Imperial College London

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Skills and InnovationResearch Reflections and
an Initiative
Professor Bruce Tether 17th November 2008
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Overview

• Part 1 Review of research on the Relationship
  between Skills and Innovation
• Part 2 Design London A Multidisciplinary
  Initiative

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Part 1 Literature Review - Questions Addressed

• How does Innovation Impact on the Demand for
  Skills?
• How does the Supply of Skills Impact on
  Innovation?
• What is the nature of the two-way
  relationshipbetween Skills Innovation?
• What are the Policy Considerations?
• What are the Research Gaps?

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Context UK Government - Five Drivers of
Productivity
Innovation
Productivity(i.e., Value of Output per hour
Worked)
Skills
Enterprise
Competition
Investment
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Innovation the Demand for Skills

• Different types of Innovation have Different
  Implications for Skills
• Process Innovation (through Technical Change)
  Generally reduces jobs and skill requirements as
  tasks become automated and simpler ( more
  amenable to relocation).
• Technical Change also interacts with Tradewith
  lower skilled jobs move to the Developing
  Worlde.g., Dyson Appliances Production to
  Malaysia, RD etc still in UK

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Innovation the Demand for Skills

• Optimisation of new technologies (such as new
  information technologies) typically requires
  Organisational Change
• e.g., impact of computing played out through
  technological and organisational change
  (resolution of the Solow Paradox)
• Skill Biased Technical and Organisational
  Change
• in advanced open economies interactions between
  technical change, trade, organisational change
  and demand for skills has favoured those with
  higher and more adaptable skills, and disfavoured
  those with low, narrow and rigid skills

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Innovation the Demand for Skills

• Product Innovation typically creates jobs and
  requires higher skills, but the nature of these
  skills relates to type of industry, e.g.
• Science Based Industries (e.g., Pharmaceuticals
  Biotech).Key skills are upstream elite
  Research Scientists in RD.
• Engineering Product Based Industries (e.g.,
  Machinery) Key skills are Design and Engineering
  Problem Solving Skillsincluding strong Technical
  Skills amongst the Workforce
• Mass Market Industries (e.g., Food
  Drink).Combination of Scientific Management
  and Marketing is key.
• Consumer Services (e.g., Hotel and Leisure
  Services).Key skills are relational - Service
  Management, Soft Skills Emotional Labour

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Innovation the Demand for Skills

• Growth of Services including Service Innovation
  Strategies in manufacturing is associated with
  Job Polarisationi.e., jobs requiring high and
  low level skills McJobs and MacJobs
• Innovation in Services is typically less
  dependent on RD elite skills in science and
  engineering More dependent on general
  workforce, organisational change supply chain
  co-operations.
• Greater demand Relational Skills, incl.
  Emotional Laboure.g., Care Organisation
  Physical Labour Emotional LabourSoft Skills
  communications, customer handling, team-working,
  problem solving, etc. (Qualifications in these
  are more difficult)

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Supply of Skills Innovation

• Empirical Evidence shows Lack of Skilled Labour
  is an Important (but not the only) Barrier to
  Innovation
• Including Different Types of Skills workforce
  skills, marketing sales skills, managerial
  skills
• And Different Levels of Skill basic skills,
  technical and commercial skills, university
  graduates
• But also a Lack of Motivation to engage with
  innovation
• Overall, at firm-level, innovation performance is
  strongly associated with higher level
  skills(including both ST and non-ST graduates)

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Supply of Skills Innovation

• Supply of Different Types of Skills favours
  Different Types or Modes of Innovation ... for
  example ...
• 1. Innovation based on Small Elitese.g.,
  Science Push model of innovation based on small
  scientific technological elites (in RD,
  etc.). Pharm. is the classic example. Also,
  specialist manufacturing (e.g., Formula 1) and
  KIBS (e.g., consulting). UK has tended to do
  well in these industries.
• 2. Innovation through Scientific
  Managemente.g., US style mass production
  functional division of labour. more recent
  Japanese approaches to managing innovationBased
  on engineers with broad not highly specific
  knowledge basesExperience gained in production
  enhances continuous improvement interlinks
  between management and workforce. UK poor at
  this.

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Supply of Skills Innovation

• 3. Workforce Skills and Distributed (or Open)
  InnovationJapanese / German approaches encourage
  workforce participationSpecific skills built on
  strong education / vocational training
  systemse.g., superior ability of German textile
  workers with written instructions enables greater
  variety, small batch production, high value
  added. c.f. UK workers demonstrations ? high
  volumes ? compete on price.
• Impacts of Weak Managerial Workforce Skills
  ...
• 1. Firms tend to invest late in
  technologiesLeads to competition on cost, not
  quality.
• 2. Make unattractive partners for Open
  Innovation
• 3. Firms can get trapped in a low skill
  equilibrium / a.k.a. the low product
  specification trap ...

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Interaction Innovation Skills
Low Skill Equilibrium / Low Product Specification
Trap
Low Production Skills
Firms Supply of Low Specification Products (for
Domestic Consumption)


Weak Management Skills
Firms Invest in Established (i.e., Mature)
Technologies
Competition on Price Costs


Demand for Low Specification Products
Firms have Little Demand for Higher Skills
Low Supply of Higher Skills
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Systemic Interactions Innovation Skills
Supply of Science Technology( skilled ST
personnel)
Workforce Skills
Management Skills
INNOVATIONPERFORMANCE
Quality of CompetitionDomestic and International
Quality of DemandIntermediate Final
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Policy Considerations

• Need to Improve Workforce Skills, from the
  Bottom UpWorkers need to engage with and be
  adaptable to innovationAlso crucial is the
  ability to retrain in event of redundancy(UK has
  a high rate of inactivity amongst unskilled
  working age men)
• Education Training for Generic, Adaptable
  SkillsBeware the Qualifications Trap of
  excessive early specialisationUnderstanding
  theory raises the ability to learn and
  adaptVocational training should incorporate
  theory (not be wholly practical)
• Combination of on-the-job and off-the-job /
  college base training.Training should not be
  controlled by Employers (short-termist)
• Also Need to Improve Management SkillsManagement
  plays crucial role in co-ordinating
  innovationImportant role in raising the quality
  of intermediate demand

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Policy Considerations

• Innovation is increasingly Open or
  DistributedWithin Firms growing importance of
  cross functional teams Between Firms less
  likely that firms can innovate alone, more
  likely that they need to collaborate for
  innovation
• Do managers know with whom and how to
  collaborate for innovation?
• Increasing importance of social or relational
  capital alongside hard scientific forms of
  knowledge
• Consider the Orientation of the Science
  BaseUnder-utilisation of SB reflects weakness in
  industry (Lambert review)UK and European
  economies increasingly dominated by services
  but arguably low relevance of much hard science
  to serviceIBMs Services Science initiative is
  a call to arms

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Part 2 Design London An Educational Innovation
Was established following the Cox Review We
focus on Recombinant Innovation Our Mission is
... to broaden the understanding and skills of
tomorrows business leaders, creative
specialists, engineers and technologists The
challenge is get business people, engineers,
technologists and designers to understand one
another Cox Review Creativity in Business
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Part 3 Design London A Triangle for Innovation
The Royal College of Art (RCA)
Desirability
Commercial Viability
Technical Feasibility
Imperial CollegeFaculty of Engineering
Imperial CollegeBusiness School
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Part 3 Design London Four Pillars
Research the role of design methods, tools and
practices on business value creation
Deliver interdisciplinary teaching to
post-graduate students and industry
Incubate new ventures and talent to demonstrate
the power of the new model
Pioneer technologies to enable high
performance innovation
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