Innovation in the Humber Transforming the Region’s Innovation Capacity through a Local Industrial Strategy June 2018

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CONTENTS

1 EXECUTIVE SUMMARY 3

2 INTRODUCTION 5

3 STRATEGIC CONTEXT 6

4 INNOVATION IN THE HUMBER 12

5 CONCLUSIONS & RECOMMENDATIONS 29

ANNEX I BUSINESS INTERVIEWEES & QUESTIONS 33

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1 EXECUTIVE SUMMARY This report provides an analysis of publicly available data on innovation activity. It considers key

relevant national strategy and context, and, based on the lack of data on activity in the Humber

as reported in the University of Hull’s preliminary findings, draws insights from a small sample of

innovation-active Humber businesses in order to make recommendations in relation to developing

the innovation component of a Local Industrial Strategy (LIS).

Attention is drawn to the fact that a LIS needs to align with national industrial strategy and

investment, equating to Humber research, innovation and infrastructure that is strong in a national

context so that it contributes to making the UK more competitive on a global basis. Offshore

energy in general and wind in particular is the most obvious Humber strength or ‘asset’ that meets

this criterion. This critical mass of businesses has made and attracted substantial investment and

is globally competitive according to a major international player interviewed for the report. The

cluster of business, knowledge base and other assets is seen as playing a prominent role in

developing innovation capacity within the Humber by embedding innovation in the supply chain.

The report assesses that manufacturing & engineering would be the main beneficiary, enabling

the region to meet more of the available demand for innovation and strengthen the Humber

innovation ecosystem by cross-fertilising developed capabilities to other applications and markets

(e.g. high-speed rail, medical devices). Other assets that currently/potentially benefit from the

opportunities in offshore energy and likewise in other applications and markets are logistics and

digital. Digital technology was referenced by interviewees operating in a range of sectors (health,

chemicals and boilers) as a key driver of innovation.

A further finding is that the opportunity in offshore energy has led to the creation of a highly

regarded intervention (Project Aura and the Aura Innovation Centre). This is because it is tailored

to suit the specific and holistic needs of business including talent and, in combination with the

aligned ERGO Centre, business incubation. Attracting and retaining talent emerged as a key

theme of the business interviews.

The definition of innovation used for the report is a broad one encompassing inputs (ideas,

technologies, resources, investment), motivation and capacity (why and how organisations go

about innovating) and outputs (products, processes, services, ways of doing business).

Interviews identified a range of inputs and outputs (mostly incremental but also significant

innovative steps) driven by the need to remain competitive, be more productive and grow. An

innovation culture was identified as important enabler of innovation alongside talent,

regulation/legislation and funding.

How innovation is measured highlighted a concern that traditional metrics (e.g. R&D investment,

patents) are excluding innovation activity, particularly in low innovation sectors, an issue

highlighted by one the interviews and raised frequently by NESTA. Metrics capturing firms’

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motivation and capacity to innovate (e.g. case studies) alongside a wider range of inputs and

outputs would more fully capture innovation activity in the Humber. It would also place more firms

on the first rung of the innovation ladder, making innovation in a Humber LIS more inclusive than

if the focus were solely on business base strengths of national importance.

Finally, interviewees stated a need and desire to raise the profile of the Humber nationally based

on the national impact of past innovations and current strengths. Promoting the Humber as an

attractive place to work and also live is seen as important in attracting talent (and retaining it) and

businesses.

The report recommends that a Humber LIS:

1. Make offshore energy the number 1 priority for a Humber LIS

2. Facilitates engagement between digital and other Humber assets to identify the most

attractive innovation opportunities

3. Adopt a broader innovation definition and set of metrics to record activity and promote

best practice

4. Target existing and tailor new interventions to better meet business need

5. Engage with business and other stakeholders to develop a narrative and plan to raise the

Humber’s profile nationally

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2 INTRODUCTION This report by the Hull University Business School is intended to help shape the innovation

component of a future Local Industrial Strategy (LIS) for the Humber. It builds on a preliminary

report by the Business School with additional interviews with Humber businesses and analysis

of available data.

A LIS is intended to provide an evidenced-based approach to growing the local economy by

capitalising on local strengths whilst addressing key weaknesses. It is a long-term strategy

tailored to the unique growth sectors of the area’s economy, building on previous work

undertaken to produce local Strategic Economic Plans whilst being aligned with the national

Industrial Strategy. A LIS will also inform how future devolved funding streams are deployed,

such as the Shared Prosperity Fund and the £115 million Strength in Places Fund.

A robust LIS with strong innovation underpinnings will also inform the Government’s review and

reform of LEPs going forward. Placing innovation at the very core of the Humber’s LIS will send

a strong and positive message to Whitehall that the Humber is a progressive, outward-looking

region that will play its part in achieving the Industrial Strategy’s vision of placing the UK at the

forefront of the industries of the future.

Innovation encompasses inputs (ideas, technologies, resources, investment),

motivation and capacity (why and how organisations go about innovating) and

outputs (products, processes, services, ways of doing business), which range

from incremental to breakthrough.

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3 STRATEGIC CONTEXT 3.1 UK INNOVATION SURVEY FINDINGS

The headline figures of the UK Innovation Survey (2014–2016)1 provide a big picture of

innovation levels and activity in the UK. The survey’s key findings are:

Innovation-active businesses has fallen from 53% in 2012-14 to 50% in 2014-16 largely

due to a fall in innovation activity amongst SMEs.

Product or process innovators rose by 7% with 31% of firms surveyed introducing new

products or processes during the survey period.

Large firms are more likely to innovate that SMEs – 63% of large firms innovated during

the period compared to 49% of SMEs

Innovation-active businesses has fallen in nearly every industry sector with the exception

of the manufacture of electrical and optical equipment and real estate, renting and

business activities

Innovation has decreased in most English regions with the exception of the South West.

Innovation-active businesses in Yorkshire and The Humber fell from 65% (2012-14)

to 51%, the largest decrease of all the regions in the survey.

Half (50%) of innovation expenditure within the businesses surveyed was spent on

internal R&D. Around 8% was spent on external R&D and less than 5% on the

acquisition of external knowledge.

Innovators are more likely to export than non-innovators – 31% compared to 12%.

Innovation-active businesses are more willing to collaborate to innovate. The number of

businesses with some form of cooperation agreement has increased from 40% in 2015

to 58%, with specific increases as follows:

Consultants, commercial labs and private research institutions from 23% to 45%

Universities and other higher education institutions from increased from 21% to 41%

Government and other public research institutions from increased from 17% to 38%

Over 80% of businesses with cooperation agreements reported partnering with their

suppliers

Only 4% of innovation-active businesses use universities as a source of information and

3% use the Government or other public research institutions.

The top four drivers of innovation amongst businesses of all sizes are ‘improving the

quality of goods and services’ (42%), ‘replacing outdated goods and services’ (38%),

‘increasing added value (33%) and ‘increasing market share’ (31%).

Cost factors (the high costs associated with innovation and the cost and availability of

finance) remain the single largest barrier to innovation (14%) followed by a lack of

1 https://www.gov.uk/government/statistics/uk-innovation-survey-2017-headline-findings

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qualified personnel at 10% with Government regulations and the EU referendum tied at

9%.

Innovation-active businesses tend to have a higher proportion of employees with a

degree or higher qualification than non-innovators. Among innovative businesses, 14%

of employees had a science or engineering qualification whilst 17% had higher level

qualifications in a non-science subject.

3.2 UK INDUSTRIAL STRATEGY

The UK’s ‘Industrial Strategy: building a Britain fit for the future’, published in November 2017,2

is built on five “Foundations of Productivity” and sets four “Grand Challenges” to place the UK at

the forefront of the industries of the future.

