used in the North East LEP

innovation strategy is “matching what’s needed with what’s

possible to create economic value, or social good, or both”.

Thinking in these terms can extend understanding of what

is truly innovative.

Service group members in particular considered that

there is insuffi cient opportunity to network with other

businesses for the purposes of identifying and sharing

best practice, and to exchange ideas. Connecting

businesses informally or through a forum for this purpose

could be a role for NECC. Businesses must be willing

to enter into this and display a more open approach to

innovation and sharing of ideas.

Government-backed support is considered confusing and

too short-term. However, greater use could and should be

made of the services within the region’s universities, both

to provide expertise and to access resources.


12

in partnership with

Investing in the future – building a history of innovation: Innovation has been at the heart of BT since its formation

in 1846 and stock market fl otation in 1984. We constantly search for new ways to improve our networks and services

to help others realise new possibilities. Coming up with ideas and developing new technologies is core to what BT does.

Whether faster broadband, fi nding ways to do things better or changing markets such as TV, our innovations continue

to grow.

The Internet of Things: There are now more devices connected to the internet than people. BT provides the

networks that connect these and is developing ways to analyse and combine the data produced, creating a wealth

of information to drive new services. The number of connected objects is expected to reach 50bn by 2020 –

transforming how we live, travel, manage our lives sustainably and use services.

Smart Cities: As cities grow they risk outstripping the infrastructure they rely on. The Milton Keynes Smart City

programme is pioneering a solution. Using cloud and big data technology, it sources information from energy,

transport, water use and weather to create a picture of the city’s real-time needs, managing resources more effi ciently

and sustainably.

We have pioneered many technologies businesses rely on today and remain one of the UK’s largest investors in R&D.

The North East is an important location for us with both a technical development hub and leading UK service centres.

Innovation is an important part of our history and an essential ingredient for our future.

Technology


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The development and application of technology has

been at the heart of North East innovation for centuries

– from the groundbreaking work of Stephenson,

Parsons and Swan; to the world class reputation earned

by the region’s off shore engineering sector; and the

manufacturing excellence that has prompted multi-

national fi rms to continue to invest here. Now, the North

East also has a growing cluster of digital businesses,

with many multinational fi rms having major bases in the

region alongside a growing pool of SMEs, including a

series of exciting start-ups. These are backed by some

strong support bodies, making the region a potential

hotbed of digital innovation.

Innovation is about both developing new technology, and

also applying it in new ways. Awareness of technological

developments is therefore essential – including through

open innovation models. Technology is also an enabler of

innovation, by making sharing and collaboration between

businesses easier. The knowledge to understand how

technology can be applied to a wide variety of businesses,

and the skills to do so, are vital to competitiveness in the

region. These must be developed both within businesses

and through the education sector.

A series of funding pots are available, but businesses

still identifi ed a number of barriers to obtaining the right

funding for projects:

• There are many diff erent funds available, each with

diff erent restrictions and conditions. This makes

identifying the right approach diffi cult for businesses.

• Funding sources are often geared to the

development rather than research phase, and

getting to that point can be challenging. Working

with universities is seen as one good solution to this

problem.

• Timescales often don’t match the speed with which

it can be important to get an innovation to market,

given the constant updating of technology.

• Businesses can be too easily put off if a funding

application is unsuccessful and need to be given

better advice as to how applications can be improved

or re-directed to other sources when this happens.

• Funding for capital investment in equipment needed to

support innovation can be more diffi cult to identify and

obtain.

It is vital that professional advisers are well appraised of

available funding sources to be able to assist clients as

eff ectively as possible, and that businesses make use

of this advice. Opportunities for fi rms to recommend

funding and support services to their peers could also be

developed.

There is an opportunity for the public sector to play a

stronger role in developing supply chain relationships,

in order to enable smaller fi rms to work with bigger

contractors and to provide innovative solutions. New

procurement directives enabling public bodies to award

contracts through ‘Innovation Partnerships’ could help

foster this and increase the involvement of local fi rms.

Businesses must also be more willing to seek solutions

within supply chains rather than in house. Relationships

between large and small businesses can be a critical

element in fostering innovation. This can be through

advice, strategic development of supply chains, and

making data available in order to understand market

demand and customer needs. Again, technology can

be an enabler of this. But while communication makes

it possible to do this across the globe, the starting point

should be to understand what is available within the

North East. Universities hold a pivotal role in this, through

creating innovation networks, helping fi nd partners and

acting as connectors between fi rms.

Skills – both within the workforce and at leadership and

management level – are often the biggest constraint

on innovation, and driving these up within the region is

essential to maximise opportunities. Businesses must

also be willing to be less risk averse in order to innovate

– in this regard regulation can be a double-edged

sword, sometimes driving innovation, but at other times

reducing businesses’ willingness to attempt something

outside of the norm.


14

AcknowledgementsThanks to the following businesses and organisations who assisted this project:

Age Inclusive

Beamish Museum

Catalyst

Chirton Engineering

Coast and Country Housing

Elddis Transport

Gentoo

H Jarvis Group

Innovation North East

North East Local Enterprise Partnership

Northern Gas Networks

Northumbrian Water

Phoenix ABC Limited

Sevcon

Siemens

SMD

Spearhead Interactive

Tadea

Utilitywise


0300 303 6322

@NEChamber

/NorthEastChamber

[email protected]

www.necc.co.uk

NECC champions, connects and develops member businesses, and their people, to win more business, become better businesses and enjoy better conditions for business within NE England and around the world. North East Chamber of Commerce (NECC). A Company Limited by Guarantee. Registered in England No.2938084. Registered Offi ce: Aykley Heads Business Centre, Aykley Heads, Durham. DH15TS. VAT No. GB454990806.


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