UK SMEs struggle to innovate amid budget cuts and skill shortages
A new report from Innovate UK showed that innovation boosted 2024 sales by 7% and cut costs for over half of businesses, but current increases in cost have halted many UK SMEs from innovating.
To help, the lead generation experts Sopro analysed government data to reveal key innovation drivers, common types of innovation and share practical tips to help companies stay competitive.
The top motivations for business innovation:
Rank | Motivation for Innovation | Percentage of Businesses |
1 | Improving quality of goods or services | 45.5% |
2 | Meet regulatory requirements | 37.3% |
3 | Increasing value added | 35.5% |
4 | Meeting technical, industry or service standards | 33.3% |
5 | Replacing outdated products or processes | 31.5% |
Topping the list as the most common motivation for innovation in business is improving the quality of goods and services. Almost half (45.5%) of UK firms innovate for this reason, which allows businesses to respond to their customers’ needs more effectively.
Meeting regulatory requirements is the second most common reason for business innovation. When regulations are revised, businesses must adapt to comply, influencing almost two in five (37.3%) to look for innovative solutions.
In third place, more than a third (35.5%) of businesses engage in innovation to increase the value added to their company, product, or service. Innovation can increase value for several reasons, including attracting new customers, increasing productivity, and reducing costs.
The most common types of innovation:
Rank | Type of Innovation | Businesses Investing in Innovation |
1 | Computer software | 17.7% |
2 | Computer hardware | 17.2% |
3 | Internal R&D | 13.8% |
Investing in new computer software is the most common type of innovation among UK businesses, experimented with by around one in five (17.7%). New software can help companies automate time-consuming tasks and reduce the risk of human error, boosting productivity.
Computer hardware follows closely behind as the second most common innovation type (17.2%). Investing in computer hardware can help grow businesses, as newer hardware is more energy efficient and has lower maintenance costs.
Internal research and development rounds off the top three types of innovation businesses are investing in (13.8%). This process can give businesses a competitive advantage by refining existing products or services or developing new ones.
Rob Harlow, chief innovation officer at Sopro, comments on the impact of innovation in business and offers his tips:
“Innovation is essential to long-term success in any industry, offering significant improvements to problem-solving, service-offering, and overall business performance. Openness to implementing new tactics and processes allows companies to adapt to market changes quickly, capitalise on emerging trends, and gain a crucial competitive edge.
“This can be through creating a unique product or service that will attract more customers or by carving a new niche in your industry to meet unfulfilled customer needs. You can do this by collaborating with your customers to collect feedback and monitoring industry trends to inform your innovations.
“Alternatively, innovation can take the form of changing the way you engage potential new customers and generate business. For example, breaking out of your old marketing habits and implementing a multi-channel approach to prospecting, as well as sophisticated lead generation and nurturing strategies, can help scale your business.
“While adjusting to new ways of operating might be difficult, it’s worth remembering that one of the biggest reasons for losing deals is choosing to stick with the status quo. Meanwhile, embracing innovation can drive your business forward and put you at the forefront of your sector.”
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