Figure 1 Industrial Strategy Foundations of Productivity & Grand Challenges

FOUNDATIONS OF PRODUCTIVITY GRAND CHALLENGES

Ideas

The world’s most innovative economy

AI & Data Economy

Putting the UK at the forefront of the artificial intelligence and data revolution

People

Good jobs and greater earning power for all

Future of Mobility

The UK as a world leader in the way people, goods and services move

Infrastructure

A major upgrade to the UK’s infrastructure

Clean Growth

Maximising the advantages for UK industry from the global shift to clean growth

Business Environment

The best place to start and grow a business

Ageing Society

Harnessing the power of innovation to help meet the needs of an ageing society

Places

Prosperous communities across the UK

The Strategy sets out a vision in which the UK is a successful, competitive, open economy that

boosts productivity and earning power throughout the country. To achieve this the Government

has established an Industrial Strategy Challenge Fund3 (ISCF), delivered by UK Research &

Innovation4 (UKRI), which is part of the government’s £4.7bn increase in R&D investment over 4

years.

2 https://www.gov.uk/government/publications/industrial-strategy-building-a-britain-fit-for-the-future 3 https://www.ukri.org/innovation/industrial-strategy-challenge-

fund/?utm_source=innovateuk&utm_medium=website#pagecontentid-0 4 https://www.ukri.org/

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The Government is keen to build on existing strengths (such as aerospace, energy, creative

industries, cybersecurity and machine learning) and develop new strengths in emerging

sectors. To do so it envisages UK-wide partnerships between businesses, scientists, investors,

educators and policy makers. These partnerships will build on the UK’s historic strengths of

developing and deploying new ideas as well as on the UK’s position as a global leader in

science and innovation. This will position the UK as leader in the ‘new industrial revolution’ with

the Grand Challenges and increased R&D investment serving as key drivers.

Several priorities have been identified within the Strategy that impact on future levels of

innovation in the UK:

Neither government nor the private sector is investing enough in R&D meaning that the

UK risks losing the race to develop the new technologies and innovations that will shape

the businesses and markets of the future. The UK invests less in R&D than most of its

competitors – 1.7% of GDP compared to 2.8% in the US and 2.9% in Germany.

R&D investment is concentrated in a small number of big businesses in a limited number

of sectors such as pharmaceuticals and automotive. Just over 75% of private R&D

investment in the UK is driven by 400 businesses.

UK R&D strength is increasingly being challenged by emerging economies.

The ability to turn innovative ideas into commercial products and services.

Converting world class science and research into world leading home-grown businesses.

In the past, pioneering innovations developed in the UK’s universities have been bought

up by global businesses from overseas e.g. magnetic resonance imaging and lithium-ion

battery technology. Therefore there needs to be a boost in the ‘development’ element of

R&D.

Building research and innovation excellence across the UK and fostering local

ecosystems capable of supporting innovation and sustained growth.

Ensuring the UK remains a world leader in global science and innovation collaboration.

Half of UK R&D undertaken in business was by overseas owned companies and 50% of

UK research publications in 2014 were co-authored with international collaborators. This

means the UK continuing to attract the best talent from around the world and retaining

access to international networks and programmes. Domestically, it also means

continuing to invest in science and innovation skills and training.

Working with UKRI, the Government will seek to attract more global investment in R&D as well

as establishing a competitive ‘Strategic Priorities Fund’ to support high quality R&D priorities.

R&D tax credits will be increased from 11% to 12% in order to stimulate business investment in

R&D as well as trying to make it generally easier for businesses to access public sources of

innovation investment. Innovate UK will be allocated an additional £44m in 2017/18 to support

high growth businesses to collaborate and innovate alongside pilot Innovation Loans (£50m)

and Investment Accelerator programmes.

Universities are also being asked to play their part in commercialising their research and taking

new and innovative products to market. UKRI are tasked with developing a new Knowledge

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Exchange Framework and a higher percentage of a university’s core funding will be determined

by the impact their research has on the economy and wider society. The funding provided to

universities in England via the Higher Education Innovation Fund (HEIF) will also be increased

(by £40m per annum to a total of £250m a year) to support collaborations between business

and academia and to work together to innovate and commercialise research. The national

network of Catapult Centres will receive £178m interim funding in order to continue their work.

Government is launching a new competitive £115m ‘Strength in Places Fund’ to support areas

to build on existing science and innovation strengths and develop strong local networks in order

that those clusters will become nationally and internationally competitive. It will identify

and support emerging areas of R&D strength as well as on the economic impact of local ‘anchor

institutions’ such as universities and other research institutions. The fund will link to Local

Industrial Strategies.

3.3 SCIENCE & INNOVATION AUDITS

The Strength in Places Fund builds on the Department for Business, Energy and Industrial

Strategy’s Science & Innovation Audits (SIAs). Now in their third wave, SIAs bring together and

support local consortia of business, universities, research and innovation organisations and

Local Enterprise Partnerships (LEPs) to examine key regional research, innovation and

infrastructure strengths, relating them to a national and international context. The

evidence is intended to inform future public and private sector investment and foster local

collaboration.

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Figure 2 Science & Innovation Audits

FIRST WAVE SECOND WAVE THIRD WAVE

Edinburgh and the

South East Scotland

City region

Bioeconomy of the

North of England.

Cyber Resilience Alliance (led by Worcestershire LEP

with support from The Marches, Gloucestershire and

Swindon and Wiltshire LEPs)

Greater Manchester

and East Cheshire

East of England Maximising the Marine Economy of the Highlands &

Islands (Led by Highlands and Islands Enterprise)

The Midlands Engine Glasgow Economic

Leadership.

North West Nuclear Arc Consortium (led by Bangor

University with support from Welsh Government and

North West England LEPs)

Sheffield City Region

and Lancashire

Innovation South North West Coastal Arc Eco-Innovation Partnership

(led by Lancaster University with support from North

West England LEPs and the Welsh Government)

South West England

and South East

Wales

Leeds City Region. Northern Powerhouse Chemicals & Processing

Science (led by Tees Valley Combined Authority with

support from North East, Humberside, and Liverpool

City Region LEPs)

Liverpool City Region

Plus.

Northern Powerhouse in Health Research (led by

Northern Health Science Alliance and includes LEPs,

universities and teaching hospitals from across the

Northern Powerhouse)

Offshore Renewable

Energy consortium

The South Wales Crucible (led by Swansea

University)

Oxfordshire

Transformative

Technologies

Alliance.

Upstream Space (led by UKSA/Scottish Enterprise

comprising Scotland; Leicester; Belfast and a corridor

between Cambridge and Portsmouth)

Precision Medicine Innovation in Scotland (led by the

University of Glasgow)

Applied Digital Technologies (led by North East LEP)

Sustainable Airports (led by Brunel University, looking

at Heathrow)

The Knowledge Quarter, London

3.4 UK RESEARCH AND INNOVATION

UK Research and Innovation (UKRI) brings together the seven research councils, Research

England and Innovate UK into a single body and is seen by Government as a step-change in

the way innovation is encouraged. It will be backed by the largest increase in R&D funding for

forty years; an additional £7bn by 2021/22, announced in the Autumn 2016 Budget statement.

The organisation’s Strategic Prospectus ‘Building the UKRI Strategy – Insight, Inspiration,

Impact’ published May 2018 begins the process of developing UKRI’s long term plans in which

research and innovation are supported in order to build a prosperous economy, address societal

challenges and ensure that the UK thrives in a changing world. The prospectus recognises that

economic growth is increasingly dependent on knowledge and that the globalisation of research,

innovation and business creates an intensely competitive environment in which companies of all

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sizes will have to operate. The document identifies several key components that underpin

excellence in research and innovation.

