A Closer Look At The Types Of Innovation
Companies must innovate to survive and thrive
Innovation is the key to company success, but can you identify which type applies to yours? Here we take a closer look at the four main innovation types - and how to support and finance them.
Type 1: Innovation concerning products and services
This is the first thing that comes to most peoples’ minds when they think of innovation. Dyson vacuum cleaners, the Sony Playstation and the Apple iPhone are all examples of products that brought seismic shifts to the sectors in which they operate. Of course, there are copyrights and trademarks galore, either for the whole product or parts of it. But imitations that erode the initial competitive advantage are never far away. This means that to stay viable, companies need to constantly design new products, process and services, and to upgrade and diversify them too.
Type 2: Cultural innovation
A company’s culture can make all the difference in how employees embrace R&D (or not). The corporate culture is typically quite traditional and staid, which doesn’t necessarily get the creative juices flowing. But if a positive R&D culture isn’t nurtured, innovation will unlikely occur longer term which puts the company at a real disadvantage.
The key is to motivate and inspire your colleagues to express their ideas openly, without fear of reprisals. Communication is important here, and avoiding micromanagement if possible. It’s also vital that staff have the skills, tools and resources they need to innovate, with management fully on board.
Type 3: Innovation around your business model
This involves taking your business model and innovating to change it in some way that (hopefully) makes it better and more profitable. For example, the budget supermarket Aldi offers no-frills shopping without any of the toilets, cafés, car parking attendants, points schemes and more that their competitors provide. This particular model keeps costs low, which other supermarkets find very hard to contend with.
This type of innovation often also goes hand in hand with product innovation, so that costs and margins are kept tight. The point is that crafting a business model that works for your company can be tricky, but it’s also usually very hard to copy.
Type 4: Operational innovation
Operational innovation often gets mixed up with operational excellence but in fact they’re very different concepts. Operational excellence is about running the company in a totally smooth, efficient way so that all your processes are completely streamlined. However, operational innovation is different in that it requires companies to completely redesign their operational processes from top to bottom. It’s about finding entirely new ways to function both internally and externally, and again this could go hand in hand with new product innovation too.
Innovation comes with risks - but you can mitigate them
Risk is all part of innovation. But to help reduce the impacts, we recommend considering these tips:
Seek professional advice around R&D tax relief
R&D tax consultants like us will be able to advise you on your eligibility for R&D Tax Credits which can help with the cost. They can provide valuable insights into how to claim successfully and where the pitfalls lie. At this point we strongly recommend you have a look at our recent blog: 8 Common Mistakes Companies Make When Claiming R&D Tax Credits.
Apply for one of the many R&D Grants
Again this is something an R&D specialist like Myriad Associates (creators of the Tax Cloud) can help you with. There are a huge number of local, national and EU grants on offer, and not only will we be able to identify the perfect one for you but we can guide you through the application process too. Why not find out more on our R&D Grants page.
Undertake a joint venture
Collaborating with another business or academic institution is a great way of sharing the costs of innovation - and the risks. It’s also the chance for your employees to benefit from the experience and knowledge of others in your field.
Release your company’s innovation potential
Innovation is always a good idea, no matter what the type. It drives creativity and gives businesses the chance to grow and compete. But the fact is, innovative R&D projects don’t usually come cheap - which is where R&D Tax Credits can again be incredibly useful.
We’ve touched on the scheme briefly already, but it’s well worth exploring in detail.
R&D Tax Credits: The Lowdown
R&D Tax Credits are administered by HMRC and serve as a government-backed incentive for companies to innovate and grow. Essentially it works by offering a portion of a company’s R&D spending back, either as a reduction in its Corporation Tax or as a cash credit if it made a loss. It’s generous too, with up to 33 pence for every £1 of expenditure claimable for UK SMEs.
It’s not a new scheme, having been unveiled back in the early 2000s, however far too many companies are still missing out on potentially thousands of pounds. Don’t let this be you!
Has your company created a brand new product, service or process recently, or appreciably upgraded an existing one?
Then R&D Tax Credits could well be available to assist with the costs. It’s not just about laboratories and big pharmaceutical either - far from it. The scheme is actually open to any UK company, regardless of its size or the sector it operates in. There’s a huge range of expenditure types that can be claimed for too, including staff costs, wages, subcontractor payments, certain overheads and software and much more.
Sound great - how do I claim?
This is the tricky bit. The R&D Tax Credits legislation is somewhat complex and guidelines are regularly changing. You need to have extensive knowledge around exactly which of your project costs specifically will qualify so you don’t get into trouble with HMRC. Plus, they need to be accounted for accurately, with records kept and proof submitted.
The thing is too, it’s not just enough to fill in a few standardised forms, send them off to HMRC and hope for the best. The onus is on you to not only supply your R&D expenditure, but to create a well-constructed narrative that ‘sells’ your case to HMRC inspectors. We strongly recommend you don’t go it alone!
Luckily the Tax Cloud portal can do it all for you
The Tax Cloud portal was created by the R&D tax and grants experts at Myriad Associates as a way of making a fully guided R&D Tax Credits claim. It’s free to sign up, and once you’ve calculated how much you could be owed, you’ll simply need to enter your figures and work on your narrative using the portal’s help along the way.
It’s great value, and of course we’re here every step of the way if you need advice.
Why not sign up for the Tax Cloud portal for businesses now, and make your fully optimised, professional, hassle-free claim today.
- Submitting R&D tax claims since 2001
- 100% success rate
- Over £100m claimed and counting
- Industry leading specialists
- In-house technical, costing and tax experts
- Member of the Research and Development Consultative (RDCC) committee
Meet some of the team behind Tax Cloud