A very conservative approach to innovation

ESSAY: The Lib-Con coalition is more concerned with controlling behaviour than forging a brave, hi-tech future.

Britain’s Conservative and Liberal-Democrat coalition issued a political programme straight after it was formed in May 2010 (1). Few people bothered to read that document – in the usual bourgeois style, it’s a massive series of bulletpoints. But as the Tories took stock at their party conference this week, The Coalition: Our Programme for Government provides a useful snapshot of the wider drift that characterises technological innovation in the West today.

Here’s how often the coalition programme, which runs to more than 30 pages, mentions some key words:

                     
Mentions of words in the coalition programme:
Computers, Telecommunications, ICT2
Art, the arts, culture beyond media and sport2
Design0
Transport, Energy1 section on each issue
Science4
Research5
Innovation8
Technology8
Spending17
Taxation39

Of the two mentions of information and communications technology (ICT), one is about publishing government ICT contracts online and the other is about enabling large government ICT projects to be split into smaller bits. There’s no hint that ICT might improve productivity, economic growth or the quality of life.

Spending, taxes, incomes, bonuses, pensions, prices, who owns what, and where: these things, not innovation, now dominate debates on economic policy. In Britain, some go out of their way to attack the City of London, uphold manufacturing, or praise happiness. Science and technological innovation, however, are just taken for granted.

In the programme’s single outing for the word ‘digital’, the Coalition says that it will ‘consider’ using ‘the part of the TV licence fee that is supporting the digital switchover [of TVs in 2012] to fund broadband in areas that the market alone will not reach’.

According to the Broadcasters’ Audience Research Board (BARB), household ownership of TVs had exceeded 97 per cent in Britain in 2010. One might therefore think that to convert, by 2012, all those TVs to handle digital broadcasting is a key challenge for innovation. One might also think that the advent of full internet services to TVs is, like broadband, another key challenge for innovation. But switching funds from one technology to another seems to fascinate officialdom much more than getting all of the best ICT actually adopted. Though the media obsess about the iPhone, elites just don’t seem very interested either in creating a broader political and cultural climate in support of innovation, or in seeing innovations through.

Governments cannot and should not decree what the course of innovation should be. But some imaginative engagement with innovation would help people identify red herrings, clarify goals and set agendas.

Plans for design, cities and transport

All is not lost. Take, for example, design. Despite the entry of new players in the field (naturally, including China and India), Britain’s reputation in design is still quite high.

Maintaining that reputation, however, is something that, like the related task of pursuing urban revival in a climate of parsimony, invites leadership in innovation. Where is that leadership? Unhappily, the only passage in the coalition programme remotely relating either to design or to urban revival is about the creation of directly elected mayors in England’s 12 largest cities. No doubt this is all very democratic, but the substantive new policies and technologies that might bring real dynamism to design and to cities are not discussed.

The coalition programme tries harder on transport. Of course, it nods at greener and more sustainable systems, and at tougher regulations on emissions. Still, there is at least a call for better railway services, stations and trains, as well as a commitment to a truly national high-speed rail network – achieved, predictably enough, ‘in phases’.

That, however, is nearly all that the coalition programme has to say about transport. It favours a national recharging system for electric and plug-in hybrid vehicles, but will brook no new aircraft runways at Heathrow, Gatwick or Stansted. New or better roads do not figure in its perspective: instead, innovation in transport is much more about the need for… more cycling and walking.

Energy: plenty of regulation, not much R&D

In different and often novel ways, regulation continues to impede innovation. The coalition programme doesn’t say it, but that point is all too relevant to innovation in energy. For example, in 2009, the average time taken for any kind of wind turbine to gain planning approval in Britain was 15 months. Local authority approvals for wind turbines had fallen from 68 per cent in 2008 to 53 per cent in the space of a year (2). In 2010, British industry gave up on a scheme to draw tidal energy from the Severn Estuary, fearful that to get planning permission might cost it £250million (3).