Figure 3 UKRI Foundations for Excellent Research and Innovation

Leading talent – creating and maintaining a highly skilled workforce and attracting world-leading

researchers and innovators in both academia and business. UKRI will support multi-disciplinary

teams and encourage the movement of individuals between research and business

A trusted and diverse system – a system that adopts and evidence-based approach and that

collaborates with partners nationally and internationally to gather ideas and catalyse change

Research and Innovation culture – a culture that is based on ethical, honest and verifiable

methods leading to reproducibility and underpinned by metrics-based analysis

Openness and transparency – ensuring that publicly funded research is widely accessible, and

that research data is openly available

UKRI acknowledge that today’s problems are inherently interdisciplinary in nature and often

require rapid response times in order to be able to capitalise on opportunities. It also sees that

the UK is operating in a highly competitive environment in which research and development is

globalised and requires collaboration across disciplinary, organisational and disciplinary

boundaries. This means that UKRI can only afford to invest in the highest quality research

and innovation and will do so on a place-based competitive basis i.e. building on local

business strengths and pockets of research and innovation excellence. Its funding will be

aligned to Government priorities (as set out in the Industrial Strategy) and will be invested

both strategically (i.e. looking towards future growth sectors) and responsively (i.e. dealing with

immediate challenges and issues).

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4 INNOVATION IN THE HUMBER

4.1 INNOVATION ACTIVITY

As the preliminary report by Hull University Business School concluded, data on innovation

activity in the Humber is not easy to identify and access.

Looking at public sector investment in innovation, analysis of Innovate UK data from 2004 to

2017 shows the Humber performing below the rest of the Yorkshire & Humber (Y&H) region and

the UK as a whole in terms of average project values. Furthermore, the Humber generates just

7.4% of funded Innovate UK applications within Y&H. Projects led by business totalled 102,

split between large enterprises (42), SMEs (27) and micro businesses (33).

Figure 4 InnovateUK Projects in the Humber

LOCATION NUMBER

PROJECTS

AWARDED

OVERALL VALUE

PROJECTS

AWARDED

AVERAGE

PROJECT

VALUE

NUMBER

PROJECTS

PA

AVERAGE

INVESTMENT

PA

National Data 28,431 £9.6bn £338k 2,187 £7.38m

Yorkshire &

Humber

2,052 £547m £267k 158 £4.21m

Humber LEP

area

151 £26m £174k 12 £2.03m

In terms of project numbers, food, chemicals, engineering & manufacturing and healthcare

secured the most. However, with project values in energy and healthcare by far the highest

value, these sectors attracted the most funding.

Using private sector investment in R&D as a measure of innovation activity, interviews with a

small sample (17) of Humber businesses, largely micro and SME, operating primarily in

engineering & manufacturing (6) and creative & digital (3), found average levels of annual spend

to be in the region of £400-500k.

The preliminary report by the Business School also looked at patenting and licensing activity,

another traditional measure of activity. Many of the businesses interviewed stated that what

they consider to be innovative does not necessarily map onto such traditional measures.

NESTA’s Innovation Index5 uses some traditional measures of investment in innovation but

also includes intangibles such as:

5 https://www.nesta.org.uk/report/innovation-index-2014/

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Design

Organisational improvement

Training & skills development

Software development

Advertising

Market research

NESTA’s still pertinent work looking at sectors with low levels of innovation6 demonstrated

that the nature of innovation varied from sector to sector, which was also a finding of the

business interviews.

At the two extremes are SME interviewees GoHire (Case Study 1) and Rofin Sinar (Case

Study 2).

GoHire is a small company competing locally in a low innovation sector and being innovative

in how it does business to open up a new market segment and increase customer loyalty.

This it could be argued is entrepreneurial behaviour and as such not appear in the innovation

strand of a LIS. There is a good deal of overlap between entrepreneurship and innovation

when inputs, processes and outputs are included in the definition.

The opportunity for a Humber LIS is to label GoHire and other well-led businesses as case

studies in innovation in order to promote innovation as being more inclusive thereby placing

more businesses on the first rung of the innovation ladder.

At the top of the innovation ladder is Rofin Sinar, a high growth technology business

demonstrating most if not all of the characteristics of a highly-innovative organisation.

The specific need and opportunity identified by the company is for a LIS to raise the profile of

Humber companies with national funders and facilitate the flow of innovation funding.

6 https://www.nesta.org.uk/report/hidden-innovation/

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CASE STUDY 1

GoHire

GoHire Ltd is a small company, employing seven people, based in Hull and specialising in

industrial tools and equipment hire, sales and repair. The business was founded in 1995 but was

bought in 2015 by Sally Wray.

Since taking over the business Sally has sought to innovate and grow the business. By her own

admission, the business she inherited was very ‘traditional’ and operates in a very traditional

sector. As an example, all of the processes within the business were conducted using paper and

pen. Much of the product innovation in the sector is undertaken by the tool manufacturers

themselves. This has meant that Sally has focused on process improvement within her business.

Over the past two years she has introduced a new computerised accounts system. Initially she

wanted this to be cloud based but the costs were prohibitive. She is currently exploring the options

around introducing a bar-coding system for stock control and tracking purposes i.e. the return of

hire equipment. Using traditional stock control methods (i.e. manual counting) Sally identified that

hire items were often overlooked and left on site. This necessitated a return visit in order to

retrieve the missed items, thus increasing costs. Sally hope that a bar-coding system where items

are scanned in and out on site will reduce costs as well as improve overall efficiency.

Sally has also been innovative in growing and diversifying her business. She has established a

stand-alone subsidiary company, based within Humberside Airport, that exclusively serves the

offshore oil and gas sectors with their tooling requirements. After a bit of research, Sally realised

that offshore companies will go to great lengths to get the necessary tools to their workers,

including taxiing or flying them in from other parts of the country such as Aberdeen. As many

offshore workers use local hotels, Sally has set up a deal with a local hotel chain to offer a tool hire

and sale service direct from Humberside Airport thus saving the offshore companies significant

sums in transportation costs. Although currently focused on the oil and gas sector, Sally has

ambitious plans to extend this to the offshore renewables sector.

Sally is also making innovative use of customer data to identify where her business might be able

to deliver other added value services to customers at the same time as supplying hire tools. She is

also a social innovator. Three-quarters of her turnover is business to business with the remainder

business to consumer. However, nearly 95% of her customers are male aged between 20 and 60.

Sally therefore has ideas around how to address male health problems such as raising awareness

around prostate cancer or obesity by working with the NHS to deliver information and advice.

Her business is located in a part of Hull with high crime levels and where there is a considerable

amount of litter. She therefore has ideas of rallying other local businesses to form a

neighbourhood crime watch syndicate as well as to do litter picking. By so doing, she not only

hopes to improve the locality but also to grow her business by attracting more customers into a

more hospitable environment.

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CASE STUDY 2

Rofin Sinar

Rofin Sinar is a rapidly growing high-tech firm located at the Humber Bridgehead Business Park.

They design, develop and manufacture sealed carbon-dioxide lasers for marking applications and

industrial processing. They are a global firm exporting 98% of their products to over 40 countries

around the world. Since building their new facility at the Bridgehead site, the number of staff has

grown from 130 to 170, production has increased, and they now have 8 overseas staff.

Innovation is central to everything at Rofin Sinar and it is largely driven by the customer. As the

company services such a wide customer base, innovation is highly flexible and fast paced and is

focused on solving customer problems and meeting their needs. Although the product itself is

high-tech, the lasers the company supplies are often used in dirty and ‘hostile’ environments with

high levels of heat and humidity. Again, being able to address such a wide range of variables

requires considerable product innovation.

