UK business failing to ‘walk the talk’ on innovation | KPMG | UK

UK business failing to ‘walk the talk’ on innovation

UK business failing to ‘walk the talk’ on innovation

A disconnect between the value that businesses place on innovation and the amount that they are investing in it threatens to inhibit the growth of the UK’s vital middle market sector, according to new research from professional services firm KPMG.


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Research from KPMG highlights disconnect between the value placed by businesses on innovation and the investment that is channelled into it

A disconnect between the value that businesses place on innovation and the amount that they are investing in it threatens to inhibit the growth of the UK’s vital middle market sector, according to new research from professional services firm KPMG. 

The survey of 215 medium-sized businesses found that while nine out of ten companies agree that being better at innovation than competitors is fundamental to their long-term survival, companies’ confidence that they are excelling at innovation is low, with only a quarter (26 percent) believing they are superior to their competitors on the innovation front. The average company invests just 6.7 percent of its turnover in innovation – but is this enough? The lack of confidence in the effectiveness of this spend suggests that many business owners don’t really know what ‘good’ looks like. 

The disconnect is further illustrated by the range of approaches taken to driving and measuring innovation. While half of companies have put in place dedicated teams - or at the very least, have created a network of innovation champions across the business - to drive forward change, only one in four have any formalised measurement of ROI or an agreed process of financing for innovation. And while nearly half of respondents agreed that the most important ingredient in the planning and execution of innovation is via business and data insights, only a third felt that their actual analysis and use of data was thorough enough.

Ben McDonald, Enterprise partner at KPMG, commented: “In this world of extraordinary technological advancement and digital disruption, the old adage “innovate or die” has never rang more true. Yet while many business leaders understand the importance of innovation, too many companies across the UK simply haven’t grasped the nettle. Whether this is due to a fear of failure, a reluctance to monetise ideas or a lack of skills and resource, the uncomfortable truth is that many privately-owned businesses are not ‘walking the talk’ and in doing so, are limiting their growth potential in a significant way.”

Ben McDonald continued: “Of course, nobody is suggesting that innovating is easy. Indeed, one of the major challenges surrounding innovation is that it is such a broad – and abstract – term. The fact that it can occur absolutely anywhere within a business – from products and marketing to systems, processes and finance - makes it particularly difficult to quantify. 

“There is also something of a myth that good innovation is based upon big ideas, such as the launch of new products or investments in cutting-edge technology. The fact is that it doesn’t have to be centred on ‘eureka’ moments – frequent, small innovative steps can prove to be just as important as large leaps.”

Creating a culture of innovation

So what is holding companies back from innovation? The most prevalent response from those companies surveyed was the lack of dedicated team to spearhead innovation across the business. However, Ingrid Waterfield, director in KPMG’s People Powered Performance team, believes that businesses stand to benefit more from the creation of a culture of innovation which stretches from the top to the bottom of the organisation. 

She comments: “Fundamentally, any organisation which has a culture of openness and sharing is far more likely to generate new ideas. Crowdsourcing ideas or potential solutions through company intranets and communication channels, for example, can yield fantastic results. Put simply, the more you encourage people to talk to each other, swap insights and share experiences, the more likely you are to find new ways to tackle old issues.”

Ingrid Waterfield added: “Another key to success is to overcome the fear of failure, as all too often, is it this that ultimately thwarts innovation. It is absolutely crucial that it is deemed acceptable to make mistakes – and to then learn from them. Otherwise nothing will change.”

The customer is always right – but are customers listening hard enough?

The good news is that companies do appear to be putting the customer at the centre of their innovation activities, with almost nine in ten (89 percent) using face-to-face meetings with customers to inform and shape new innovations. Further, more than 70 percent of respondents said they then go on to actively involve customers in the process of evaluating and refining their ideas. 

But while all this sounds encouraging, only a third (32 percent) use customer behavioural data to inform innovation, with even fewer companies (28 percent) running customer surveys or making use of insights garnered via social media. And markedly fewer companies use market research to gain feedback on initial ideas or product features, packaging or pricing, or to evaluate potential marketing campaigns.  

Ben McDonald said: “Customer engagement during the innovation process is vital, particularly given our data suggests that the more ways in which companies involve customers, the more successful their innovations are. Indeed, our research suggests that organisations which involve customers in five or more ways during the development process have a 71% success rate – compared to only 43% for those who only involve customers at one or two points during the cycle. ”

He concluded: “Ultimately, no matter what sector a company operates in, those that can add that little bit of magic to what they do – be it a major product innovation, or a subtle twist, an income generator or a cost saver – will undoubtedly by the most successful and sustainable enterprises in the long run.”


Media Enquiries:

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Notes to Editors:

KPMG’s research was conducted in September 2015 amongst 215 companies/respondents.  Respondents were mid-market organisations, with 85% having a turnover of less than £100m.  Nearly half had turnovers between £10m and £29m.  Around three quarters of businesses had 300 employees or fewer and a similar percentage were privately owned.  Most were mature businesses that had been in operation for 20 years or more (80%).  Respondents operated in a wide range of sectors.

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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