In our new innovation interview series, Frontier talks to our network of innovation experts. These conversations look to share ideas around the economics of innovation and hear the insights from industry leaders. Here, Frontier’s Andrew Leicester virtually sat down with Dan Hodges, from Innovate UK.

Dan is the Deputy Director of Strategy at Innovate UK, the UK’s innovation agency, which he joined in 2013 to establish the in-house economics & insight function. He has over 10 years of leadership experience around research and innovation policy, strategy, and analysis including as Chief Analyst at UK Research and Innovation and, previously, Head of Innovation Analysis for the Department of Business, Innovation and Skills (now BEIS).

Andrew: What’s the biggest innovation challenge you’re grappling with right now?

Dan: One of the key things at the moment we are grappling with is how to make the innovation landscape more understandable and easier for businesses to navigate. There is a lot of advice and support available, not just from Innovate UK but from different government departments and agencies, and local players such as metro mayors and growth hubs. We’ve put a lot of work in to simplifying our offer to businesses without losing the advantages of being able to nuance the support we can provide. The focus now is really on helping business understand that offer in the context of the wider ecosystem, making support for innovation accessible, understandable and available for all.

If I can make it more about two challenges, the second is how Innovate UK can go beyond an ‘innovation project’ and support businesses to grow. What does that support look like beyond helping bring a product or service to market, to include the adoption and diffusion side of things. That’s becoming a much more pertinent part of what we do.

Andrew: Innovate UK has just published their plan for action for business innovation in the UK. What are the main features?

Dan: There are five key themes in the plan for action, each targeting what we think is a priority for the innovation system to focus on.

The first is the ‘future economy’, looking at those major global trends which we expect to have a big impact on the economy and what business innovation can do to overcome challenges and grab any opportunities that are out there.

The second theme is ‘growth and scale’, with a big focus on innovation finance and wrap-around support for innovative businesses.

The third is ‘global opportunities’, with three aspects: the UK as a place and partner of choice for innovation; supporting UK businesses to access global markets; and attracting international activity to the UK.

The fourth theme is the ‘innovation ecosystem’ looking at the whole landscape and how it fits together and what we can do to help support businesses to navigate that system.

The final one is around ‘government levers’ and making sure all of government is acting in a way that stimulates and supports UK business innovation.

Those five themes are underpinned by what we are calling ‘strong foundations’, six important assets or principles for innovation:

• Innovation talent and skills;
• Equality, diversity and inclusion;
• Place based innovation;
• Societal impacts and responsible innovation;
• Strong science and research base; and
• Human-centred design.

We think these foundations are so important to drive sustainable growth through innovation, and in helping Innovate UK become a more modern and rounded innovation agency.

Andrew: How does this new plan differ from previous thinking?

Dan: I think this is quite a transformative document in terms of our approach to innovation support in the UK. It’s a real partner approach: this isn’t just an Innovate UK document, we’ve worked closely in partnership with players across the innovation ecosystem, the likes of the Intellectual Property Office, the National Physical Laboratory, Dstl, the British Business Bank and the British Standards Institute to make sure we are thinking about what the innovation ecosystem as a whole can do.

The other really important thing for me is bringing all those foundations together and spelling them out as priorities we’ll work on in a strategic document.

Andrew: How important was the business community in shaping the new plan?

Dan: Absolutely essential to the way this was developed. We did a lot of consultation last summer to hear the views of industry. We went out and asked ‘what are your challenges, what are the opportunities that you see, how could the government support you?’ and we built Plan for Action out of that. Our perspective at Innovate UK is absolutely business-oriented and focused – the vast majority of colleagues come from business, from the CEO all the way down.  They're out there talking, listening, understanding and thinking about how we adapt the way we're doing it to have a stronger impact for business.

We really want to continue the conversation with business on what their asks of government are. One thing I hear from business quite a lot is about what government’s longer-term vision is. The really great thing about direct support for innovation is that it you can use it to create a critical mass in an area. But just to say, well, this is what we're going to do next year only gets you so far and to increase business confidence in that direction of travel; setting out that long term vision is vital.