At the same time there are very few ‘off the shelf’ machines that can manufacture the type and

variety of lasers that Rofin Sinar produce. Much of the company’s production equipment has

therefore been designed and manufactured in-house. Process innovation and improvement has

therefore gone hand in hand with product design and development. A recent new product range,

for example, is used in a particularly dirty environment in which lasers have traditionally

experienced high failure rates. In response, Rofin Sinar designed and incorporated a new type of

sealants into their product thus reducing the number of failures.

The company have also recently automated one of their manufacturing processes that was

previously a very manual activity to the point where 95% of the process is automated. This is a

unique process found nowhere else in the world and is generating invaluable production data for

the company that they are using to further refine and improve the process.

Rofin Sinar is trying build an innovation culture within the business and rewards individuals and

teams who come up with new ideas. The company therefore feels that it is pretty high up on the

innovation scale and that it has achieved a workable balance between innovation and risk.

Exporting globally is a key driver of innovation, requiring process innovation for example in order to

improve efficiency and reduce lead teams for goods overseas. It has also innovated to make their

products quicker and easier to ship in order to address customs and excise issues.

Rofin Sinar works closely and collaborates with a number of Universities, including Hull,

Southampton and Heriot-Watt. Such collaborations aren’t without their difficulties including often-

high costs and the need to address intellectual property matters right from the outset.

The company has benefited from local innovation funding from the LEP and the former RDA

Yorkshire Forward but has been less successful in securing national-level funding despite being a

winner of two Queen’s Awards and having hosted visits from a previous Secretary of State for

Industry and Prince Andrew. It is adamant that the innovation strand of any LIS should be focused

on facilitating the flow of innovation funding to companies as well as fostering the ability to network

with national funding bodies, at the same time as raising the Humber’s profile nationally. Rofin

Sinar would be pleased to be actively involved in the development of such a strategy.

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4.2 INNOVATION ECOSYSTEM

The 5 Foundations of Productivity is a framework for developing an holistic industrial strategy,

an approach adopted in the Northern Powerhouse economic ecosystem concept7 For

innovation to thrive all elements or ‘assets’ from inside and also where appropriate outside the

region need to be available, curated and tailored to suit the needs of business as the most

important asset where critical mass makes this desirable and achievable. There is evidence of

this taking place, most obviously in offshore wind energy.

Figure 5 Northern Powerhouse Depiction of an Economic Ecosystem

4.3 INNOVATION ASSETS

The following is far from a complete list of assets, it is more of snapshot. Further work is

required in areas such as skills/talent, external business expertise and the knowledge base to

inform innovation strategy within the Humber LIS.

4.3.1 Business Base

The most important innovation asset in the Humber is the business base. Investment by larger

innovation-active Humber companies (Figure 6) pulls in public sector investment including from

outside the region, attracts talent and draws on ideas and knowledge from the knowledge base,

other companies including technology start-ups and supply chain, and elsewhere. The

7 http://www.northernpowerhousepartnership.co.uk/media/1029/24jun16-executive-summary-np-

independent-economic-review.pdf

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opportunity and challenge for a Humber LIS is to support companies in their efforts to do so

thereby strengthening the ecosystem.

Figure 6 Science and Innovation Investment by Humber Businesses

Reckitt Benckiser Healthcare (consumer) £105 million Centre of Excellence

Smith & Nephew Healthcare State of the art wound care R&D centre

Croda International Chemicals (specialty) £27 million capital investment to expand

capacity and expand its technological lead

Novartis Pharmaceuticals £100 million investment in Grimsby facilities

over the past 10 years

Siemens Manufacturing &

engineering

£310 million investment in offshore wind

turbine assembly plan

£200 million rail factory at Goole

Ideal Boilers Manufacturing &

engineering

Brand new Innovation Team

The most significant opportunity is offshore wind energy specifically and offshore renewable

energy more generally, investment in which to date includes: £160m in wind turbine production

and installation facilities at Alexandra Dock in Hull by Siemens; and Ørsted’s O&M East Coast

Hub located at Grimsby Royal Dock. The latter is the largest port facility of its kind in the UK

and will service all of Ørsted’s North Sea Operations.

A major player in the Humber’s offshore wind cluster, Ørsted (Case Study 3) sees embedding

innovation with the local supply chain as critical to innovating at pace. It sees the cluster as the

most advanced globally and playing a major role in developing the Humber’s innovation

capacity. Project Aura8 was highlighted because it will enable incubation and prototyping of

new ideas and a nexus for new entrants.

8 https://aurawindenergy.com/

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Offshore Renewable Energy Science & Innovation Audit

The 2017 SIA identified 109 businesses actively engaged in offshore renewable energy

research and innovation projects. It concluded that there are a high number of

companies actively engaged in innovation, for many of whom offshore renewables is

their core business. 124 individual research & innovation projects were identified, with a

combined value >£70 million, more than a quarter of which (27%) are industry-academic

collaborations, thus highlighting the strong links between the sector and universities.

However, this funding tends to be concentrated in a small number of large grants. There

also appears to be a lack of offshore renewable energy specific funding sources

available for innovative companies, including SMEs, in Northern England compared to

Scotland.

The SIA found that universities within the SIA area are engaged in world-class research

in the field of offshore renewable energy, but there is potential for increased

specialisation. Taking patents as a measure of innovation, the audit found that the UK

demonstrated low levels of innovation compared to global competitors when it came to

wind energy but performed more favourably in relation to wave and tidal energy-related

patent filings.

Project Aura is also featured as a case study of innovation in the report, emphasising the

multi-disciplinary nature of the project and highlighting nine key areas of innovation

which have already secured in excess of £10m of research funding.

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CASE STUDY 3

Ørsted

Ørsted develops, constructs and operates offshore wind farms, bioenergy plants and waste-to-

energy solutions as well as providing smart energy products to its customers. The company has a

dedicated innovation department, based at their Danish headquarters, and fosters a strong

innovation culture throughout the organisation – an annual ‘Innovation Games’ enables teams from

across the business to compete on the basis of new product and service innovations.

Innovation underpins and drives Ørsted’s continued growth and has played a critical role in

continuous cost reduction to maintain a competitive advantage. Innovation permeates all aspects

of product development (e.g. reducing steel content in wind turbine bases without losing rigidity),

processes (e.g. new supply chain innovations) as well as in how Ørsted conducts its business (e.g.

in how large offshore projects are structured and operated – increasingly important as wind farms

extend further and further offshore). On a scale of 1 to 10 therefore, innovation is a ‘high ten’: “If

we’re not innovating, we will be overtaken by other market players.”

In a dynamic high growth sector in which the frontiers keep shifting, innovation is key to winning

new business. More so as the strength of competition within the sector grows. Innovation is

therefore central to Ørsted’s strategy of driving out costs and increasing productivity.

Innovation has also played a critical role in Ørsted’s expansion into overseas markets. The

company originally envisaged that they would be able to take established products and processes

and apply them within new markets and that the course of business would follow the same

developmental paths as in more established markets. The reality, however, has been one of a very

rapid equalisation of costs in these new markets and therefore innovation has played a critical role

in enabling Ørsted to adapt its products to these markets and remain competitive.

Perhaps the single largest barrier to innovation within Ørsted is having the capacity to innovate

quickly. It does not lack for financial resources or skills and talent (much of which is grown and

developed in-house) and the company is one of the major players pushing for an Offshore Wind

Sector Deal with the Government. It is about embedding innovation in the supply chain. Matthew

sees the growth of an ‘innovation cluster’ in the Humber as central to this. In his opinion the

concentration of large OEMs such as Siemens, O&M facilities (such as Ørsted’s own facility in

Grimsby – the largest in the UK) and projects like Aura is the most advanced in the world and will

play a prominent role in developing innovation capacity within the Humber.

