NESTA Conference – ‘Making Innovation Flourish.’
Speech by:
Rt. Hon. Tessa Jowell MP, Secretary of State for Culture, Media & Sport
Since NESTA was founded in 1998 it has done an enormous amount to foster a system of innovation in Britain. From Tideway’s innovative IT management system that has secured an additional £6.5 million investment to the Futurelab that has brought in an additional £3 million from external sources, including Disney and Microsoft. And the vision Jonathon set out lays the foundations for a successful future.
From Penicillin to The World Wide Web British inventions form the foundations of global industries that create jobs and generate wealth. The challenge of intensified competition means redoubling our efforts to ensure the conditions are in place in our country for creativity and innovation to continue to flourish.
I want to focus this morning on the UK’s creative industries, as they are at the forefront of the changes in our wider economy and, as I think you will understand, will be central to our future prosperity. I will set out what we need to do to meet the challenge of intensified global competition. I’ll talk about what more we need to do to put the right foundations in place and why I think doing this, coupled with our historic strengths and rich cultural assets, will enable us to take full advantage of new markets. And I’ll conclude with some practical steps that we might take.
The production of low-cost, low margin goods and processes are moving off-shore. The last thirty years have seen the emerging economies share of global exports more than double, they now account for over half of total global output. Our future lies in high-value, high-margin industries and services like our creative industries. It’s as simple as that. Precisely the kind of sector that, as your report shows, historical measures of innovation have tended to underestimate.
Our economic success will depend on the effective use of intangible assets such as creativity, knowledge and skills. As the Kok report made clear, this has to mean much more than a renewed commitment to R&D spending. It demands a radically new approach.
The UK is starting though from a strong economic position. We’ve enjoyed fifty-six successive quarters of growth. It is the sixth largest economy in the world and with the highest employment rate in the G7 we’re putting our human potential into practice.
The contribution of knowledge based industries is well above the OECD average. The share of employment in the knowledge sectors is the third highest in the EU, even higher than the US. And knowledge service exports trebled from £27 billion in 1995 to £76 billion last year.
The creative industries are absolutely fundamental to that success. Taken as a whole, they invest more in R&D, have significantly higher rates of innovation, employ more graduates and have a higher proportion of their sales to overseas markets than other sectors of our economy.
But we can’t afford to be complacent. This is a sector that brings enormous challenges each day. Despite our strong performance, we face real challenges. By 2015, China is likely to have become the third largest economy in the world after Japan and the US. That shifting balance of economic activity provides significant opportunities but also risks for UK businesses; creating new markets and cheaper inputs for production, but also a more competitive environment.
Our economy continues to have relatively poor productivity. Output per hour worked is almost 30 per cent higher in France and more than 10 per cent higher in Germany and the USA than it is in the UK.
And the Leitch review of skills has identified the need for 5 million more highly skilled workers by 2020. But, despite the substantial increases in people in higher education over the last few years, we are still only just above the OECD average with about a quarter of adults holding a degree level qualification.
So how do we continue to be successful? To begin with it means Government and business must work in partnership. At the macro level it means providing a stable economic environment that encourages investment.
We also need to keep Britain competitive. That means light-touch regulation, the right tax environment, high quality infrastructure and to put the proper incentives in place that enable you to develop.
Innovation is fundamental to the process of economic growth. But it is also something that the market alone struggles to provide, because ideas are expensive to produce but very cheap to copy.
There’s a clear role for Government here. From putting in place the right incentives like the R&D tax credits and investment in world-class training and obviously investment in research through to the pioneering approaches of NESTA.
We know investment in skills is essential for growth. Increasing the proportion of the population with a degree by just 11% by 2020 has been estimated to add over £3 billion to our economy.
Equipping the workforce of the future can’t just mean more of the same. It means understanding that creativity isn’t something that only happens in art class. And innovation isn’t only something that just happens in the laboratory.
Sustained success in business – regardless of the sector – increasingly depends on the ability to innovate. According to PricewaterhouseCoopers, top innovators generate over 75 per cent of revenue from products not in existence five years ago.
The need for innovation favours workers with skills such as creativity, problem solving, communication and collaboration.
That means nurturing everyone’s creative talent. Just think of all the good ideas and the potential good ideas, that have gone to waste because all too often young people from poorer families have only gone on to succeed in spite of their background. When what we need, if we are to prosper, is an environment in which everyone is able to go as far as their talent and potential will take them.
Because opportunity and realisable ambition for all isn’t just about fairness and social justice, it’s an economic necessity.
In 1997, 32 percent of jobs required no qualifications, by 2001 this had fallen to 27 per cent. By 2010, it is forecast that 80 per cent of new jobs will be in higher-level occupations – most likely to be filled by people with higher-level qualifications.
That’s why investment in programmes like Creative Partnerships that give all young people the space to develop their creative potential are so important. The benefits aren’t limited to the creative end of the education spectrum. OFSTED noted only last month that, as well as directly boosting young people’s creative skills, there were also, for those people who took part, “improvements in literacy, writing, and speaking were significant in the majority of schools visited.”
There’s an innovation chasm that products or services need to cross from being those bright ideas to viable commercial commodities. That’s why NESTA’s role as an incubator and catalyst turning creative ideas into innovative products is so very important.
Just think of NESTA’s Creative Pioneer Programme, and there are many successful graduates of this programme here today, this offers a model for identifying new creative talent and gives them the business skills and the confidence to set up their own businesses.
