Innovation in the UK Retail Sector - Nesta

Innovation in the UK Retail Sector
“that relates them both to other types of resources … intangible investment which covers not only
R&D and related S&T activities but also expenditures on software, training, organisation,
etc.” (OECD, 2002, p.14).
In relation to services these sentiments are echoed by the recent report commissioned by
the US National Science Foundation (RTI International, 2005). Measuring service sectors
(such as retailing) with direct R&D measures does not account for R&D flows between
the manufacturing and services sectors, neither does it account for the large volumes of
R&D services outsourcing. This results in potential under-representation of nonmanufacturing
sectors such as retailing.
“Using both direct R&D expenditures and indirect R&D (consumed), such as R&D incorporated in
equipment and intermediates, provides a different estimate of technology intensity for the service industry
(RTI International, 2005, p. 2-3).
3.6 There is also evidence that in ‘low innovation’ sectors such as oil production,
construction or retail banking, large proportion of innovation is to a lesser extent
technological, involving organisational and market change or melding technologies in
delivering innovative services. This type of innovation remains largely ‘hidden under the
radar’ of the traditional measures of innovation (NESTA, 2007). Similarly, Jorma Ollia,
the Chairman of the Board of Directors of Nokia points out that currently the most
fertile area of innovation today in effect could be found in management (Economist,
2007). In this vein according the most recent BCG innovation survey among a cross
section of senior executives, the retail sector appears among the most innovative; five
retailers feature in the top twenty ‘most innovative’ firms of 2007; i.e., Wal-Mart (11),
Starbucks (14), Target (15) and Amazon.com (20), with another four retailers in the top
50 (i.e., Ikea, Costco, Best Buy, McDonalds) (Business Week, 2007).
3.7 The Community Innovation Survey sought to uncover aspects of ‘hidden’ innovation for
the first time in 2005. Wider innovation within firms was examined in the form of a
question exploring “new or significantly amended forms of organisation, business
structures or practices, aimed at step changes in internal efficiency of effectiveness or in
approaching markets and customers.” This included the possible introduction of a new or
significantly changed corporate strategy; advanced techniques such as knowledge
management systems or an Investors in People initiative; organizational changes, such as
out-sourcing or cross-functional team building; or marketing concepts or strategies, such
as packaging or presentational changes to a product to target new markets, or new
support services to open up new markets. Figure 3.2 shows a comparison between the
retail sector, engineering and the survey average.
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