By Daniel Hunter

The idea that corporate success, economic growth and increasing market share are all dependent on the size of a business’s R&D budget has been dismissed as Twentieth Century thinking in a report, published today (Wednesday) by KPMG.

Calling on UK plc to create a ‘true culture of innovation’ that goes beyond the 4 walls of the R&D department, the report argues that British organisations must accept the need to experiment and risk failure, or be left ‘behind the curtain on the global business stage’.

“The days of ‘easy growth’ are long gone and long-term financial success is dependent on agile forward thinking. The organisations that are most likely to prevail are those where entrepreneurialism and risk taking is recognised and celebrated by leaders and where honest failure is viewed as a learning experience,” says Robert Bolton, co-leader of KPMG’s Global HR Centre of Excellence.

In addition, KPMG’s report suggests that successful companies reject an insular approach, preferring to collaborate with external networks and customers. The key is linking people - from within an organisation and beyond — so that ideas are shared, tested and rewarded. Given the focus on people, KPMG’s report goes on to argue that company HR functions are ideally placed to drive a ‘cultural revolution’ ensuring staff are incentivised and recognised for developing innovative approaches to the Twenty-First Century workplace.

Bolton continues: “HR teams are fortunate to be responsible for many of the levers required to bring about the transformation needed if innovation is more built in to business than bolted on. It is no easy task but, done well, will enable HR to take its place alongside the other mission-critical functions such as finance and IT, ultimately making the people agenda just as important to the Boardroom as the balance sheet and profit and loss statement.”

Called ‘HR as a driver for Innovation’, the report goes on to identify a series of common themes across organisations with a successful track record in innovation. Core amongst these is the idea of ensuring innovation is no longer an adjunct to the day job and, instead, a prominent feature of objective setting and appraisals. How people are performance managed, rewarded and recognised are also shown to encourage genuinely fresh thinking and HR’s role in redesigning organisational structures is evidenced as helping staff push boundaries.

Against this backdrop, KPMG’s report outlines the ‘Innovation Dynamic’ — 11 factors which Boardrooms should consider to determine if their organisation is going wrong, or making the right moves. Each factor relates to an organisation’s structure, processes or culture and, taken together, should help business leaders see what they need to improve. The 11 factors behind an organisation’s ‘Innovation Dynamic’ also focus on the level of freedom employees are given to try new approaches; the extent to which staff are networked within and outside their organisation, and an acceptance that some degree of future gazing is necessary to predict future needs.

Bolton concludes: “Anyone looking to unleash innovation on a sustainable basis should start by asking how much they are prepared to think ahead and do things differently. After all, those at the top must be prepared to take risks and accept the consequences. Anything less fosters a culture of blame when things go wrong — and is the best way to ensure that innovation is stifled before it has a chance to flourish.”

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