Business and Finance

Plan I for innovation

PEYE  100913KB1  0179 NESTA’s Stian Westlake is encouraging government to look at the evidence for good innovation and support ambitious start-up businesses.

As an innovation think tank, NESTA wants the economic debate to move beyond the narrative of Plan A against Plan B and instead turn to Plan I: how can the UK encourage innovation-led growth?

Stian Westlake (pictured at centre) is Executive Director of Policy and Research at the innovation think tank NESTA which aims to make innovation “flourish” in the UK. For context, he explained that GDP growth in major European economies has fallen since 2010 and the economic difficulties were not yet over.

NESTA instead sees a deeper problem than the deficit: UK productivity has not returned to pre-recession levels. In contrast, the economy recovered much more quickly after the recession in the 1970s, 1980s and 1990s.

This was “pretty damning” especially in the light of decreasing unemployment and the advances in technology since 2008. NESTA’s Innovation Index has demonstrated that 67 per cent of productivity is due to innovation.

In 2007-2010, the majority of job-creating businesses were start-ups (69 per cent). NESTA wants government policy to promote “ambitious” start-ups as opposed to start-ups in general. Innovative businesses tend to grow faster than non-innovators but innovation is “a lot more than just science and technology”.

Westlake sees great potential in combining the creative and technological skills available in the creative industries e.g. video games and visual effects developers. He added that innovation in public services must not be neglected.

The public sector was a “significant” part of the economy, productivity growth in the sector has been historically low and both technology and social innovation has an “increasingly important” role to play here. Social innovation is the use of new ideas to meet social need and build networks.

NESTA’s ‘Doctor Know’ report focuses on how innovation can improve care at home and keep people out of hospital: “The potential for these things is hugely untapped and it’s something where government has a huge role to play.”

Big data offered the opportunity to change the ICT sector and also financial services, healthcare and retail. Crowdfunding and crowdsourcing were not new ideas: the Statue of Liberty and the mosques of Islamic Spain were built by people “clubbing together to raise money”. The power of the internet was making that easier and could free up funding for ambitious start-up businesses.

Disruption is the most challenging aspect of innovation. Good businesses need room to grow. NESTA has looked at country-industry pairs i.e. all the businesses in a particular sector in a European country. Countries where companies grow faster also see them shrink fast, leading to high levels of productivity. Finance matters here: “If your business can’t grow, then you can’t take advantage of some of those opportunities of innovation.”

One of the US Government’s great successes over the last 50 years has been to prioritise procurement spending on companies with a strong focus on R&D. Government could also designate ‘test bed areas’ for new technologies e.g. self-driving cars. Clusters often need political leadership to bring people together. On a final point, Westlake emphasised the need for public services to work well with high growth businesses and innovate in the same way as their private sector partners.

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