Another potential stumbling block to innovation in the Humber that Matthew sees is the tech

transfer piece i.e. turning good ideas into commercial products and services. However, he sees

the Aura Innovation Centre to be constructed over the next 12 months as a big step forward in

addressing that barrier. The Centre will provide the equipment and expertise to incubate and

prototype new ideas as well as serving as a nucleation point for new entrants to the sector.

In summary, innovation is central to the way Ørsted does business. However, innovation in the

supply chain is equally important. Matthew would therefore like to see the innovation component of

a future Local Industrial Strategy emphasising that and making sure that innovation is better

integrated into local business culture and practices. To do this, it needs to get really close to

business and have the ability to translate into practical actions and outcomes.

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More work is needed to define other opportunities. These will be smaller in scale than offshore

energy. Part of this work will be to map linkages between different parts of the business base in

order that ideas and capabilities are cross-fertilised.

There is evidence of this in digital. Given the current and prospective impact of digital

technologies on a range of applications and sectors (e.g. health, manufacturing & engineering,

logistics), this is one Humber asset that could potentially play a significant role in a LIS. C4DI is

enabling a growing cluster of digital businesses and primes like Reckitt Benckiser (Case Study

4) have benefited from engagement.

There may be opportunities in health although on the evidence of the Reckitt Benckiser

interview, these may be limited in scope. That said there may be other opportunities in the

healthcare space, for example, digital.

Manufacturing & engineering is likely to be diverse including the likes of Ideal Boilers (Case

Study 5) with the potential for supply chain capabilities being developed to meet the innovation

needs of offshore energy and rail to be applied elsewhere. Likewise, there may be opportunities

to lever the significant port infrastructure and associated logistics capability as articulated in the

Humber Strategic Economic Plan 2014-20.

The interview with BP (Case Study 6) highlights a desire by the significant chemical,

petrochemical and energy cluster for dialogue to explore ideas and innovation opportunities

outside chemicals and processing, with digital mentioned as an area of interest.

Food is another area highlighted in the Humber SEP. Food is one of the sectors attracting

Innovate UK grants.

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CASE STUDY 4

Reckitt Benckiser

There are two parts to Reckitt Benckiser’s business, consumer health and home & hygiene.

Enabled by a £105m Centre for Scientific Excellence in health investment, the Hull site now has

the largest R&D centre in the Reckitt Benckiser (RB) community of such centres around the

world.

RB is focused on getting new products into consumers’ hands rather than new molecules – its

scientists are expected to apply consumer insight – and so innovation is the main driver of

growth. As an insight-led company, consumer research, data analytics and the management of

intellectual property are of critical importance.

The increasing complexity involved in meeting needs in different markets means a lot of

incremental benefits to drive customer satisfaction. Innovation also adds new product ranges, for

example, the Nurofen® FeverSmart™ digital thermometer with Bluetooth connectivity to monitor

a child’s temperature via an app, and entirely new propositions like the Dettol™ SiTi Shield range

of products designed to protect against air pollution (e.g. smart mask, nasal filter and monitor).

Consumer satisfaction measured by uptake (sales value) is the main innovation metric, with

forecast sales value used as a pipeline metric. Longer-term activity is measured by looking at the

quality of partnerships.

As a multinational RB has considerable internal resources and a wide range of capabilities at its

disposal around the world, but actively works in partnership with academics, advisory groups and

start-ups to access specific inputs. This network extends far beyond the Humber.

RB sees itself as unique in the Humber in health (with the exception of Smith & Nephew) and

FMCG, the region being dominated by renewables. In the past, the company has not engaged to

any great extent with the local innovation ecosystem, but this has started to change particularly in

relation to education. Within the wider context of RB’s comprehensive efforts to attract and retain

talent and be more open about doing so, including investment in the new Centre, a Future

Leaders Programme for graduates and advocacy for women in science and STEM, RB conducts

outreach with primary schools and is a co-founder of the UTC.

RB sees an opportunity to put Hull on the map, to raise its profile by shouting about the impact

Hull innovations have had and are having nationally and internationally (e.g. Oyster card, imports

through the port, RB global exports). The Centre for Digital Innovation (C4DI) tells a good story

about this. Attracting high profile innovation conferences and professional bodies would help.

The City of Culture has made Hull an attractive place and led to improvements in basic things

hotel accommodation. A concerted effort would help attract and retain talent as well as

encourage businesses into the region.

RB has also engaged with the C4DI, providing funding to help with start-ups and in return

learning from small companies about how to be nimble.

National innovation and industrial strategy is important to RB in terms of its innovation needs. It

sees a LIS being relevant when it comes to attracting and retaining talent.

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CASE STUDY 5

Ideal Boilers

Now owned by French company Groupe Atlantic but run independently, Ideal Boilers makes in

excess of 400,000 boilers annually. Since January this year it has operated with a new innovation

team, part of the 45-strong R&D team on site.

There is a strong push on innovation within the business and agreed definition: ‘Innovation is about

creating value’. There is a careful balance to be struck between recognising the need to innovate

and the demands of the business today, cost pressures. The team are always looking to horizon

scan and undertake proactive concept development but can be a challenge because of short-term

business pressures. This is where the ‘creating value’ mantra comes in. Consumer insight has

own training centre (learn about consumers from installation community).

The company is thinking about how it works to deliver innovation outcomes (product and process).

Outcomes are a mix of incremental and more fundamental. The innovation team is currently

mapping incremental and breakthrough innovations against current and new markets. Other than

pipeline management, the company doesn’t yet have a set of formal innovation metrics. It isn’t

driven by things like number of patents.

Cost competitiveness is the largest driver of innovation. It takes 10+ mins to assemble a boiler so

even small savings in time really help. Opportunities to reduce cost through Design for

Manufacture & Assembly techniques are considered from the outset. Compromising product

reliability to save assembly time is off limits. Getting the product-market strategy right is vital. For

example, the current UK product is being looked at for the French market because it is more cost

competitive, but the different composition of gas requires innovation.

Cost reduction closely followed by legislation drive continuous improvement but also pose more

fundamental challenges such as de-carbonisation of gas (future hydrogen use).

New technology is another important driver. Connectivity/Internet of Things is another challenge as

this requires new skills, skills that are not core to a boiler business. 3D printing is another

interesting technology.

Attracting people with high-level skills is very important, for example, a PhD with CFC expertise has

just been recruited. It is challenge to recruit electronics and control skills relevant to boilers. Ideal

There is plenty of innovation and engineering capability Ideal Boilers won’t be aware of, which isn’t

visible, and raising the profile of what is going on would help attract and importantly retain talent in

the Humber. Boilers is one of the UTC co-founders.

The Groupe Atlantic model is to work with other teams, sharing and accessing specialist expertise.

Ideal Boilers also collaborate with universities including Hull (polymers) and there is a push to do

more. It is early days in terms of funding for innovation, but opportunities are actively being

explored (e.g. Innovate UK).

Engaging with a range of regional stakeholders including the LEP is seen as potentially beneficial

as a way of shaping the thinking on innovation. Previous experience indicates that there will be

plenty of good ideas, the challenge will be seeing the best ones through to implementation.

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CASE STUDY 6

BP

The impact of chemistry and chemistry processing research in Hull, which currently involves 80

people, has been felt globally, with eight plants using technology developed in the region. BP is a

major player in the global commodity market and as such needs new to market product and

process innovation to remain competitive. Acetic acid is used in a wide range of commodities and

consumer products (e.g. clothes, pharmaceuticals, washing powders).

