7 highlights from our new research on Process Innovation

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Today EEF published an infographic and a new report in partnership with Santander – Process innovation: Bringing manufacturers to the frontier.

Here are 7 highlights from our new research:

1) Innovation is widespread across manufacturing

Our 2017/18 Innovation Monitor shows that 95% of our survey respondents were engaged in some form of innovation activities, unmoved from our last Monitor in 2015/16.

2) Innovation is key to manufacturers’ success at home and in overseas markets

Manufacturers cited satisfying existing clients and enhancing margins on existing products and services as top innovation drivers this year. This reflects how important innovation is in helping manufacturers do things better and strengthen their position in existing markets.

Innovation is also critical to build new opportunities, about half of manufacturers innovate to enter new export markets and 40% innovate to seek new domestic markets. 

Why-do-manuf-innovate

3) The breadth and focus of innovation activities has changed in recent years

Although the development of new and improved products remains critical in meeting customer requirements and cementing manufacturer’s position in global value chains, process innovation is becoming even more important.

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4) Not all companies are moving forward at the same pace

Manufacturers’ investment in process improvement is not necessarily directed at innovations associated with the highest productivity benefits and/or at the cutting-edge of production techniques. Although two-thirds of manufacturers said they introduced process innovations in the past three years, only 45% of companies introduced ICT to improve processes, while less than one in ten introduced ICT to improve delivery and logistics.

types-process-innovation 

5) This results in a widening productivity gap according to the OECD

Because new technologies are not being diffused quickly and widely enough across the manufacturing supply chain, productivity gains are highly concentrated among some firms that are close to the global technology frontier. This has led to a growing productivity gap in recent years according to the OECD.

6) Our survey highlighted a number of barriers preventing companies from making the most of process innovation

cash-cap-certainty

Capabilities – Definitely the most important barrier to process innovation. Although firms have the appropriate set of skills within the business, there is no incentive for them to dedicate time to process innovation. Moreover, companies over rely on internal capabilities, with a sizable proportion of companies never involving consultants (44%), universities (43%) or Catapult centres (90%) when introducing new processes.

Certainty – Uncertainty is inherent to any type of innovation activity and process innovation is no exception. One in three companies said they underestimated what process innovation would involve, while more than a quarter said they were uncertain about the outcomes.

Cash – Process innovation is more likely to be funded internally, and 28% of our survey respondents said they lacked the required resources within the business to implement new processes. By contrast, lack of external finance was less of an issue.  

7) How do we bring more manufacturers to the productivity frontier?

The UK’s long tail of not-very-productive companies requires more resources to be allocated to process innovation in order to enhance the adoption of new technologies and modern manufacturing techniques.

The report outlines our main policy recommendations in order to correct the market failures associated with process innovation. Policy support is an imperative to bring more manufacturers to the frontier and to help spur the benefits associated with the 4th industrial revolution.

Bridging-the-gaps-without-text   

These policy recommendations are part of EEF's Autumn Budget submission. Click here to find out more.

 

 

Author

Economist

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