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Innovation in the UK: Good, but not enough?

Updated Thursday, 27th September 2012
Is invention enough without commercialisation? Former 3M CEO Sir George Buckley questions the UK's approach to innovation

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Sir George Buckley was talking to The Open University's Leslie Budd after a recording of The Bottom Line.


Leslie Budd:  George, you’ve been President, Chairman and CEO of a global conglomerate that makes everything from post-it notes to fibre optics.  What’s your view on the claim that these industrial conglomerates are actually dinosaurs?

George Buckley:  Well I don’t think they are, and of course I would also say that 3M is not really a conglomerate in the classic sense of the word.  The way you would define a conglomerate is individual channels that sort of in a sense almost silo that don’t necessarily relate to each other; their aim is not like that.  What really 3M is is a technology company, takes about 40 different technologies that it applies again and again and again and again in different end markets.  So for example let’s think about films, 3M is the largest filmmaker in the world, and you see that rendition in one extreme as an optical film that are used to amplify the light or polarise the light on a flat screen TV, say for example LCD TV or a handheld or those other sorts of applications, right at the other extreme to Scotch tape.  It’s a film but now with an adhesive coated on the back that performs a completely different function, and every rendition in between that you can think of in different markets, so it’s really a technology company, a multi-application technology company, not a conglomerate.

Leslie Budd:  There’s been a claim that all that the UK needs to solve its economic problems is innovation.  But in your experience do you think other countries engineer innovation rather better than we do?

George Buckley:  Well first of all innovation is only one of the competitive platforms that a company needs.  Typically I think of six.  Cost perhaps in the end being the most important.  But cost, I would call it innovation technology, distribution, customer service, brands and marketing and last but not least people.  And in some perhaps cases maybe design would be another one that would be important.  They’re the platforms.  So you can have an absolutely fabulous product, great innovation, great technology, but if it has the wrong cost basis or you have no route to market it won’t work.  So it’s not only about invention, it’s about business development.  It’s about thinking about the product, getting it the right kind of cost basis to be able to compete against other products in that marketplace, or penetrated market where there are incumbents in that marketplace.

So it’s not just a question of innovation; it’s a sort of holistic whole that you have to use as a set of tools in a kitbag that you’re using, and you use different tools in different circumstances.  So for example if you think about the classic market pyramid of good, better, best, then cost might be the single most important competitive weapon down here; in fact maybe the ultimate competitive deadly weapon in all cases.  Whereas at the top you might be really using more technology - cost is still an important issue, you can’t discount it.  So it depends on where you are, what the product is, whether it’s a regulated product, whether it’s a commoditised product, as to how you go about competing, but it is not simply about innovation.

There’s still the question about whether we do that well in this country or not.  I saw somewhere on TV a little while ago an interview of some German industrialist, and he said what is the key to Germany’s success? He said oh it’s quite simple: we just steal the inventions from the British and make them better.  So I don’t think, you know, it’s a humorous answer that this man gave, and there’s an element of truth in it.  This country’s great at invention but often is not as good as they might be at commercialisation.  And when you see great companies like ARM, for example, really doing both, really this country has nothing to fear if you can think not just in terms of invention or innovation but in terms of commercialisation.

Leslie Budd:  Just a quick follow-on on that, do you think we don’t treat engineers in this country with the kind of status they gain in France and Germany, and perhaps we should actually produce a wider engineering education?

George Buckley:  Well, I think it’s probably true that people here aren’t treated with respect.  I would think the thing that’s missing in Britain is Britain has no heroes.  There are no Isambard Kingdom Brunels anymore; there aren’t any Bill Gates or Steve Jobs; there aren’t people like that that are sort of iconic figures that young children, in particular, people coming through the educational system can aspire to.  And often there is the draw of the banks and the kind of salaries they pay, so I wish in some ways there was a way to rebalance that.  But yes we probably don’t give engineers enough credit.  But I don’t think that’s necessarily the solution.  I think personally I would have been an engineer almost no matter what they paid me, because I just loved engineering.  So I think if we can find a way to build some heroes, and you know this new prize, sort of a Nobel prize of engineering, which I think is called the Queen’s Engineering Prize or something like that, I forget how it’s titled now.  It’s a great idea.  I think it was Olive Lettman’s idea if I remember, and it was just a wonderful idea to sort of capture the importance of engineering.

I’d like just to say one thing that when you think about the nation’s really become great, how did they really compete?  I have this sort of thesis that there are only three ways in the world in which to create new wealth.  And I don’t mean new wealth for me or new wealth for you; I mean new wealth in the Adam Smith societal sense of the word so that it can trickle down through an economy.  And they are manufacturing, mining and minerals extraction, and agriculture.  We don’t actually create new wealth net-net through service businesses.  There isn’t new wealth created by opening more restaurants for example.  Banking’s an interesting lubricant for business, but it doesn’t necessarily create new wealth; it’s these other three things that I speak about.  And if you look about the great nations of the world of yesteryear or of today or of tomorrow, the way that they have become great is off these three things.

So if you want to be good at those three things you have to be good at science and engineering.  So I would always encourage government, I would encourage families, I would encourage anybody that’s got any kind of influence, always to keep those three things in mind.  And of course I might be a little bit techno centric but I think engineering is one of the most wonderful things that you could ever wish to do as a career.

Leslie Budd:  And finally you’ve moved over to ARM Capital Partners who invest in energy and industrial sectors, do you think your colleagues there have anything to learn about financing innovation from your experience at 3M?

George Buckley:  Well, I’m not sure that I can teach them very much about finance; I can teach them a lot about manufacturing and industrial management and growth perhaps.  I do think that sometimes private equity, certainly for a while, went down a pathway of thinking that they could pay any price for any company and they could ultimately make money.  Those days have really changed.  In the old days people paid low multiples, purchase price multiples, EBITDA multiples for companies, and they put a small amount of equity in and leveraged these companies up very heavily with debt.  Those days have gone a little bit.  Prices are much higher today.  Debt may be cheap but I mean in the end ultimately if you put too much debt on a company it does make it difficult to operate.

So I would think that my private equity colleagues can learn a little bit more about growth from me, as I can probably learn something about finance from them, and I think if we can find a way to combine the best of both worlds this growth orientation, value creation for a shareholder, but with creative means of incentivising management, creative means of financing, I think if we can weld those two together then we have the chance of making the best of both worlds.

Leslie Budd:  George Buckley, thank you very much.

George Buckley:  My pleasure.





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