R&D sometimes necessary, but never sufficient, for innovation

A couple of interesting reports on R&D… firstly the DTI’s R&D Scoreboard 2006, where clearly more is better – at least one assumes that’s the purpose of creating lists and league tables ordered by the sums spent (see chart from the report showing the world’s biggest R&D spenders). Note the big spenders are not necessarily who you would regard as the great innovators.

The second report is from the management consultants Booz Allen Hamilton… Its arresting title is: A Select Set of Companies Sustain Superior Financial Performance While Spending Less on R&D Than Their Competitors [release/report]… What it comes down to is that innovation drives business, but that R&D spend is only loosely correlated with innovation. Booz Allen reckons that 94 out of the 1,000 companies it surveyed are ‘high leverage innovators’ (ie. Google not Microsoft, Toyota not General Motors)- they have an innovation system rather than R&D spend.

All of this should give pause for thought… For example, the EU plans to spend €50.5 billion on R&D between 2007 and 2013. Will this be spent in a way that generates innovation? Continue reading “R&D sometimes necessary, but never sufficient, for innovation”

Mega projects and risk – is co-operation a dangerous new idea?

Whatever one thinks of the sanity of the projected growth in aviation as foreseen and accommodated in the aviation white paper, The Future of Air Transport, the project to build the £4 billion Terminal 5 at Heathrow has some fascinating lessons for project management and contracting – and wider commerce. Against the prevailing orthodoxy, the project promoter, BAA, has assumed all the project risk itself, instead of designing contracts to allocate risk – with penalties – to its main contractors. After studying mega-project failures elsewhere, BAA reasoned that an aggressive risk transfer approach would lead contractors to behave in ways that harmed its interests: Continue reading “Mega projects and risk – is co-operation a dangerous new idea?”

Environmental markets – long, loud and legal please

An excellent report from Vivid Economics, titled The business opportunities for SMEs in tackling the causes of climate change, done for Shell’s Springboard programme.

The particularly good thing about it is that it shows in clear terms how a market for environmental goods and services forms – primarily through policy interventions, as ‘the environment’ doesn’t establish a demand and pay in its own right. The chart shows the expected environmental value of the policy intervention in avoided carbon emissions (top) and the expected value of the market for environmental goods and services thereby created in £million (bottom).

Long, loud and legal – the value of strong interventions
It’s because of this market-making function that forward-looking business groups (eg, WBCSE) call for the policy framework to be ‘long, loud and legal‘ – if the signals from environmental policy are sufficiently long-term, clear in intent, and intolerant of free-riding then they will stimulate investment and R&D to meet future demand. Continue reading “Environmental markets – long, loud and legal please”

Killing by the million – and that’s just the health campaigners…

World cigarette production is about 5.53 trillion sticks per year. (about 2.4 per day for every single person in the world). This is stabilising as people in developed countries quit and growing populations in the developing world start puffing. According to WHO’s tobacco group, death-toll from this is now about 5 million per year, heading for 10 million. With perhaps 1 billion potential premature deaths at stake in 21st Century on current trends. In other words it’s huge.

What is absolutely amazing though is that there are forms of tobacco use about 10- 100+ times less hazardous than smoking (ie. chewing, sucking – anything non-combustible) – it’s the smoke that really kills. Widespread use of these is why, for example, Sweden has the lowest rates of cancer and heart disease in the world. If the world tobacco market shifted to selling more of this and less cigarettes, millions of premature deaths could be avoided over the 21st Century. But true to form, the well paid and comfortably smug public health community refuses to accept this concept and adopts a counter-productive prohibitionist stance – hoping naively that if people have a choice between quitting and dying, they’ll choose to quit. Continue reading “Killing by the million – and that’s just the health campaigners…”

Microsoft – give me a mekko chart now, you useless, greedy monopolist!

Annoying!!! I want to do something simple… plot a bar chart for a bunch of countries where the width of each bar = the population of the country, the height of the bar = its GDP/capita and hence area of the bar = its GDP. Clearly an insane requirement – who would ever want to display world poverty in such an obvious way? This type of chart is called a ‘mekko’ or ‘marimekko’ chart (example to the left). After years of new versions and irritating paperclips and lots of other rubbish, can MS Excel even do this? Er, no… Ray Ozzie was hired by Microsoft to buff up its sagging innovation record. His excellent memo Internet services disruption took the lame corporation to task for its record on innovation. Despite having a $7 billion R&D programme they’ve been hammered by Google on serach, Blackberry on mobile, iTunes on music, Sony on games… and so on. R&D and innovation… two very diffrent things.

The under-performing British consumer

Just back from an excellent break in the Lake District, but had cause to reflect on the reasons for Britain’s poor record on economic productivity compared to the US. I’m convinced it’s little to do with the rise of China taking all our jobs, the failing biotech revolution, poor R&D spend or any of the other reasons usually offered. No, it is something much closer to home: the underperforming British consumer is to blame.

The basic reason is that Brits too easily put up with rubbish service or products or are too undiscerning to notice that’s what they have been offered. The consumer is the problem… Continue reading “The under-performing British consumer”

Thames Water – why water metering needs to be mandatory

Just received a slightly irritating letter from Thames Water cheerfully suggesting: “Let’s beat the drought together”. At no point in the letter do they suggest that customers should ask to have a free water meter installed. Yet when people actually pay for the volume they use, they do actually use 10-20% less on average. Even in the advice on saving water section on their web site they decline to suggest it. But meters are essential for fair charging for water, efficient use and sensible tariffs. Continue reading “Thames Water – why water metering needs to be mandatory”

Is this a Garden Table of Death?

I’ve just done up my garden, including the purchase of a new garden table. I went to crocus.co.uk and ordered on-line…. and here it is pictured on-site. I was of course worried that this may be a table made of tropical hardwood – so I took some comfort from the Crocus’ hardwood guarantee, but was I right to?  Continue reading “Is this a Garden Table of Death?”

Nationalise infrastructure?

Was presenting at an interesting Oxera conference today. Amazing suggestion – not quite a proposal – from one famous speaker… when the government stands behind the main networks, as it always will…. electricity, gas, water etc. why does the consumer pay market interest rates (as the government ultimately bears the risks)? In other words, why not give these operations quasi-public sector status and let them borrow at the Treasury rate, making it cheaper for the consumer?

A most unexpected place to find the incubation of the coming era of ‘new’ socialism…