Apart from slowing up energy innovation with bureaucracy, the British state slows it up by inept financial moves. One of the current administration’s first acts after publishing its programme for government was to cancel an £80million loan to Sheffield Forgemasters. The loan was to finance the installation of a forging press with which to challenge Japan Steel in giant steel forgings for nuclear reactors. At the end of the coalition programme section on energy, Tories and Lib Dems agree to disagree about nuclear power. But in practice, at Sheffield, they have already united to stop innovation in nuclear engineering.

Nobody in the coalition would like to admit to what is happening in energy innovation. UK state support for research, development and deployment (RD&D) in energy, for instance, isn’t just low, but embarrassingly low. One need not approve of the state running an industrial policy to see that. For every £10,000 Britain generates in gross domestic product (GDP), Whitehall spares just £1 on researching how to keep the lights on:

State spending on energy RD&D as a percentage of GDP, 2007 (4)

countrypercentage of GDP
Japan, Finlandnearly 0.09
Koreamore than 0.05
France0.05
Denmarknearly 0.05
Norway0.04
US, Italynearly 0.03
Germanynearly 0.02
UK0.01
Spainunder 0.01
Irelandabout 0.005

In fact, state support for RD&D in energy is low right around the world: the International Energy Agency, for example, estimates that public support for energy RD&D around the world should be multiplied by between two and five times (5). But in Britain as elsewhere, research into energy by business is nothing to celebrate either:

Percentage of sales revenues spent on energy R&D by companies among the largest 1,000 firms in the UK, 2008/9, by sector (6)

Electricity: 0.2%
Gas, water & multi-utilities: 0.1%
Oil and gas producers: 0.2%

Of course, in energy as in any other sector, simply increasing budgets for R&D does not guarantee successful innovation. But these statistics provide ample grounds for concern. Since the disaster of Deepwater Horizon, BP has attracted a lot of attention. Perhaps BP might not be where it is now, had it spent more than £2 in every £1000 it earns on researching and developing the future (7).

We can be sure that we won’t be hearing much about any of this from the coalition.

The new duplicity in science and innovation

In September 2010, Vince Cable, PhD – secretary of state at the Department of Business, Innovation and Skills - announced that he was in favour of ‘blue skies’ research in science, but also that he wanted to ‘screen out’ what he called ‘mediocrity’ among British scientists (8). What should we make of this posture?

In the coalition programme, one mention of science calls for ‘a carefully managed and science-led policy of badger control in areas with high and persistent levels of bovine tuberculosis’. Another is about teaching science; another about reducing the use of animals in scientific research; a fourth is about maintaining sites of special scientific interest (SSSIs).

With this kind of treatment of science, it is hard to take seriously Cable’s professed fondness for open-ended, world-beating science – even if we leave aside Whitehall’s continuing efforts to subject higher education and science to cuts in state expenditure.

In its eight mentions of innovation, the coalition programme betrays a similar insouciance. Two mentions go on innovation (especially that in ICT) allowing the government, in a rather ominous manner, to extend ‘transparency’ to ‘every area’ of public life. The programme also wants those non-governmental organisations dealing with overseas poverty to be smaller and more innovative. It wants Britain to export green technologies. And it says it wants innovation in economy, business and society.

Inspiring stuff. In fact, what is really meant by ‘innovation’, here as elsewhere, is well captured by a passing phrase that is made in the coalition’s passage on public health. What is needed, it says, is an ‘ambitious strategy’ which harnesses ‘innovative techniques to help people take responsibility for their own health’.

The chief conceit about innovation today is here laid bare: innovation is not about science, technology, laboratories, curiosity, experiment, prototypes, generating new needs or anything like that. Termed ‘social’ innovation, it is really about innovation in behaviour (9). Overpaid bankers must make innovations in their behaviour. Men with too much testosterone must do the same. Here, any amount of blue skies thinking is suddenly permissible, as long as liberties are curbed and individuals start to behave themselves. Science and technology are occasionally flagged up, but nearly always ignored.

