Innovation in the UK Retail Sector - Nesta

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Innovation in the UK Retail Sector “On occasion there is a lack of technical skills, but more often there is a lack of leadership skills to drive/demand innovation and tie everything together” (Retailer). “Research institutes were also a source of talent so their decline has aggravated the skills shortage” (Retailer). 6.4 In relation to regulation, EU regulations are perceived to be less of a barrier than are domestic regulations. However, there is relatively little difference between the retail sector and the responses to the survey from all sectors in relation to barriers: the majority of all firms report no experience of barriers preventing innovation, although concerns about erosion of components of the science and research base, supported by Government, do prompt comment: “There has been an erosion of government funding into research institutes. E.g. Silsoe Institute no longer exists. They developed the concept of Precision Agriculture in response to concerns about labour shortages and pesticides” (Retailer). As do concerns over the availability of allowances for mitigating some of the risks of innovation: “Risk allowance for business, allowing shared risk in terms of financial investments” (Retailer). There are some specific concerns expressed in relation to the regulation of sustainable technology: “Planning regulations: wind turbines, solar panels, mezzanines and expansion of stores.” 6.5 But perhaps the biggest concern (which relates to sustainability but to other areas of Government’s attitude and policies towards innovation) is: “Lack of inter-departmental co-operation within government and lack of common agendas.” 6.6 One of the most significant market factors inhibiting or shaping innovation in retailing is derived, as we have suggested, from the ease with which many innovations can be copied. Another way of illustrating this is to examine the extent of protection of innovation employed by innovation active firms. Figure 6.2 shows this for the retail sector. Page 44
Innovation in the UK Retail Sector Figure 6.2. Nature of protection of innovation employed: retail trade Formal Strategic Lead-time advantage on competitors Complexity of design Secrecy Copyright Confidentiality agreements Patents Trademarks Registration of design 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Not used Low Medium High Source: Community Innovation Survey 2004 (CIS4), 2005. 6.7 Relatively low levels of innovation protection are employed by retail firms and there is a tendency to use informal (such as secrecy) over formal methods (such as patents). In part, this relates to the nature and incidence of retail innovation – often not patentable or capable of being trademarked, and where designs may be much less complex than in, say, manufacturing. Retailers appear to rely more on secrecy and lead times in protecting the new things they do from competitors. But the majority in every case who do not employ either formal or informal protection mechanisms reinforces the visibility and – in many cases – transparency of retail innovations, particularly customer-facing ones. 6.8 When compared to the protection employed by, say, engineering firms, (Figure 6.3) the irrelevance of all kinds of protection for retailing becomes clear. The nature of often complex proprietary engineering projects leads to very low levels of appropriability and the likely greater success of informal mechanisms, whilst the tangible nature of much innovation in engineering lends itself also to formal protection mechanisms. Engineering projects are habitually front-loaded in terms of cost and often require more complex financing; retailing innovation is more incremental, cheaper, and can be turned off relatively quickly if it fails or becomes more expensive than originally budgeted. Retail projects are more often back-loaded from the point of view of finance, as we have suggested. Retailers appear to be more confident of their markets and relevant technology better, but the relative difference in relation to technology not as high. Finally, the two sectors are closer on regulatory barriers, but engineering appears more affected by EU regulation than UK. We might speculate that this reflects actual or perceived lack of services legislation at EU level. Page 45
Page 1 and 2: Report for NESTA December 2007 Inno
Page 3 and 4: Contents Innovation in the UK Retai
Page 5 and 6: Innovation in the UK Retail Sector
Page 9 and 10: 2. The nature and contribution of r
Page 23 and 24: v. Retailers’ reverse innovation
Page 41 and 42: Vignette 5.3: Currys customer recyc
Page 43: 6. What are the barriers to retail
Page 47 and 48: 7. What are the measures of retail
Page 49 and 50: . Types of Measures Innovation in t
Page 65 and 66: . Promoting innovation in sustainab
Page 69 and 70: Conclusion/Next Steps: Innovation i
Page 73 and 74: Recommendation 4: Innovation in the
Page 77 and 78: Appendix 1 Research Methodology 350

Innovation in the UK Retail Sector - Nesta

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