Breaking new ground

Breaking new ground

The issue: How can manufacturers in the region continue to innovate to enable them to go from good to great on the domestic and world stage, and what do we need to do to support them?

Santander Taking PartInnovation in manufacturing doesn’t necessarily mean developing a transformative piece of technology. It can be a clever rethink on an existing model – like the decision to bring washing machine manufacturing back to the UK taken by North East firm Ebac.
Or engineering and manufacturing group Ford’s recently opened Tyneside training facility which will help fight back against the skills gap.

These and other equally innovative North East firms gathered at Jesmond Dene House, Newcastle, along with industry influencers and financiers to discuss the challenges and opportunities for businesses in their battle to break new ground.

While there was a recognition that the North East has much to shout about and is doing many things right in leading the way in emerging manufacturing markets, many problems and pitfalls were outlined.

Solutions were sought, too, including the suggestions that manufacturers lower their defences, collaborate more and take heed from other more personable sectors like retail. Here’s how the evening unfolded:
The debate

With one of BQ’s biggest debate gatherings around the table – perhaps indicating the eagerness of manufacturers to drive growth through innovation – the customary introductions soon gave way to heated and insightful jousting. After many positives and challenges in an increasingly competitive global market were outlined, the foundations for the debate were laid – how exactly do we define innovation?

Elizabeth Shaw had the answer: “It can be a process, a change of a process as well as a service or a product. Or even an existing product in a new market”.

Kenny Dalgarno, whose main research area during his academic career has been in innovative manufacturing processes, said: “The classical definition of innovation is that you have a need, a solution and finance and any new combination of those three things is innovation. But people are sometimes too scared to call themselves innovators.”

One of the other sticking points with innovation, said Elizabeth Shaw, is that it doesn’t always create jobs – and in fact can create efficiencies, causing job losses.

Kenny Dalgarno:“But there’s a bigger picture that it creates different jobs.”
So what does the climate for innovation in the region look like currently for manufacturers?

Colin Hewitt, an influential dealmaker who insists intellectual property (IP) departments are seeing plenty of evidence of innovation in the North East currently, said: “There are great opportunities and there is undoubtedly an upsurge in interest in engineering. There’s also a move from bedroom software start-ups to hard-tech science businesses. People are also much smarter now in terms of their knowledge and understanding of IP and how to protect it. The region is a much more sophisticated base than it used to be in terms of IP knowledge and understanding.”

Brian Nicholls asked where this smartness comes from.

Colin Hewitt: “It would be fair to say that most of the hard-tech businesses have people with degree backgrounds in the main.”

Lynn Tomkins, whose organisation is a specialist provider of gender-diversity initiatives, said: “The stats might not support that. I think there are 460 aerospace chief execs in the defence and its related sectors and more than half started life as an apprentice. And more and more, that’s becoming the case. People want to grow their own talent.”

Santander Meal

After conceding that apprenticeship levels have undoubtedly surged within innovative organisations, Colin Hewitt added: “What I’m saying is that there is a significantly increased level of graduates involved in those new start businesses.”

But have rising university fees clogged up the source of the next generation of innovators?

Kenny Dalgarno: “Engineering schools are doing very well in terms of applications at the moment because it’s a very attractive recession subject. But there was a time 10 years ago when we had the 50% higher education target, which was a mistake – not because it wasn’t a good thing to go to university – but because it was presented as though everything else wasn’t as good. And that was a terrible mistake. There needs to be opportunities to come in and out of education at different stages in people’s careers.”

Graeme Parkins: “In the last 18 months we’ve recruited graduates and apprentices, but they are all on different journeys. If an apprentice joining us at 16 wants to continue their journey in our business and has the ability, we’re more than happy to sponsor them because it will buy their loyalty.”
Brian Nicholls: From what we are saying here, are we getting to a position of say Austria or Germany where a doctor of engineering is respected as much as a doctor of medicine?

Colin Heron, a doctor of engineering himself, said: “No. We’ve lost the word engineer. It’s completely lost and you can’t get it back. When British Gas advertise that an engineer will be round to fix your boiler, or notices on toilets say ‘out of order, engineer called’, or photocopiers being fixed by ‘engineers’, the word is lost in this country.”

Geoff Ford: “A straw poll of the public last year asked ‘who do you see as a typical engineer?’ and it came back as an actor in Coronation Street who plays a mechanic. If that’s the image then boy have we got a problem getting young people to come into engineering.”

Graeme Parkins: “There are still plenty of people wanting to go to university to become engineers so it’s not completely lost.”

