Enterprise Ireland clients that received research, development and innovation (RDI) support in the past 10 years have experienced four times higher growth rates as firms which are not R&D active, have seen their exports treble while those of non-active firms have declined, and have achieved twice the employee value added. But on a more concerning note, long-term studies have shown that at least 50 per cent of companies who do not actively innovate have ceased to trade after 10 years.
It is clear that innovation works for companies and the gap is widening all the time between those that are innovative and those that are not. It is also of little surprise that companies which innovate have such a greater survival prospect. These companies have problem-solving capacity already in place so when a downturn comes they are much better equipped to deal with it. And they are also much better equipped to deal with the challenges presented by growth.
The product lifecycle used to be three to five years; now it’s one to three years and shortening. Competitors are moving on and so are customers. Companies have to become more innovative, look out for opportunities, and ask how they can be exploited.
The question for many companies is how to become more innovative and how to build innovation capacity. The problem they face very often is a lack of understanding of just what innovation is and how it can benefit them.
There can be a belief that it is some kind of dark art or very expensive activity to engage in. That’s not the case at all. Innovation is mostly common sense and any company can become innovative if they approach it in the right way.
Furthermore, many companies equate innovation with the development of new products, but new process or service innovation may be more relevant. In an innovation context, new product development on its own may provide little or no return if the development does not address issues such as market need, a volume opportunity, or having the correct price point.
A good definition of innovation is the successful exploitation of new ideas and involves doing something new for commercial gain or competitive advantage.
Greater understanding
The first step for companies which want to set out on the road to becoming more innovative is to gain a greater understanding of their own businesses. They need to ask questions, like how are they going to identify market opportunities and how are they going to come up with the ideas to address them? Who in the company will do that? What skills will be needed? What about commercial prospects? Is there a market for products identified? Can the company develop the products on its own?
These are just a few of the questions a company needs to ask. After that, it’s a question of building the culture, the capability and the processes which will address the answers. There is a lot of benefit in a management team taking time out to work on the business to identify priorities, strengths, weaknesses and so on. This will allow people to interrogate the business offer in a constructive way and identify what areas might need to be improved.
People shouldn’t be frightened of engagements like this. They are never as bad as initially feared. Companies have to be doing things reasonably well, otherwise they wouldn’t be in business. The purpose is to be even better, to meet the challenges ahead.
The next step is to put a strategy and structures in place to improve the business. Companies need to decide what they offer and where they want to target these offers. Most SMEs are small, with scarce resources. They also have to think ahead as to how ideas will be exploited. Those with a well-thought-out innovation structure in place are multiple times more likely to succeed.
Enterprise Ireland can assist with a number of areas. Our Innovation Health Check can help companies to assess their current innovation capabilities and identify strengths and areas for improvement. While our Excel @ Growth series of workshops helps companies identify innovation opportunities, de-risk the innovation process, and manage successful innovation and R&D projects. We can also help companies acquire the skills they require to engage in innovation, help them put in place the structures and processes required, and assist with market intelligence.
The prize for companies that do engage in RDI is international success and growth, while the future for those who do not is less certain.