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Innovation: The X-factor Driving Success Across Our Region

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‘Innovation’ is a key pillar of the CCR. Alongside Connectivity, Sustainability and Inclusion, it’s core to everything we do. But what is ‘Innovation’? What are its key characteristics? And how do we compare with other regions and countries as an ‘innovator’? This feature scopes the bigger innovation picture and gives a perspective to CCR’s own #InnovationInAction ….

In an age of wholesale transformation and complex change, it might sound rather simplistic to imbue a single word with the all-encompassing power of being ‘key to our future success’.  

But ‘Innovation’ is just that.

It’s the oxygen breathing life into every breakthrough being made in every corner of the Cardiff Capital Region.

It’s the thread pulling and pushing all the progress being achieved in our region – from the targeting of our investment activity and reshaping of our infrastructure, to the vision that’s transforming our transport, the collaborations that are strengthening our skills framework, and the pioneering spirit that’s nurturing our priority sectors.

It’s optimising digitisation and driving decarbonisation across our region – taking us closer to the connectivity we require, the sustainability we need and the socio-economic inclusion we crave.

It changes our game completely: producing new ideas and technologies that increase productivity and generate greater value – using no greater (and ideally less) resource.

Over the coming months and years, CCR’s #InnovationInAction will showcase the wide-ranging ingenuity and inventions that are transforming our region. And we begin by evidencing the crucial nature of innovation to modern economies – discovering why both the radically innovative and inspired incremental improvements are particularly critical to achieving the ambitions we have, here in Southeast Wales …

How Innovation is energising our economy and shaping our society 

In today’s world, the most successful economies, communities, businesses and organisations have the highest levels of innovation.

And that’s a fact.

The Institution of Engineering & Technology has shown that a company investing in innovation enjoys an average return of £1.70 on every £1 spent.

Stanford University in the US recently published a report detailing how innovation is responsible for up to 85% of all growth in the developed economies.

The emergent combination of technology and data-driven decision-making means that we now know how to improve – and continually improve – our healthcare and public sector service provision, our workplace productivity, our carbon footprint and sustainability, our collaboration and connectivity, our business performance, our general wellbeing, and so much more.

Innovation is the key to unlocking many large and small improvements in all those areas: enabling us to turn our vision for a sustainable future built on a resilient economy into a reality enjoyed by all in our region.  

But how do we measure ‘Innovation’ in action? It’s all around us, which can make it difficult to categorise, as it covers everything from those rare ‘Eureka’ moments such as a vaccine breakthrough that changes the world, to the countless ‘baby-step’ iterations that happen on an endless journey of improvement and refinement.

‘Innovation’, along with Connectivity, Sustainability and Inclusion is a key pillar of the  CCR. For us, it’s characterised by the inquisitive outlook, appetite for collaboration and courage to embrace progressive practices that deliver new and wider benefits.

That could manifest itself as a new way of working, an improvement to a process, a novel application, a unique solution, a major breakthrough, or a world-first.

It can be the catalyst for an increase in productivity, a decrease in waste, an opening up of new opportunities, an improvement in economic performance, a better way of living, a happier place to be.

And because ‘Innovation’ is everywhere – and for everyone – it’s worth putting its true place into a proper perspective …

Putting Innovation in its Place

Given the importance of innovation to realising a country’s strategic aims and ambitions, it’s accepted that government bodies should fund a proportion of this vital ‘practice’. Some 33 out of 35 OECD countries have national science, technology and innovation strategies, usually twinning ‘Innovation’ and ‘Research’ as a core category – R&I – with innovation being seen as the actions and outcomes that bring to life research findings and results.

The OECD data tells us that countries invest between 1% to 7% of their total annual budget in R&I activities; with the UK Government Industrial Strategy Report aiming to boost investment in R&I from the current 1.7% to 2.4% of GDP by 2027 (a huge commitment that will increase public funding to £22 billion per year by 2024-25).

Cutting through all the percentages and figures, it’s clear that an increase in both public and private spending on R&I highly desirable, with the latest UK Government economic development policy document Build Back Better: our plan for growth explaining that: “Public investment in R&D crowds in private investment at a ratio of around two pounds on average for each pound of government funding”.

The need to optimise that balance of public/private investment in Innovation is even more acute for our region. Whilst CCR enjoys a research base and R&D activity with a high impact and demonstrable world-leading research, the research and innovation system in Wales as a whole lacks volume and mass – it’s impactful but small, with Wales currently investing just 1% of GDP in R&I, far below the OECD average of 2.4%.

It means we have to be even smarter in the way we innovate – and history tells us that we need to innovate more than most, taking a more targeted approach to achieving clear strategic aims and sustainable ambitions.   

We need to innovate more than most…. 

Inequality in economic performance and productivity between Wales and the UK’s other regions and nations has been a longstanding issue. An Industrial Strategy Council review of UK regional productivity differences found that in 1901 the income per worker in Wales was 15% below the UK average and that despite some productivity convergence in the mid-20th century, pre-pandemic figures from 2017 show Wales was still 16% below the UK average.

Little wonder that the Welsh Government’s Prosperity for All: the National Strategy spotlighted innovation and research – alongside investment in skills and infrastructure – as core to increasing the productivity needed to drive economic growth and higher living standards here in our region.

ONS figures for 2018 show that all Welsh regions fall below the UK average in terms of output per hour; and these stats don’t look any better in a bigger picture, with Wales – like the rest of the UK – in the midst of a ‘productivity puzzle’: an entrenched problem with parts of the nation trapped in “a cycle of low-skill, low-wage and low productivity”.

The post-2008 figures for the whole of the UK reveals an annual increase in productivity of just 0.3%, compared to a 2.3% annual rate of growth between 1971 and 2005, suggesting we are experiencing the worst UK productivity in 250 years – with Wales in the lower quartile of this performance.

So, much work needs to be done. Much innovation needs to happen, to build a connected, sustainable, inclusive region. And therein lies our opportunity here in the CCR. We have the unique opportunity presented by the dawning of the fourth industrial age to leapfrog rather than just ‘catch up’ – using our innate abilities to collaborate and innovate: building on our strengths and unlocking the huge potential that has remained largely dormant for decades in many skillsets, communities and parts of our economy.

Choosing the smartest ways to innovate 

In many ways, CCR’s maturing into a catalyst with a wider remit has come at a time when the whole subject of Innovation in our region is approaching something of a crossroads.

ONS data shows that most of the spending on Innovation in Wales is by the business sector, accounting for 55% of all expenditure on R&I in 2018 (compared to 68% of all R&I spending is by businesses across the UK) – and given that current state of play, CCR is strongly placed to play a key role as a catalyst, co-partner and investor in innovation.

There’s been much debate around the innovation pathways that our region should take. This has thrown up many different questions. How can we best take ground-breaking fundamental research and translate it into real-world uses? Should the focus be on centres of excellence or places in need – with place-based outcomes helping drive levelling-up?  How can we harness the innovation of both private enterprise and our outstanding universities, to build the best future possible?  Can we bring more close-to-the-ground SMEs into the equation?

CCR has been challenging itself to answer these questions and more – and In our next feature, we’ll look at how Innovation is playing out across Southeast Wales: exploring in detail how an innovative DNA is driving the CCR priority sectors … how our three world-class universities are working in close collaboration with government, industry, SMEs and individuals to bring ideas into the real world … how CCR’s own investment in pilots and major programmes is bearing fruit … how our Challenge Funds are bringing together the spirit of innovation that lives in both the public and private sectors – and how we are skilling our region to ‘think new’, developing an innovation mindset geared to putting #InnovationInAction.