Sue Houston: “We are starting to turn things around by helping careers teachers, youngsters and parents understand what the opportunities are. So there is still an opportunity to change it but it’s going to take time. The economic climate, the fees and other things going on in education will lead us to move back to our better understanding of engineering.”
At this point academic and serial entrepreneur Tony Trapp, whose previous successes and current enterprise have been built on truly innovative practices, entered the debate.

“My businesses have all been from a university base and all have a university, common room feel about them still. And we’ve always looked for talented engineers from universities. If you get clever graduates and put them in the right environment they can do wonderful things. The tragedy is most people never get in an environment where they can do wonderful things. Part of what we do is to create a community working for itself and building for itself. I’m convinced that’s the solution. And in the North East, if you get innovative engineering companies, everything else flows around it and grows out of it.”

Brian Nicholls: And are your bright young people all from this region or do you have to look nationwide?

Tony Trapp: “We have a lot from the region [but] it is a fact that Edinburgh University attracts bright students so we always target them. We are retaining talent here and attracting it.”

Stephen Carmichael: “So how do you create the right environment to help graduates grow and innovate?”

Tony Trapp: “We try to not be bureaucratic and everyone is called an engineer instead of having 20 different titles for engineers. We’ve got a Victorian villa in Riding Mill and it’s just a friendly and relaxed environment. Most people flourish in it – maybe one in 50 will sink. ”

Thriving graduates are one thing but quality management may be in short supply.

Tony Trapp: “We still have a problem attracting top management up here, if you look at the boards of the big companies and how many actually live here. We still have a problem persuading people this is a place they’d like to live.”

Leaving staffing issues aside, Stephen Carmichael, who works on the coalface with innovative firms as a relationship director for Santander, was then asked how he responds to businesses with new ideas looking for backing.

He said: “Most bank products are more or less the same so it tends to be about relationships and we have to try to be doing it differently. We often say to clients ‘have you ever taken a step back and looked at your cash cycle, your processes, the way you do business, your supply chain and your customers?’ and it can be quite startling what can come out.”

James Ritchie, who heads up a particularly forward-thinking design, engineering and manufacturing business in the subsea sector, then explained how often innovation requires a new take on an existing product base. His firm is currently applying technology it developed for the offshore wind sector back into oil and gas.

And, just like Tony Trapp’s business, people are the key element for its successful innovation.

“We’ve got to be innovative in the way we recruit and retain people because we cannot pay the fees that the Aberdeen oil and gas market pays. We just can’t compete with that market. So we have to look at ways of incentivising people by having a good working environment.”

Returning to the notion that innovative firms needn’t be technology-driven, Andy Tuscher – a relative newcomer to his role of EEF regional director - said: “We have lots of metal bashers in the region but metal bashers can be innovative. What I’m finding with a lot of them is that they aren’t just metal bashers but they are solution providers. And that’s where the real innovation is. Those that are doing well are the ones that aren’t selling a widget, but a solution. It’s incredible the solutions engineers are coming up with. What I am also finding is the connectivity that technology is providing, is helping innovation. One company will be providing one solution and another business something else and when they connect all of a sudden that then solves another issue. That’s what we need to do more of, but sometimes businesses lose sight of it.”

As well as connectivity, the balance of the teams driving innovation can play
an important role, said Lynn Tomkins.

“We work for companies taking an innovative approach to their skills development, particularly those looking to have a culture of a diverse gender balance. It’s an official fact that mixed gender teams out perform single sex teams because they approach a problem in a different way. Great minds do not think alike, they think very differently and there are lots of leading companies that are broaching that in a really positive way. Having the right culture leads to innovation and an equal culture very much leads to innovation. Women make up approximately 50% of the workforce but they are less than 20% of the engineering and manufacturing sector and even a smaller percentage in the North East.

So if we can’t attract from the whole of the talent pool then you’re fishing in a much smaller skills environment.” She added that more positive female role models in engineering and manufacturing would help to boost female involvement in the sector.

Tony Trapp mentioned here that he has seen a notable rise in quality female graduates when recruiting for his business.
From personal experience, Graeme Parkins believes much more needs to be done, however. He said: “My daughter has just started an engineering degree course in Sunderland and there are two females and about 120 boys.”

Stephen Carmichael: “There’s nothing to let young people know what the opportunity is for a career in manufacturing and engineering unless they go to a university open day. But I remember when I was at high school, loads of firms would come in to promote themselves and by the time I left school I had a choice of different careers. But one of the problems in this region is that companies are not allowed to actually present, recruit and promote their business and sector in high schools.”