Since 2008, when the US economists Richard Thaler and Cass Sunstein published Nudge: Improving Decisions about Health, Wealth, and Happiness, the idea that the state’s job is to act as a paternalistic ‘choice architect’, guiding feckless and irrational people to the right path, has become highly fashionable in the corridors of power on both sides of the Atlantic (10). Conservative leader David Cameron took up this doctrine almost immediately (11). Today, every initiative in fields such as transport or energy can only be made, officials say, by first recognising that technology is ‘not the only answer’ (whoever said it was?). Then, in the usual condescending style, it is suggested that ‘helping people make informed choices’ about their behaviour – that is, dutifully accepting the choice laid down from on high – does, in fact, amount to the only answer.

This is cheap, in every sense of the word.

Conclusion

Torpor and duplicitous rhetoric in innovation are not trends confined to Britain: they are all too easy to notice elsewhere.

Around the world, there have been steps forward in science and technology. More than 10 years after two of the world’s most acclaimed thinkers announced the advent of the biotech century (12), there are modest signs of progress. Medicine is making some advances and several pharmaceutical firms, for example, raised their R&D expenditure in the teeth of the recession, 2008-9 (13).

However, a worldwide survey of 2,240 corporate executives, performed by McKinsey in 2010 and running across a full range of industries, regions, functional specialties and seniority, confirms some familiar problems with innovation in business. Among the respondents, 55 per cent have, since 2008, said that their companies are better than their peers at innovation – but far fewer now say their companies are good at generating breakthrough ideas, selecting the right ones, prototyping, and developing business cases for innovation. Only 26 per cent say their firms were good at stopping ideas at the right time; only 27 per cent say their firms are very or extremely effective at making their leaders formally accountable for innovation. About 40 per cent of respondents say their companies make decisions on commercialising innovations in an ad hoc manner; only 23 per cent are sure that such decisions are a regular topic at top meetings. An astonishing 57 per cent say that their employers ‘execute well on the few good ideas we have’ but need ‘a more robust pipeline of big ideas’ (14).

For all Britain’s supposedly unique record of amateurism in innovation, McKinsey underlines how a lack of formal organisation characterises the world’s corporate efforts in this domain. Of course, the executives polled say they prefer to make new products, services or customers than to engage in mergers and acquisitions (M&A). But in 2010, M&A in the ICT sector, like M&A designed to access new geographical markets, has – not for the first time – emerged as more or less a distraction from the far messier business of making fundamental breakthroughs in science and technology.

With plastic electronics and photonics, there is forward movement. But the takeovers made by Intel, Oracle and Hewlett-Packard reveal industry consolidation, not Joseph Schumpeter’s creative destruction. With President Obama’s state takeover of General Motors, we saw neither creation nor destruction. Reinforcing that picture, the total number of patent applications filed at the patent offices of nine key countries decreased by 2.9 per cent during 2008-9. Here is a breakdown of the statistics:

Applications for patents, 2008-9: rates of growth, selected countries (15)

Clearly the world can expect to see some important innovations coming out of China. In ICT between 2008 and 2009, for example, Microsoft and Apple increased their R&D spending by a creditable 10 and 20 per cent, respectively, but China’s Huawei and ZTE raised theirs by an impressive 27 and 45 per cent.

On average and around the world, however, publicly listed firms cut spending on R&D by 1.7 per cent during 2008-9. Most automotive firms spent less (General Motors, down 24.5 per cent; Toyota, down 19.8 per cent). So did firms in construction (Caterpillar, down 17.8 per cent) and in consumer products (Unilever, down 3.9 per cent).

The problem that Big Potatoes, the London manifesto for innovation of which I am a co-author, seeks to address isn’t just that innovation is too often an informal business in the West. The problem isn’t even that declining corporate profitability and rising state indebtedness each make serious spending on R&D look too risky. No, the problem is that innovation isn’t a central part of the West’s intellectual, political and economic apparatus any more.