Innovation is driven entirely by business need and remaining the lowest cost producer. As a result,

there is constant pressure to deliver optimisation after optimisation to squeeze out small

productivity gains. Technology is a significant enabler of cost reduction and can take years to

develop – a new technology close to introduction has been in development for more than ten years.

Alongside other macro-level drivers of innovation, legislation is particularly (e.g. Co2 reduction).

Most IP is created in-house with universities providing specialist expertise. BP’s deepest

relationships exist with a small number of US and UK universities (Manchester, Cambridge and

UCL). There used to be strong connections with Hull in the liquid crystals research. IP

management is a major in-house activity.

Talent is very important to BP and the company sets the bar high with recruitment needs for mainly

graduate engineers and PhD chemists tending to be met by the universities with the above

universities. Recruitment is running at lower levels than in the past.

BP has accessed innovation support locally to a very limited extent and as a multinational it has

self-funded innovation rather than tap into innovation funding, although it has secured Industrial

Cooperative Awards in Science & Technology (CASE) studentships in the past and is currently

looking at a Knowledge Transfer Partnership (KTP).

However, there is now a desire to engage, to see what is out there beyond chemistry and process

development in relation to ideas and innovation. BP is involved with CATCH (industry led

partnership supporting the process, energy, engineering and renewable industries) and there is

interest from the Hull cluster of petrochemical, chemistry and energy businesses in being more

outward looking. Digital is one area that is of interest.

There are links to renewables with BP Ventures in London investing in solar, wind and hydrogen,

collaborating with Siemens. It is not clear if these projects will make it to the Humber.

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4.3.2 Knowledge Base

A key Humber knowledge asset is the University itself. As well as providing access to research

and innovation (R&I) capability in the form of expertise and equipment, the University is a

source of talent.

Some of this R&I capability is of national significance. For example, the Offshore Renewable

Energy Science & Innovation Audit9 recognised the University of Hull’s research and innovation

strengths in the areas of advanced manufacturing (the use of novel material and

manufacturing processes in the production of blades, including smart surfaces and advanced

coatings), operations and maintenance (health monitoring, simulation and visualisation and

logistics and supply chain innovation) and market condition studies including the development

of ‘Whole Life Supply Chain’ modelling tools, SME innovation support and assistance with proof

of market assessments.

Catapult Centres10 bridge the gap between business, academia, research and government,

supporting collaboration and knowledge exchange and building new partnerships. They help

business to ‘adopt, develop and exploit innovative products and technologies’ and provide

support along the pathway from concept to commercialisation. Of particular relevance is the

Offshore Renewable Energy Catapult. Similarly, and by virtue of proximity, the High Value

Manufacturing Catapult in the shape of the Advanced Manufacturing Research Centre (AMRC)

at Sheffield.

Humber businesses are able to take advantage of nearby specialist national research centres

and institutes including the Food and Environment Research Agency (FERA) based in York

(https://www.fera.co.uk/) and the National Physical Laboratory (NPL) at Huddersfield

(http://www.npl.co.uk/regional-hubs/npl-huddersfield/).

Such leading-edge ‘new to market’ knowledge and technologies are important to

businesses that compete globally. Firms competing locally can and do make effective

use of existing ‘new to firm’ knowledge and technologies to make significant innovative

steps. This is an important distinction when thinking about engaging more businesses

in innovation.

Grimsby Institute (GIFHE) is not a research-intensive institution but provides business with

access to training and facilities across a wide breadth of subject areas including logistics,

9 https://www.ncl.ac.uk/media/wwwnclacuk/business/files/sia-report-offshore-energy.pdf. The SIA was conducted

by a consortium comprised of the Universities of Durham, Hull, Liverpool and Newcastle; four Local Enterprise Partnerships (Humber, Liverpool City Region, North-East and Tees Valley Combined Authority); Scottish Enterprise and the Offshore Renewable Energy Catapult (OREC).

10 https://catapult.org.uk/

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manufacturing and process technologies, food manufacture and research as well as general

business management11. These all serve to underpin and support the innovation process within

companies. Through its various collaborations and networks, GIFHE is also able to signpost

businesses on to other sources of innovation advice and support both within the region and

nationally.

4.3.3 Funding

Spark Fund12, administered by the University of Hull, is an ERDF funded innovation support

and grants programme to support SMEs to improve or develop new products, services or

processes. The project is targeted at growth-oriented businesses in the Humber and North

Yorkshire that meet ERDF eligibility criteria. The University secured £6m of ERDF investment

to deliver the programme over 3 years and offers three main types of innovation funding:

Innovation vouchers – support up to £20,000 to engage with the knowledge base and

undertake early stage innovative product/process/service development, testing and

prototyping.

R&D grants – support up to £50,000 to support businesses to take forward their early

stage ideas and prototypes and provide support with technical proof of concept work,

advanced design work, advanced product prototyping and testing, technical and

regulatory compliance work, near market ready demonstrator product design and

development and early to intermediate stage field/commercial trials.

Low carbon R&D grants – support up to £50,000 to support businesses in a similar

fashion to the “regular” Grants for R&D but with an emphasis and focus on low carbon

products and services and lowering the carbon footprint of businesses.

The programme has been operational for a little over a year and has already been successful in

engaging dozens of companies across the region and initiating a number of innovation projects.

Innovate UK13 – uptake in the Humber may be low comparatively but is nevertheless freely and

readily accessible. Now an integral part of UK Research & Innovation, Innovate UK runs a wide

spectrum of funding competitions spanning multiple sectors which are open to companies both

small and large. Innovate UK is also a source of innovation advice and guidance as well as

providing networking and information sharing opportunities through regular events and the

Knowledge Transfer Network14.

As more and more innovation funding and support will be channelled through Innovate UK and

UKRI as part of the Industrial Strategy, businesses need to be open to the opportunities for

collaboration and participation this will create. Equally the extension of funding to the national

11 http://www.commercialtraining.co.uk/index.php 12 http://www.spark-fund.co.uk/ 13 https://www.gov.uk/government/organisations/innovate-uk 14 https://ktn-uk.co.uk/

26

network of Catapult centres is a sign of the Government’s continued commitment to focus and

target innovation investment on key growth sectors of the UK economy.

Local Authority and LEP support for Business Growth and Innovation also provide

business grants, loans and support. While only a limited number of the grants and support are

innovation-specific, there is an innovation thread woven throughout the support on offer.

4.3.4 Skills/Talent

This was identified as an important asset by all but one interviewee with universities the source

for recruitment and will be an important part of a LIS. It is worth noting that the sector-specific

assets listed below have built skills into the range of support they provide, affording a more

holistic approach to business needs.

4.3.5 Sector-Specific

By definition such assets are much more tailored to business needs and tend to cut across

traditional innovation support boundaries such as: innovation and skills; revenue and capital;

and research areas. Purpose-designed physical infrastructure helps collaboration via events,

access to equipment and co-location.

Project Aura and the Aura Innovation Centre is designed to be a catalyst for collaboration,

bringing together industry partners to harness and drive innovation in the offshore wind sector.

Aura aims to help solve the technical and operational challenges facing offshore wind and

facilitate the development of skills and expertise to meet the needs of this rapidly growing

industry, worldwide. The project brings together professionals from across industry, universities

and other expert organisations to support the development of offshore wind as a sustainable

source of low carbon energy for future generations. Partners include the Universities of

Sheffield and Durham, the Offshore Renewable Energy Catapult, CATCH as well as the

Humber LEP.

