Sustained innovation will be a key survival tool for firms that want to successfully weather the credit crunch, says a report from the CBI and QinetiQ.

The study says companies must do more than simply pour money into research and development (R&D), by adopting a culture of risk taking and improving collaboration practices.

The report says organisations that invest in technology and improving skills are much more likely to be successful in times of economic difficulty.

“Our capacity to innovate will make or break the economy in the 21st century,” said John Denham, secretary of state for innovation, universities and skills, at the launch of the report.

Collaboration with private sector partners and academia was highlighted as a key aspect to innovation.

While investing in technology is an important part of innovation, firms can also use it as a tool to improve collaborative practices.

Tax and audit firm KPMG uses podcasts, social networking, videoconferencing
and wikis to support collaboration within the company and externally.

“Flying people round the world to sit in a dark room with a flipchart is not
always the best way to come up with new ideas,” said Sarah McNaught, head of
innovation and knowledge management at KPMG.

The report found that smaller companies tend to have a more pervasive view
of innovation because it is often more important to their existence as they attempt to find a profitable niche in the market.

Sarah McVittie, founder and chief executive of mobile information company Texperts, said innovation was key to her business, but that some government policies had hindered rather than helped the innovation process.

“The changes to the capital gains tax created a big barrier for us, while the
enterprise management incentive options scheme [designed to help small businesses to recruit higher-skilled workers] no longer provides the incentive that it once did,” she said.

Tim Bradshaw, senior policy adviser at the CBI, said that regulation needs updating to support innovation.

“At the moment there are no R&D tax credits that are meaningful in the service sector, and the Technology Strategy Board needs more funding,” he said.

As well as regulating with a light touch, the government can help to encourage business investment in service innovation by ensuring the public sector buys innovative new solutions from businesses, said the report.

Technology innovators:

- Footwear company Nike developed the Nike ID concept, which allows customers
to design customisable trainers online.

- Qinetiq used Google Earth to help model the effect of wind farms on air traffic control radars.

- Shoe shop Clarks recently brought to market a three-dimensional foot-measuring tool for measuring children’s feet accurately and more quickly.