In the three years the programme has been running it has launched 100 new businesses initiatives and trained over 50 business pioneers. It’s been picked up by partners and rolled out across the regions. And it’s a tremendous example of precisely the kind of practical programme we need and have come to expect from NESTA.
I want my department to work in partnership with NESTA to do as much as we can to mainstream your research, skills and experience into the Creative Industries.
Because, just as globalisation can benefit us all through accelerating growth and poverty, reduction in the emerging economies, together will reduce consumer prices and present new markets for advanced economies - the entry of new companies into the global market places increases competitive pressures.
The answer has to be to bring creativity and innovation to the fore. To seek to strive for share in a wider global market place rather than atrophy in what will be a shrinking domestic pool.
Because, as Adam Smith realised two hundred and thirty years ago, trade means wealth.
My visit to China just a few weeks ago showed me just how much we could benefit from positioning ourselves; not in competition, but in a complimentary way with China..
When you look out at the skyline of Beijing from your hotel room I was struck by just how much of China’s construction boom is being designed by British architects like Foster & Partners.
But because you’re also somewhere unique and different. Chinese culture and history permeates everything. And China’s development will be no different. That means getting a real understanding of how this new market is developing.
In what has become a highly entrepreneurial society where fortunes can be made, lost, and made again, and where the gap between wealth and weaknesses is sharpened by the absence of any system of social security, China’s passion for profit is becoming legendary.
That focus on commercialisation and the Chinese education system’s historic failure to encourage creativity means that there is an innovation gap. The potential is there for our creative industries to add value. And China is eager to work with us, but only if we develop in a complementary manner, working in partnership not opposition.
My Department is responsible for supporting Britain’s creative industries. And as I’ve said this morning, the environment which they operate has been transformed. That means we too need to change our approach.
We know that the creative industries will flourish if we enable them to be fleet of foot. So seven working groups of experts from across the creative sectors, and I’m enormously grateful to Chris Powell for his contribution, have looked at what our creative industries need to thrive; from nurturing young people to what’s needed in emerging markets. We’ve called this the Creative Economy Programme. And here are some of the ideas for how we might help our creative industries to develop to the next generation.
We need to recognise that in some quarters there’s still a discontinuity between Britain as we see it and the view from abroad. More bowlers and beefeaters than innovation and creativity.
One thing we might do is to use the existing interest in established images of British life and institutions to stimulate curiosity about Britain today. Jasper Conran pointed out to me the success of Anglomania at the New York Met. Over third of a million people saw the exhibition that juxtaposed the lifestyle that led to the craze for all things English in eighteenth century Europe with 21st century creative work.
He asked if there’s scope to do more that draws on our cultural heritage and showcases our vibrant creative life around the world. Just think of the excitement that the heady mix our fantastic heritage, culture, arts and creative industries together could generate.
One way to encourage a partnership approach and showcasing British skills in China could be to create a Sino-British Creative Academy. An institution that draws on the existing respect for our higher education sector and links young British and Chinese designers and creative professionals, benefiting both.
As I’ve said, education is fundamental to our continuing success. And we have to equip people with the kind of practical, flexible skills that businesses in this sector need.
Apple’s CEO Steve Jobs argues people are the key to success. He said - "Innovation has nothing to do with how many R&D dollars you have. It's about the people you have, how you're led, and how much you get it."
Of course he exaggerates to make a good point. People, leadership and management are important anywhere but in fast moving sectors like the creative industries they are essential.
Recent research by Peer Ederer emphasises the importance of adult education and in-house training by companies. These have at least as big an impact on a country's ability to create knowledge as the performance of its education system does.
That’s why I wanted to introduce the programme of Creative Apprenticeships that we launched this summer. They give talented young people an introduction to working in the sector and it’s helping employers - both large and small - to meet pressing skills needs. I want to see what we can learn from the pilot and to think about what more we can do to encourage this kind of practical learning in the future.
Meeting the challenge of globalisation means finding new relationships with consumers and with citizens, it means an emphasis on skills like creativity, communication and analytical thinking.
But just as firms have to work in new ways, it is also true for Government.
The development of the creative economy shows that innovation is an increasingly collaborative and iterative process. And I believe that public policy is changing along the same lines. And don’t underestimate the scale of the revolution that this represents.
Research from MORI shows that 83% of the public want to be more involved in the decisions that affect their local area and that satisfaction with services rises with engagement.
So the challenge for experts is to engage with the public. To explain, to guide, to teach and to listen. Not dictate and determine. The creative economy programme and BBC Charter Review show the benefits of openness, transparency and a willingness to engage in meaningful dialogue. Here the relationship between Government, the State and citizens is key and the 'how' is as important as the policy position itself.
And I’m pleased to announce that our findings will be announced in a Green Paper in the Spring. The Green Paper is going to set out an ambitious and practical agenda and I also want it to embody a new kind of engagement with the sector we seek to support – an innovative and collaborative partnership for the future.
We want British business to continue to be competitive, and even more so, on the world stage. If we see creativity as divorced from commerce then we will fall short. If we fail to put the foundations in place for innovation to succeed then we will not succeed.
Our achievements have been based on the double-helix of a culture of creativity and commerce. The challenge is to ensure that the conditions are in place for innovation to flourish in the future.
That’s a job for me.
That’s a job for you.
Aided and abetted by NESTA.
Thank you.
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