My first job on leaving university was for a company called Procter and Gamble, better known as P&G. Starting off as a soap and candle manufacturer, P&G had developed into one of the world’s largest companies (the world’s largest spender on advertising) and owner, at the time, of brands as diverse as Pringles, Max Factor Pampers, Olay, Vicks, Fairy, Flash, Lenor and Tropicana. I worked in the Health and Beauty division on haircare brands such as Wash & Go, Head and Shoulders, and Pantene. Nowadays you will also know them as Gillette, Duracell, Clairol / Wella and Always to name just a few.
I had joined their graduate programme, so they moved me from department to department, gaining experience in sales, marketing, promotion and a new department named Sales and Marketing which combined the two skill sets into specialist pre-launch teams. My first big launch was Project Grey, which later launched as the healthy looking haircare brand Pantene. My ideal job, I was desperate to find out what made the difference: how could a soap and candle manufacturer evolve over just a few generations into one to the two true giants of fast moving consumer goods (FMCG), arch enemies Unilever being the other. The answer was disappointingly simple, very easy to understand but strangely rare in business.
The value that drove the company’s success was innovation; we had it drummed into us that we never take a product to market unless it has a demonstrable technical advantage over the competition. Who shaves you closer… the best a man can get, Duracell last longer, five times more absorbent… take two bottles into the shower? Now you can just wash and go. We washed one twin’s hair with Head and Shoulders… two identical bathrooms, one we cleaned with new Flash Bathroom… and that is innovation. Innovation is often misunderstood; it’s not necessarily about IT or genetic research. Often the innovation that drives profit, increases market share, creates new jobs and export potential (especially against a rising pound) is just a small technical advantage that you can communicate and demonstrate, so the consumer sees added value in the product or service and rewards the company by being willing to pay more for it and buy it often, creating not just a brand but an added value brand. If you do this, you can create a leadership position in unit sales and profit per sale versus your competition. This means you can innovate more, pay your people more, attract the best people and enter new markets that will appreciate your innovative products.
“Ah!” people say, “but we make a boring product that you can’t innovate – P&G started with soap and candles people!”
It seems when we talk about innovation in Scotland we resort to the tired old “wha’s like us” tea towel claims and add Dolly the sheep on the end. Sure, there are innovative companies, some indeed that are world beaters, but world class innovation doesn’t run through the genetic code of Scottish business. Far too little company money is invested in innovation and the links between world-class research in universities and the SME sector is famously weak, despite years of Government and enterprise company campaigning.
Innovation doesn’t just need to be at a brand level; improved services and own label products can also facilitate rapid sales growth. Innovation is the key to improving productivity, the output per head of the economy and is, therefore, a crucial element of any economic growth strategy, especially when we underspend on innovation in Scotland, slowing our economy down.
Scotland plods along at about 3% behind the UK in average productivity measures but as much as 40% behind closely comparable economies such as Norway, Belgium, Ireland and The Netherlands outperform us on research and development (R&D) spend, as does Germany and even France. The faster growing, more prosperous, smaller European nations spend an average of 3.4% on R&D but Scotland spends only 1.25% of GDP on R&D and that’s the problem. A report last year by the innovation think tank NESTA claimed if Scotland started to build towards an R&D spend of 3.4% of GDP over a five year period, this would mean that Scotland’s economy would grow by around £12bn a year. Our economy isn’t dependent on oil, it’s dependent on innovation and we are hardly doing any!
If you want to find an opportunity for rapid growth within the Scottish economy then it is to rapidly increase R&D commercialisation and innovation / productivity investment in SMEs, the smaller to medium-sized enterprises.
This is why we must welcome Nicola Sturgeon’s announcement of a £78 million fund for business over the next three years that will offer bespoke advice and financial support, mostly to SME’s looking to innovate. The fund’s goals include helping an additional 1,200 businesses to work directly with universities, creating an open dialogue on innovation.
Nicola Sturgeon has clearly blasted critics out of the water who claimed that she is moving the SNP too far to the left and that business-friendly policies of the Salmond era are thin on the ground; rather, she is emphasising one of the key messages of the SNP, that Scotland needs a balance between economic growth and economic inclusion or neither are sustainable. A few months ago the Scottish Government announced the Business Pledge for businesses to sign up to that included commitments on the living wage, exporting, innovation, gender balance, youth investment and social good. “Great” said the critics, “platitudes, but where is the meat?” Well, a £78 million fund that can be matched to private sector funding and bring down EU innovation grants is the meat and two veg and just what business organisations such as Business for Scotland and SCDI (who hosted the launch) have been calling for.
Can Scotland become an SME led innovation nation? Hell yes! and the Scottish Government, despite not having all the powers it needs to drive our economy, is doing everything it can to turbo charge our often uninspired business culture.
Business for Scotland – Prosperity for Scotland – Join us now