Fail to innovate and fail in business by Tony Egerton of Portal on 13-Oct-2011

N early a third of British companies (31.4%) spend absolutely nothing on searching for new ideas, services and products. That is the shocking finding of a new survey conducted by leading IT consultancy, Portal. The survey of 500 companies up and down the country found that only a fifth of companies spend more than five per cent of their revenues on research and development (R&D), despite the fact that nearly 52 per cent (51.8%) recognise that innovation is critical to maintaining, or growing, market share.

The major reason for companies failing to invest in R&D is the economic downturn. Less than seven per cent of respondents have increased their investment since the start of the recession in 2008 while nearly 14 per cent have 'cut their investment in R&D enormously'. The effect of the prolonged economic downturn is easy to see as 48 per cent said they would invest more if the government were able to offer tax breaks on R&D expenditure.

"We all know that in a downturn we must try and find easy ways to cut costs," said Tony Egerton, Sales and Marketing Director at Portal. "But cutting R&D is a corporate version of cutting off your nose to spite your face and is only going to be bad news for companies that think it’s a rational business strategy."

Lack of available funds is not the only reason for companies failing to invest sufficiently. Perceived difficulty of the process is deterring some from applying sufficient resources. There were three major process challenges identified from the survey:

1. Creating a collaborative environment – innovation does not just happen; it requires an environment in which it can flourish;
2. Finding the right people – for many companies, particularly those with multiple sites, knowing what skills the workforce has, whether they are part of current job descriptions or not, is an almost impossible job; and
3. Keeping the team collaborating – we all know how our ‘day jobs’ get in the way of special projects, so keeping everyone focused and collaborating on the innovation process is a major challenge for companies.

"Working with customers such as Element Six and TNT Express, we know there are very real challenges for modern businesses that want to collaborate effectively," contined Tony. "The combination of technology such as IBM Connections with our years’ of experience means we‘re able to help customers maintain market leadership through outstanding innovation."

Other key findings from the survey include:

• 31.4% of companies spend absolutely nothing on innovating while 56.6% spend less than two per cent of their revenue;
• 82.2% of companies spend less than ten hours a month innovating. Assuming a 35-hour week and a 48-week working year, that translates to 0.5% of time spent on R&D;
• 51.8% of respondents acknowledged that R&D can help maintain or build market share;
• 35% of respondents felt that keeping people focused on R&D was the main process challenge while understanding available skills was an issue for 14.8%. Getting people to collaborate was a challenge for a further 12% of respondents; and
• 45.8% would invest more in R&D if the government offered tax incentives.

The findings are published in a whitepaper entitled Innovation: the first casualty of a downturn which is available to download for free from: www.chooseportal.com/innovation.

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