Andrew: How does business innovation, and the new plan, support other government priorities like levelling up, net-zero and new trade arrangements?

Dan: Innovation is absolutely central to supporting those policies, and of course to delivering the Government’s Innovation Strategy. If you want to support sustainable economic growth, Innovation is the main route to net zero if you want to combine it with prosperity as well, and it's a key part of the UK's offer both in terms of attracting international investment into the UK and making Britain a global country. We've got a really strong science base, business base and innovation base. We can use that to partner with countries to understand where we can collaborate, and where we can provide solutions.

On the levelling up agenda, Innovate UK supports businesses everywhere in the country: around two-thirds of funding goes outside of London and the South East, and success rates are pretty even wherever businesses apply.  But what we see is that in some areas outside London and the South East businesses are putting in fewer applications or applying for smaller amounts. So we see a crucial role for Innovate UK to understand why, and working with local partners in all areas to increase their innovation capacity and capability.

Andrew: Do you have clear limits on where Government should and shouldn't step in to support the innovation process?

Dan: I’m an economist by background and that gives me a particular perspective on why government should intervene the market. I think the market and systems failure framework stands up really well even with mission-orientated and more radical innovation approaches. So in a way my answer to the question is quite simple – we should support innovation where we can help drive innovation to the point that is benefiting society, whether that's through economic growth, or whether it's through targeting some of those broader challenges like difficulties in building networks or knowing what’s going on out there.

Where we shouldn't intervene is where this stuff is going to happen anyway, or indeed where supporting innovation might have significant negative impacts in other areas. Ultimately, we're using taxpayers’ money to support businesses, so we need to make sure we're doing that in a way which then helps the economy and society to justify that expense.

Andrew: How do you think the UK's public support for business innovation stacks up against other countries?

Dan: I think we're quite efficient with what we do. We don't have the largest support given the size of our economy, but we do quite a lot with it. And I think that proposition is even more attractive when you couple it with that wider science and research base we've got in the UK.

I’d like to see more direct support for R&D. The UK is relatively skewed towards tax incentives. There's lots of evidence that shows they do increase private investment in R&D, but with direct support you can target that activity at those challenges we talked about, so there's a lot of advantages that can come from that more direct approach.

What I do see is how often other countries look to the UK to learn from what we do. I think there's a lot of respect for the evidence-based approach that's taken in the UK, in terms of public policy that rigorous approach to evaluation and the economic rationale for intervention. The Industrial Strategy Challenge Fund was quite a bold approach in terms of taking a strong, clear approach to mission-orientated innovation, and something other countries are looking at.

Andrew: Is there anything that you would ask of business to help make Innovate UK be even more effective?

Dan: Keep talking to us and also to wider government. Let us know your challenges and opportunities so we can target our support in the most effective way and help you to invest in innovation to ensure the UK remains competitive on a global stage.

We're passionate about helping companies grow through innovation but we're working with scarce resources. So what's really important is to be able to target those resources effectively, and then demonstrate the impacts we have so we can justify the expenditure.

QUICK FIRE QUESTIONS

One thing missing from business innovation portfolios today is...

...a greater use of human-led design earlier in the innovation process, particularly where it’s a new tech. Understand the customer and innovate for what they need.

If you want to create more incentives to innovate, you should...

...celebrate it and reward an innovation culture. It has to be at the heart of what you do.

If you want to innovate faster, you need to...

...consider not just the project you are working on but what’s going on around it: the standards, regulation, design and skills needed to get something to the market.

If you want to create successful partnerships and collaborations around innovation you need to...

...be open and transparent. Be open to others’ experiences and expertise. Really understand and recognise what help you need but also what you can offer.

If you could change one thing about how innovation works today it would be...

...make it absolutely central across the policy landscape. So if we’re investing in infrastructure and designing public services, consider how innovation and business innovation can help that.