At EEF we’ve been tracking innovation in the manufacturing sector for many years now. Manufacturing innovation comes in many forms, including the development of – or significant improvement to – products, processes, services, marketing/distribution activities and organisational structures. Just as there are many types of innovation, there are also many reasons for innovating. In this article, we take a look at one area where we’ve seen sustained focus in recent years: using innovation to help grow exports.
Why innovate to export?
Innovation is the key tool manufacturers use for moving into new markets and expanding in existing markets. In the EEF/Vodafone Innovation Monitor 2015/16 we found that 59% of companies looking to grow exports thought innovation would play a significant role in this, and a further 39% thought innovation would at least play some role in growing their exports.
How does innovation help UK Manufacturers? Innovation enables manufacturers to develop new products and services that can out-perform competitors, that are customised to meet each buyer’s requirements and are accompanied by sophisticated service support and back up. Innovation is the key differentiator.
Innovating to export is no easy feat, it comes with risks and isn’t cheap. . In fact innovating for new export markets is one of the hardest things manufacturers can do. Not only do manufacturers need to invest in new technology to fuel their innovation, people and product development, they also need to develop new customer relationships, address the regulatory requirements of new marketplaces and may also need to overcome differences in language, business customs and practices.
UK Manufacturing is rising to the challenge
The good news is that manufacturers are rising to the challenge. Manufacturers of all shapes sectors and sizes are innovating in order to help them compete overseas.
All of this innovation is helping manufacturers to export more. For example, one company we spoke to exports 96% of its products, something that they could not do without innovation. Their innovations have enabled them to develop higher specification goods than their competitors, gaining them the attention of new buyers in new markets, and sustaining their lead in existing markets.
This company is not alone. Our survey shows that 52% of manufacturers were investing in innovation in order to move into new markets while 48% per cent said they were innovating to develop existing export markets.
Manufacturers’ hard work is paying off
Even in the face of challenging demand conditions around the world, these efforts are paying off for manufacturers. The sector accounts for a whopping 44% of UK exports, a reflection of how the innovativeness of manufacturing enables this sector to compete on the global stage. The sector is also growing its share of exports to emerging markets: the proportion of UK goods exports to our top-20 emerging markets rose from 19% in 2011, to 22% in 2014.
Is this a step change for manufacturing and exports?
Despite this progress, overall UK export growth has stalled of late. The question then, is how can we build on the good work manufacturers are doing to deliver a step change in innovation and exports? For manufacturers, more successful innovation will mean overcoming resource constraints and getting their ideas to market faster. As it stands, 39% of manufacturers report that there are resources they would like to use, but cannot access. And around a third of companies say that their speed in developing innovations is poor.
Manufacturers are themselves taking actions to address these challenges. Nearly all manufacturers work with partners to help them to innovate more successfully. Collaboration with customers, suppliers or universities can help manufacturers to access additional resources and expertise, helping them innovate more quickly and effectively than ever before.
Government has a role to play here too. Its investments can act as enablers and catalysts for innovative businesses, be it through providing finance, brokering collaborations, or through the provision of export support.
Innovation and exporting offer many opportunities for manufacturers to grow their businesses. The majority of manufacturers have already set off by committing to invest in innovation in the UK. With the right resources and the right support, the opportunities are vast and the industry can go from strength to strength.