Innovation Strategy


A business view of the strategy

Paul Stein

Paul Stein is the Chief Technology Officer of Rolls- Royce plc, the global power and propulsion company. He is a member of the Executive Team of Rolls-Royce and as CTO is responsible for overseeing the company’s investment in research and development. He has a long career in engineering and technology leadership including a period as Director General, Science and Technology, in the UK Ministry of Defence. Paul is a member of the Prime Minister’s Council for Science and Technology (CST).


  • Industry needs to see demand signals if it is to invest in R&D
  • Government procurement has an important part to play in encouraging innovation
  • In some areas, regulation drives product innovation, not market forces
  • Support is needed at all stages of the innovation pipeline
  • Industry, academia and Government can understand each other better with more opportunities for people to move between them.

The innovation strategy is clearly hugely important, because it provides the structure and the convening force for the innovation ecosystem. The need to achieve the UK’s target of 2.4% of GDP on R&D has to include a sterling effort by business. That is because business investment is falling behind compared with our international competitors.

I want to highlight enablers, from an innovation perspective, that my company believes are necessary, and crosscheck with the Innovation Strategy to see whether it echoes those same enablers.

The first is that we want to see demand signals. We are not going to invest in R&D unless customers want to buy the ultimate product or service. Now, many products are market-driven, particularly in the business-to-consumer space where there is little Government intervention but even in the business-to-business space. For example, more efficient aeroplanes are market-driven products, because manufacturers go out of business if their offering is not as efficient as the competitor’s.

And many of these demand signals are arrived at by industry and Government working together, working together on a common agenda. Here, the legislative framework and the innovation ecosystem work hand in glove.


However, many innovations are driven by changes in regulation. Net zero is a golden opportunity to align regulation with innovation and Government procurement. We should not underestimate the role of procurement. The MOD, for example, is not there just to procure items for our armed forces, it is also there to stimulate innovation. The multiplier effect that comes with investment in high-risk, high-payoff projects is very large. It is great to see that the corner has been turned with programmes like Tempest.

The regulatory framework sometimes needs to be convened at an international level: one example of this is sustainable aviation fuels. The development of new fuels to decarbonise aviation is not being driven by conventional market forces because they are more expensive than digging fossil fuels out of the ground. So a ‘forcing function’ is needed. Yet because this is such an international industry, unless all countries move in lockstep then no one is going to go first. That shows how international regulation can produce innovation.

The UK has to get ahead of the curve in its skills base, particularly in areas like battery technology – in battery chemistry and electrical skills.


Scaling up

Then there is the challenge of scaling up: it is very important to see these innovative industries move through to volume manufacture. The technology involved in scaling is as precious as the fundamental science that goes into the start of the pipe-line. Government, industry and patient capital all have to work together towards a common goal as they invest in the whole of the innovation ecosystem – and that involves the supply chains as well. There is no point in creating first-class Tier One and Tier Two suppliers, if the supply chains are not agile enough and do not invest enough.

Then there are the people that deliver this. It is not just a question of technical skills but also business skills. We need more entrepreneurs, people who understand the language of business but also understand the language of innovation. There are some very talented scientists and some exceptional engineers: combining those skills with an understanding of business is so important. 

Of course, technical skills are also in short supply. The UK has to get ahead of the curve in its skills base, particularly in areas like battery technology – such as battery chemistry and electrical skills – where it is behind the curve compared with competitors such as Germany.

Another issue is that academia, industry and Government must become more permeable. Careers tend to follow either a Government path, an academic path or an industry path. It is rare for people to cross boundaries. That really has to change, because understanding the needs of all of these three is so important.

Looking at the innovation infrastructure, facilities like the High Value Manufacturing Catapult in the UK are looked upon as exemplars by other nations. There have been inward missions from Brazil, from France and from many other countries to see it and understand why it is so good. The answer is that the HVM catapult is a convening force for leading-edge manufacturing technologies, bringing small- and medium-sized companies together with large companies, creating agility in supply chains. Investment is needed across the whole of the supply chain stack, not just in small companies, not just in big companies, but in the whole ecosystem.

Finally, clarity of vision and leadership, especially from Government, is hugely helpful. The Prime Minister’s 10 point plan for decarbonisation has provided focus and clarity for innovation. The Innovation Strategy is another step on that journey.

So in all we do see good alignment between the Innovation Strategy and the needs of business and it represents a worthy next step. However, more work is needed on skills, permeability of career paths, the role of procurement and industry and government working hand in hand to use regulation as an innovation stimulus.

Clarity of vision and leadership, especially from Government, is hugely helpful. The Innovation Strategy is another step on that journey.