Sue Houston: “There is actually a lot going on. SEMTA [the engineering skills body] recently organised events with careers teachers from across the region. And some of them were working with engineering businesses. But also EEF is doing a lot of work. However, at the SEMTA event a number of barriers were identified by the careers teachers and those results will be pushed back to BIS [Department of Business, Innovation and Skills] to get more schools and businesses working together. We are trying to encourage the DfE [Department for Education] to take a different approach so that those opportunities are recognised and identified early.”

Kenny Dalgarno: “The universities are working with schools on this and we are continually looking for more businesses to work with. So there is a route available.”

Sue Houston: “There’s also still a perception issue that’s it’s better to be doctors and nurses than engineers.”

As an employer with a gender-balanced workforce, Colin Herron gave his views on the issue: “I have three men and eight women in my team. With four of those women, every morning I don’t know exactly when they will turn in because they are also being mothers bringing up kids and being engineers at the same time. In certain industries with production lines they won’t accept that. I’m flexible and I’ve learned to live with it – but some people won’t.”
The conversation moved to the question of the expense of being innovative. Sitting at the helm of touch technology maker Zytronic, Mark Cambridge was well positioned to comment here.

“It is expensive [to remain innovative] in one sense. Part of our problem is getting the right calibre of engineers into the business. We moved from being a processing company to an electronics company. As a consequence, finding engineers to come into the business when we need them is very difficult in the North East. We’ve employed people from different parts of the country and we’ve found, unless they’ve got a definitive need to be in the North East, trying to keep those people here is particularly difficult. There’s definitely a move towards people going into engineering, but the reason we can’t get the right people now is because if you go back ten years the educational establishments were not pushing engineering. They were quite happy to bring people in to fund it from abroad.”

Colin Herron: “Immediately post Thatcher, why would you go into manufacturing and engineering? That was the statement then. It was closing, it was history. It wasn’t the universities it was the political agenda at
the time.”

Kenny Dalgarno: “Ten years ago the universities couldn’t make a demand out of nothing. We weren’t getting the applications. It was a different landscape then.”

Mark Cambridge: “The education system is a business in its own right but ultimately as a consequence, those people who came from abroad didn’t want to stay in the North East of England. So they got the education and left.”

Kenny Dalgarno: “That’s not how university finance works in fact. The local market and the international market are two different things so people coming in from the outside don’t displace or take seats away. Had we had an awful lot of demand in the national market it would have been met. It wasn’t there.”

Tony Trapp: “Only in the last six to eight years has engineering been an attractive career to follow. Before that it’s been low paid, low status and the bright graduates coming out of universities annoyingly all went into finance.”

Graeme Parkins: “You had that generation when engineering shut down but that probably jumped on a couple of generations with parents saying ‘you don’t want to do that son, that made me redundant’. Now that it’s starting to change and people are coming back to engineering, it’s definitely a very attractive option now.”

Craig Iley: “Opportunity is one thing but I’m sure if I did a straw poll around the table nobody would disagree that this is a fantastic place to live and work. We have a fantastic quality of life but do we do enough to promote that in an innovative fashion to highlight the benefits of living here?”

Drawing a line under the link between successful innovation and skills, Brian Nicholls asked delegates to come up with a tangible way of boosting innovation and maximising its positive impact among manufacturers.

Mark Cambridge: “I think we’re getting hung up on invention coupled with engineering and we should really be focusing on innovation, which is multi-faceted in a business. It’s not just process innovation or product innovation, its market development, social media to generate business, all of these things are coming together. Innovation is about bringing other facets together, like bringing in language graduates to support exports, for example.”

Lynn Tomkins suggested: “The North East is a great place to innovate and to live and work and we need to get better at getting those three points across.”

Andy Tuscher: “It’s about providing solutions instead of making widgets. And you do that by engaging with the knowledge base.”

James Ritchie: “We need to give staff the autonomy to be able to innovate themselves and understand the applications on which they’re working.”

Stephen Carmichael: “I think to innovate more we need to create some type of forum where businesses can tap into that knowledge base and check their own business with others in similar fields. So they could tap into the knowledge of businesses that have been through it.”

Tony Trapp: “You have to spot a need which has the potential to have money driving it and have a creative team able to deliver the need.”

Colin Hewitt: “I think you need to get into the schools and raise aspirations and confidence in the sector. And also we need to raise the aspirations of management.”