Aura has three mutually reinforcing strands:

Research, development and innovation – identifying and solving the technical challenges

faced by the offshore wind sector across a number of different fields including next

generation blade design and manufacture, whole-life supply chain modelling, materials,

coatings and surfaces and operations and maintenance.

Talent pipeline – working with industry to establish the ‘go to’ framework for demand-led

high-quality education and training to meet the skills needs of the offshore wind industry

and renewables. Aura will work with companies to understand sector skill needs, identify

and analyse key roles in order to create a ‘talent inventory’ of skills and competencies

required which will be valuable for both the region and the sector.

Industry engagement and enterprise – acting as a catalyst for the development of

innovative and knowledge-based businesses benefiting the offshore wind sector. Aura

will nurture and cultivate business and technology support services across the value

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chain to help create sustainable jobs and a long-term future for wind and other

renewable energy sources in the Energy Estuary.

Underpinning and central to the delivery of Project Aura is the Aura Innovation Centre (AIC), a

£10m15 initiative, part-funded by ERDF and the Green Port Growth Fund. The AIC is a 2,500m2

purpose-built facility that will be constructed over the next 18 months and located at the Humber

Bridgehead Park, immediately adjacent to the ERGO Centre16. It will facilitate ongoing regional

economic development in the low carbon and offshore wind sectors and secure collaboration

between SMEs and the research base. It will accelerate the development of new products and

technologies, enhancing the region's reputation as the place to develop offshore wind and low

carbon innovation.

The AIC will provide SMEs with access to a unique portfolio of services in one building to

initiate, encourage and deliver the development of commercially relevant products for the target

sectors. It will also act as a magnet to attract companies that are relocating to the Humber or

expanding and seeking access to the low carbon and offshore wind sectors. The objectives of

the AIC are to:

Support low carbon innovation, foster research collaborations and promote knowledge

exchange.

Stimulate SMEs to access innovation expertise.

Promote the low carbon agenda.

Bring together UK and international leaders in wind energy and low carbon sectors

enabling SMEs to benefit from supply chain opportunities.

Showcase low carbon innovations, host sector events and facilitate information

exchange and networking.

Support SMEs to accelerate their innovations and progress collaborative low carbon

research outcomes towards market readiness.

It is expected to provide the nucleation point and a platform for the future growth and expansion

of the offshore wind and renewables sector in the Humber and driven by the need to

continuously innovate.

The ERGO Centre is a specialist managed workspace building targeting business and

professional services to support the development of environmental technologies sector. It is a

collaboration between East Riding of Yorkshire Council and the University of Hull and provides

an environment in which innovative businesses can share problems and challenges as well as

access the knowledge, research and technical expertise of the University.

15 The AIC has secured £4m of ERDF funding in addition to £1.4m of Green Port Growth investment for the

purchase of specialist equipment and over £4.5m of University contribution. 16 http://www2.eastriding.gov.uk/business/starting-growing-and-re-locating-your-business/find-your-nearest-

business-centre/?entry=ergo

28

Strategically located at the Humber Bridgehead Business Park, it provides nearly 1,200m2 of

office space (33 units), over 180m2 of conference and meeting space as well as a cafe. It

provides a range of innovation-led services to business including: commercialisation; knowledge

exchange; research; supply chain linkages; collaboration & networking; business mentoring;

and information, advice & guidance.

Centre for Digital Innovation is a £15m hub for the Humber’s digital sector developed by Hull-

based regeneration company Wykeland Group, with support from KCOM, Sonoco Trident, the

University of Hull and Hull Digital to accelerate growth of this burgeoning asset.

C4DI has a simple mission, to help tech start-ups grow and big businesses innovate by using

technology more efficiently. C4DI’s fast-growing co-working community of more than 230 digital

specialists are developing projects for more than 30-member businesses, including global

organisations such as Siemens and Reckitt Benckiser. C4DI provides a collaborative

environment where people in the tech sector – and businesses that seek to harness the power

of digital technology – can think, work, share ideas and ultimately develop innovations to help

shape the future.

4.3.6 Other Assets

The places people live and work, and the infrastructure needed to make them function

effectively are important components in attracting and retaining talent.

Broadband infrastructure and high-speed internet access is a given in today’s business world.

However, in comparison with other parts of the UK, the Humber does not have the fastest or

most widespread high-speed infrastructure. In recent years considerable efforts and progress

have been made in providing businesses with access to at least basic broadband (speeds of at

least 2 Mbps) although 95% of the UK benefits from superfast broadband (speeds of 24 Mbps

or more) and some of the areas with the lowest access to such speeds are in the Humber.

Hull is now looking to build on the year’s successful City of Culture to develop a legacy of

cultural activity that extends beyond the city’s boundaries. The year itself was marked by a

number of notable cultural innovations which extend into the arts, heritage and creative and

digital sectors. The desire is to further capitalise on these and take advantage of the support

available to digital media companies through assets such as the C4DI.

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5 CONCLUSIONS & RECOMMENDATIONS

5.1 STRENGTHS IN A NATIONAL AND INTERNATIONAL CONTEXT

Government industrial strategy positions innovation as a key driver of growth and productivity in

the UK economy and centres on investing selectively in strengths that enable the UK to

compete effectively on a global basis or have the potential to do so. Therefore, such strengths

are of national importance and, by definition, are characterised by higher levels of innovation

activity. Alignment of Humber strengths or assets with national priorities and investment was

noted in the preliminary report by the Business School and will be the main action of a LIS.

Self-evidently offshore energy, wind in particular, represents by far the most significant of the

Humber’s assets. The interview with Ørsted was compelling. In Ørsted’s view the

concentration of large OEMs such as Siemens, O&M facilities (such as Ørsted’s own facility in

Grimsby – the largest in the UK) and projects like Aura makes this cluster the most advanced

globally. Important from an innovation standpoint, Ørsted views the cluster as playing a

prominent role in developing innovation capacity within the Humber by embedding innovation in

the supply chain.

Recommendation 1: Make offshore energy the number 1 priority for a Humber LIS.

Not all of the innovation needs demanded by this cluster are being met locally, as noted by the

SIA in relation to offshore wind energy. The need and challenge for a LIS is meeting more of

this demand locally. Strengthening the capacity of the Humber’s innovation ecosystem is a

must for offshore energy but also because it opens up cross-fertilisation opportunities for the

supply chain. Advanced manufacturing & engineering and other capabilities such as logistics

will be in demand for applications in other end markets (e.g. high-speed rail, medical devices).

This means that the ability of supply chain companies to identify, define and market & sell to

such opportunities will be important.

Meet the buyer/specifier-type events, where requirements and opportunities are set out, have

always been effective at engaging supply chains and enabling them to make informed decisions

about skills, equipment, etc. and also available funding and support.

If offshore energy is the most significant strength and opportunity for a Humber LIS, what others

are there? Data informing the Humber SEP has not been part of this review, but it is possible to

say with a degree of certainty that none will be on anything like the same scale.

Given the current and prospective impact of digital technologies on a range of applications and

sectors (e.g. health, manufacturing & engineering, logistics), this is one Humber asset that could

potentially play a significant role in a LIS. C4DI is enabling a growing cluster of digital

businesses and Humber-based manufacturing & engineering and health primes are engaging,

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and interest in doing so has been expressed by a significant member of the Humber’s chemical,

petrochemical and energy cluster.

Recommendation 2: Facilitate engagement between digital and other Humber assets to

identify the most attractive innovation opportunities.

5.2 SCOPE OF INTERVENTION

Clearly a Humber LIS will need to be cognisant of the factors that can enable or stifle innovation

(see box below), many of which have been highlighted by the business interviews. This mix of

internal and external influences vary from sector to sector and across business stages and

sizes. Understanding them should lead to more tailored and holistic interventions that address

firms’ motivation and capacity to innovate as well as innovation inputs, both of which are

required to deliver the innovation outputs that will drive growth and productivity.

