The cost of (not) Innovating

In the current economic landscape, how do business leaders feel about innovation? Are they investing in it? We surveyed 300 C-Suite execs and their answers may surprise you.

The government wants the UK to become a global hub for innovation by 2035, at the forefront of solving the world’s biggest challenges. It has been said that investment in innovation is critical to building a greener, healthier and more prosperous future for the UK and to achieving a robust, agile economy that works for everyone.

“Innovation is central to the largest challenges the world faces, from climate change and the ageing society to global pandemics. The UK must be in the vanguard of the response to these challenges.”

– UK Innovation Strategy: November 2023

In late 2023, we surveyed 300 UK business leaders to find out their attitudes to innovation. More than a third said growth and innovation are their biggest priority. This places it higher than upskilling staff, managing costs, staffing, cyber-security or sustainability.

What are your biggest business priorities over the six months to April 2024?

• Growth and innovation: 37.21%
• Upskilling staff: 31.56%
• Managing rising overheads: 31.56%
• Staff retention: 29.90%
• Staff recruitment: 26.58%
• Upgrading cyber-security: 26.58%
• Developing sustainability strategies: 26.58%
• Investing in IT infrastructure: 25.58%
• Adapting to evolving customer needs: 24.92%
• Shifting towards long-term thinking: 23.92%

Magnetic survey of 301 UK C-Suite executives, Oct/Nov 2023

Despite this intention, there are barriers to innovation, including the perceived cost of it, the cost of training staff in innovation skills, fear of failure, lack of fresh thinking and red tape from stakeholders or investors.

The biggest one of these obstacles, according to our survey, is the cost. The will is there, but the financial challenge is real. Half of business leaders said innovation had been halted in 2023 due to the threat of economic disruption. Their top three business challenges are currently all financial: interest rates, inflation and the cost of doing business, and economic uncertainty.

What are your biggest challenges over the six months to April 2024?

• Rising interest rates: 37.87%
• Inflation and the rising cost of doing business: 35.88%
• Economic uncertainty: 33.22%
• Access to talent: 25.58%
• Being able to successfully grow my business: 24.92%
• Ensuring the business meets net-zero targets: 20.93%
• Supply chain delays: 20.60%
• The pace of technological developments: 19.27%
• Changing consumer needs: 19.27%
• Too many competing priorities: 19.27%

Magnetic survey of 300 c-suite executives, Oct/Nov 2023

So we asked our respondents what they think would encourage more innovation. Their top three answers were government grants, access to innovation expertise and tax relief on innovation investment. More than a quarter wanted a clearer understanding of the value of innovation.

The government’s innovation strategy has four objectives to encourage innovation which, if they are delivered, it says will achieve its 2035 vision:

• Pillar 1. Unleashing business: fuelling businesses who want to innovate.
• Pillar 2. People: making the UK the most exciting place for innovation talent.
• Pillar 3. Institutions and places: ensuring that research, development and innovation institutions serve the needs of businesses and places across the UK.
• Pillar 4. Missions and Technologies: stimulating innovation to tackle major challenges faced by the UK and the world and drive capability in key technologies.

Read the innovation strategy policy paper for the in-depth plan for achieving these goals, including investment, research, programmes and partnerships.

A culture of innovation

The second obstacle to businesses being able to innovate, according to our survey, is the cost of training staff in the necessary skills.

On top of this, almost half of leaders don’t know which innovation skills would be useful to their business and two out of five don’t know how to bring their wider team on board with innovation.

There are a few things to consider here. The first is that innovation is a process, with skills and methods that teams can learn, such as how to frame a problem, do research, generate ideas, run experiments, test and validate, synthesise, pitch, design, deliver and iterate.

But it’s also a mindset. It requires leaders to create a culture of innovation, where teams are empowered to act and know that they are all part of building a successful future.

We have seen in some businesses we work with that having ideas is not the problem, but teams are hampered by a lack of skills and processes or by the business prioritising short-term results over long-term progress. It’s hard for ideas to get off the ground.

Innovation requires leaders who can respond to the changing needs and expectations of both workforces and customers. People need training and techniques but they also need the vision of why an initiative matters and how it will create a better future.

With businesses planning now for the next financial year, forward-thinking businesses will be considering how to balance economic uncertainty and the need for short-term outcomes with long-term investment in creating a better future for your business, teams and customers.

The investment is worth it: 74% of leaders in our survey said that upskilling their teams in innovation skills has had a good ROI. This year, a huge 83% will be making “some” or “significant” investment in innovation. These are the leaders who recognise that to thrive in an ever-evolving business landscape, investing in innovation isn’t just an option — it’s a necessity.

If you want to understand more, join debates and listen to talks, we have some upcoming events:

Exchange: The cost of Innovation

Weds 20th March 8.30–9.30am GMT. Digital event.

Join other senior business leaders for a stimulating discussion. Reserve your free spot here.

Magnetic is a design and innovation company that helps design better futures. We’ve worked with global businesses to build capabilities, products, services and transform organisations. To find out more get in touch: hello@wearemagnetic.com.