Elizabeth Shaw: “For me it’s about the approach to funding and having transparent funding programmes out there that don’t duplicate each other and reduce the complexity for SMEs in accessing the money, but which also have SMEs at heart.”

Geoff Ford: “I think we have to avoid a one-solution-fits-all mentality. We all face different problems. As a region we’re of no interest to any political party, with no marginal seats, so we need to do our own thing. But the key word is ‘do’.”

Sue Houston: “We need to change perceptions so we can get children to be creative and understand what the opportunities are to them and part of that is about changing policy to enable those opportunities to be recognised.”

Graeme Parkins: “I consider myself to have a good company but to be a great company I have to confront the accepted norm, look for different ways of delivering the service we offer so that I do it quicker, faster and meet the demands of the ever increasing speeding up world.”

Pamela Petty: “Innovation isn’t just about engineering or invention. I would personally like to see as much effort on import displacement as there is on exporting because I think there are so many opportunities out there for manufacturers to apply to – like all the boring stuff we use everyday.”

Mike Smith: “I’d like to see a central point where we are getting the innovation agenda on the map in the North East.”

Kenny Dalgarno: “One point is that an awful lot of innovation is knowledge and you need to think of knowledge in your supply chain. So you need to know who outside your organisation you work with in terms of building knowledge. You need to have a view of who your knowledge partners are. The other observation I would make, is that there is something coming along called Horizon 2020 which has 70 billion Euros in it and a huge emphasis on SME engagement. If you want to have a look at what, over the next seven years, is going to provide a huge opportunity for manufacturers, then that is the place to go.”

Colin Herron: “I’ve listened to quite a lot about what we do in the region but I spend a lot of my time outside the region. People say we’re a great place to work and we need to be on the map etc etc. However, the RDA [regional development agency] is dead, we accept that. But there is absolutely no-one shouting for the region. If you phoned the North East who would answer the phone? The answer is nobody. Who greets you at the airport? Nobody. So I think we have a problem that promoting the region just doesn’t happen anymore. We used to have ‘Passionate People’ posters [as placed by One North East] and now there’s nothing.

“With Horizon 2020, we need to be aware that each region is going to say what it’s going to be good at. What is its subject? The subjects then go to Europe and if you apply for grants and what you do is not on that list, you don’t get the money. If you’re not in low carbon, energy storage or tick other boxes, you will get absolutely no support. I think we need to wake up in the region to what Europe and the world is determining as the order. We can either plough on successfully as individual companies or we have to work together as a group. In the Far East they don’t care where North Tyneside is, they think the Nissan plant is in Newcastle. They work with a region and a country and they want the package. At the moment we’ve completely lost that. If we want to compete against the major markets in the world, we have to work out how.”

Tony Trapp: “But the money is in the customer’s pocket, it isn’t determined by government or quangos. We want good companies who get money out of
customer’s pockets.”

Colin Herron: “I accept that but when you talk to big players, they want to know what the package is, where are the golf courses? Where can they buy fresh fish? What are the universities like? ... And so on, and we can’t answer them anymore. That will bite us.”

Craig Iley: “I think we do compete and I see great businesses every day. But I do think it’s a shame we don’t have a single unified voice even at a national level, never mind a European one. There are still too many people that view the North East as the problem but actually we are the solution and we’re the only region with a net balance of exports.

“We also allow other people to drive the agenda. For example, they talk about manufacturing shrinking, but it’s not, it’s just not grown as fast as the service sector. We’ve got a great product here and a great proposition and for me it’s about positioning on the UK and European stage.”

As the debate drew to a close, many other issues were raised to ponder into the night – like how Scottish independence might impact on this region’s innovation-driven success and what part the splitting of the North East in to two LEP-represented zones has played.

But a defiant Colin Hewitt interjected: “The issue is about what the North East can do, not whether we can get inward investment. It’s about what the companies can do and I think we can compete. We need to stop whingeing about it and just let them get on and help them. I think we have to accept that we’ll always be marginalised so let’s just get on and do it ourselves.”

Tony Trapp: “We’ve got the best companies, we’ve got NOF Energy, which spreads the word all over the place and we’ve got Subsea North East and others, and I think we’re very well represented.”

Kenny Dalgarno: “In Germany they have apolitical trade associations who go out around the world and explain the offer and there is no political edge to it. They represent their region and the businesses within it and the changing political winds have nothing to do with it. They are there to represent their members.”

With desserts devoured and coffees drunk – and the debate in danger of veering off into an entirely different issue around North East identity – Brian Nicholls brought the evening to a close with much to think about
around innovation.