Some of the questions a LIS might consider are:

How and where can best practice in the way firms innovate be captured and

disseminated?

Is there appetite for an intervention around firms’ motivation and capacity to innovate

(e.g. Knowledge Action Network17) linked to funding for innovation delivery projects?

What more can be done to help Humber businesses develop their own, attract new and

ultimately retain talent?

How might the business base benefit from an ‘innovation observatory’ that provided data

on market, societal, technological, legislation and other trends?

How can more businesses be encouraged to access available support and funding?

Is there a role for professional service firms as ‘trusted advisors’ to promote innovation?

Are interventions too short to have lasting effect?

Recommendation 3: Target existing and tailor new interventions to better meet business

need.

5.3 INNOVATION GLASS CEILING

As stated the first action of a LIS is to focus on Humber strengths within a national and

international context. This means prioritising and investing selectively in order to maximise

impact, mirroring the Government’s strategy of picking winners. The downside is that it

excludes the vast majority of businesses, which raises the question what could and should be

done to make innovation more accessible, to break what might be termed the ‘innovation glass

ceiling’?

17 http://www.chester.ac.uk/knowledge-action-network

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INNOVATION DRIVERS & ENABLERS

Internal factors that can enable or stifle innovation are:

Culture can encompass an organisation’s attitude to risk, how it rewards

innovation (both at the individual as well as the organisational level) as well as

expectations in terms of innovation timeframes and outcomes. Culture is reflected

in policies, structures and processes that can routinely deliver or stifle innovation.

An innovation culture was repeatedly referenced by businesses interviewed for this

report.

A strong theme to emerge from the interviews was the fundamental nature of

having the right people with the right skills, knowledge, expertise and attitude.

Innovative companies grow their own talent in-house as well as recruiting the best

talent available. Where innovation is science & technology-based, firms employ

graduate-level staff but even here, the importance of having people with open and

enquiring minds and the capability to approach problems from multiple angles was

mentioned.

External factors that can enable or stifle innovation are:

Interviewees talked about the importance of understanding markets and

customers to identify and exploit opportunities and respond to competitive threats,

for example, innovating to maintain market leadership and enter new markets, or

remain cost/price competitive. Wider social trends can also open up innovation

opportunities.

New science and technology is an important influence on innovation in many

applications and markets and can be particularly disruptive enabling new lower cost

processes or business models, for example.

Regulatory and legal changes can have a significant impact, often challenging but

also representing opportunities for significant innovative steps and competitive

advantage. It is important but not always possible to be aware of upcoming

changes.

Government policy and support. The Industrial Strategy places great

importance on innovation and Government is investing substantial sums of money

to support and encourage more companies to innovate. At the same time,

government regulation and also bureaucracy can be a barrier and slow the pace of

innovation. Significant resources are available, but they can be confusing and

difficult to access.

Finance and investment. Innovation simply won’t happen without investment.

Companies may self-finance, making use of the tax system, and/or seek external

funds, depending on the stage of the innovation cycle. Lack of awareness of the

myriad of funding opportunities, and often demanding applications and reporting

requirements is often a barrier.

32

Arguably there is an opportunity for a Humber LIS is to label GoHire and other well-led

businesses as case studies in innovation in order to promote innovation as being more inclusive

thereby placing more businesses on the first rung of the innovation ladder. GoHire could

legitimately argue that for it ‘innovation is about creating value’ (Ideal Boilers definition).

NESTA’s work is relevant here in using a range of intangibles alongside traditional measures of

innovation. As the preliminary Business School report identified data on innovation activity in

the Humber is hard to come by. A Humber innovation index capturing the usual UK Innovation

Survey-type metrics for comparison purposes as well as a broader range of indicators on inputs

and outputs could form part of the work of the aforementioned innovation observatory. This

could usefully include case studies explaining how firms go about innovating.

In this way the Humber could develop a differentiated profile based on a much more complete

picture of innovation activity.

Recommendation 4: Adopt a broader innovation definition and set of metrics to record

activity and promote best practice.

5.4 RAISING THE HUMBER’S PROFILE

Business interviews highlighted a need and desire to raise the Humber’s profile nationally. This

is about highlighting the impact the Humber has had and is having nationally by promoting

current strengths and its innovation heritage. This is viewed as important in attracting talent

(and retaining it) and businesses. Apparently C4DI has developed some narrative.

Promoting the Humber as an attractive place to live has been helped by the City of Culture.

Promoting the Humber as an attractive place to do business brings into play connectivity and

transport.

Recommendation 5: Engage with business and other stakeholders to develop a narrative and plan to raise the Humber’s profile nationally.

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ANNEX I BUSINESS INTERVIEWEES & QUESTIONS

Company Interviewee Position

Reckitt Benckiser Bruce Charlesworth Health R&D Category Group Director & Hull Site Lead

BP Martin Hegarty Petrochemicals Analytical Manager

Ørsted Matthew Wright UK Managing Director

Ideal Boilers Christel Croft Innovation Manager

Rofin Sinar Dr Jason Lee Research & Development Director

GoHire Sally Wray Managing Director

Innovation Activity

1. How would you characterise the innovation your company undertakes?

Innovative in terms of your company or the market in which you operate?

Improved/new (select one or more):

Products

Production processes

Business processes/ways of working

New ways of doing business (e.g. how go to market)

Other type/form

Are there any other indicators of your company’s ‘innovativeness’ you would identity? Do you have a set of metrics you use to monitor innovation performance?

2. On a scale of 1 (low) to 10 (high), how important is innovation to your business?

1 2 3 4 5 6 7 8 9 10

Can you tell me a little more about the reasoning behind that score?

Is there a need or desire and plans in place to increase the level and/or nature of innovation activity?

If yes, please describe and say what if anything is preventing this.

3. On a scale of 1 (low) to 10 (high), how important are external factors in driving innovation in your business?

1 2 3 4 5 6 7 8 9 10

What 3 external factors are the primary drivers of innovation in your business?

Is your business seeking to diversify its product/service range through innovation in order to access new markets both in the UK and overseas? Do you have any examples?

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4. On a scale of 1 (low) to 10 (high), how important a driver of innovation is the need to improve productivity in your company?

1 2 3 4 5 6 7 8 9 10

Can you provide examples?

External Innovation Support & Access

5. On a scale of 1 (low) to 10 (high), how important to your business are the following types of external innovation support?

1 2 3 4 5 6 7 8 9 10

Knowledge, data & IP

Elaborate/Comments

Skills/talent

Elaborate/Comments

Funding

Elaborate/Comments

Other (e.g. business expertise)

Elaborate/Comments

6. On a scale of 1 (weak) to 10 (strong), how would you describe the innovation support ‘ecosystem’ in the Humber?

1 2 3 4 5 6 7 8 9 10

Which types of innovation support have you accessed in the Humber in the past 2 years? If any, please describe and say how you have benefited.

And nationally, e.g. InnovateUK?

Are there gaps in innovation support and/or barriers to access in the Humber you can identify that have caused you to seek support elsewhere? If yes, please describe.

And gaps in support nationally?

Innovation Policy & Strategy

7. On a scale of 1 (low) to 10 (high), how important is it to have the right policy framework to support innovation?

1 2 3 4 5 6 7 8 9 10

Would the existence of a supportive Humber-wide Innovation Strategy encourage your business to innovate more or would it have little or no relevance?

How important is the Government’s Industrial Strategy in shaping your company’s future innovation strategy and activity?

What metrics do you believe should be used to measure innovation performance in the Humber?