Perhaps, in Britain, there will be a whole lot more rhetoric about innovation from the coalition. Cameron himself has discovered that capital projects such as high-speed rail, or carbon capture and storage schemes for power stations, are very good for long-term UK competitiveness. At the Department for Business Innovation and Skills, the charismatic Cable is supposed to favour something like the local ‘Clerk Maxwell Centres’ for technology and innovation proposed to Lord Mandelson in the dying days of the last government (16).

Well, civil service press releases about UK innovation may increase, just as state budgets for innovation may rise in absolute terms. Yet, compared to all the challenges for innovation that lie ahead, real, continuous and inspired commitment to innovation will demand more than bigger budgets, whether public or private. For innovation to become a truly informed part of everyday discussion and everyday business, an intellectual and cultural revolution will be necessary.

That will not be achieved easily. As Daniel Ben-Ami has pointed out, a ‘Yes, but…’ scepticism about economic growth dominates Western discourse nowadays (17). Similarly, nearly every enlightened authority now takes the view that science and technology bring major hazards in their wake (18).

In fact, however, science and technology have always brought hazard with them. Yet not so very long after humankind created fire, it began to develop ways of putting fires out.

Right now, we could all do with a lot more fire in the realm of innovation.

James Woudhuysen is author, with Joe Kaplinsky, of Energise! A Future for Energy Innovation, published by Beautiful Books. (Buy this book from Amazon(UK).) This is an abridged version of a preface to the second English edition of Big Potatoes: The London Manifesto for Innovation. For more information, visit BIG POTATOES.

 

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Footnotes and references

(1) The Coalition: our programme for government, May 2010

(2) Climate Change Committee, Building a low-carbon economy – the UK’s innovation challenge, July 2010, p24. The statutory target for planning approval of wind turbines is 16 weeks for on-shore devices

(3) Declan Lynch, ‘Planning costs may pull the plug on Severn Barrage’, Business Green, 9 September 2010

(4) Climate Change Committee, op cit, p22

(5) Cited in ibid, p21.

(6) Department for Business Innovation & Skills, The 2009 R&D Scoreboard: the top 1,000 UK and 1,000 global companies by R&D investment – company data, March 2010, pp 10, 18, 28. Among large oil equipment, services and distribution firms based in the UK, what is termed R&D intensity is a more respectable 2.1 per cent, though these firms are dwarfed in size by primary producers of oil and gas

(7) Figure from ibid, p28. The R&D intensity of Royal Dutch Shell is better than that of BP: it stands not at 0.2 per cent, but at 0.3.

(8) Cable, Science, Research and Innovation, speech, 8 September 2010

(9) See Social innovation: Let’s hear those ideas, The Economist, 12 August 2010

(10) Richard Thaler and Cass Sunstein, Nudge: improving decisions about health, wealth, and happiness, Yale University Press, 2008

(11) David Cameron, The power of social innovation, speech, 13 June 2008

(12) See Jeremy Rifkin, The biotech century: the coming age of genetic commerce, Weidenfeld & Nicolson, 1998; Francis Fukayama, Our posthuman future: consequences of the biotechnology revolution, Profile Books, 2002

(13) World Intellectual Property Organization (WIPO), Signs of Recovery Emerge after Economic Crisis Hits Innovation & IP Filings, press release, 15 September 2010. The report on which this press release was based is World Intellectual Property Indicators 2010, September 2010#

(14) McKinsey, Innovation and commercialization, 2010: McKinsey Global Survey results, August 2010

(15) WIPO, op cit, Figure 2, ‘Patent and Trademark Applications Growth Rate (2008-09)’.

(16) On Cameron, see George Parker and Jane Croft, Cameron orders good news plan amid cuts, Financial Times, 1 October 2010. Innovation centres are recommended in Hermann Hauser, The Current and Future Role of Technology and Innovation Centres in the UK, 2010

(17) Daniel Ben-Ami, Ferraris for all: in defence of economic progress, Policy Press, 2010

(18) See for example Nicholas Carr, The shallows: what the Internet is doing to our brains, W. W. Norton & Company, 2010.