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“Closing the innovation gap”: Strategic considerations.

This article was originally produced by Equip Consultancy for the Education and Training Foundation, December 2023.


i. Why innovate?

The benefits of innovation to any organisation are well known. The rapid rate of technological, societal and political change presents challenges and opportunities which require innovative approaches if organisations are to thrive. Innovation allows business to stay competitive, increase their market share, and operate efficiently.

In addition, there are merits to engaging with, and promoting innovation, which apply specifically to the FE and Training Sector.

Unesco for example have outlined the benefits of increasing citizens’ potential to innovate and transform the economy and society through dynamic skills provisions. From that perspective, engaging in innovation promotes relevance and makes Vocational Education and Training (VET) an attractive option, that business considers an investment rather than a cost. (Unesco 2020)

Vorley et el. (2022) outline further advantages:

“Innovation is the lifeblood of business. It is key to the evolving Industrial Strategy and the related goals of national growth and levelling up regional economies, which rely on stimulating firm growth and scale ups. Innovation also has important societal impacts and is at the heart of promoting wellbeing, enhancing quality of life, increasing security and resilience, and in building the UK’s reputation and influence.”

The UK has lagged behind its G7 competitors for some time now when it comes to productivity (ONS, 2021).  The link between fostering innovation and increasing productivity is clear. As a recent report from the Department for Business, Energy and Industrial Strategy puts it:

“Both R&D investment and innovation significantly boost productivity growth…. R&D investment has a strong positive effect on productivity, especially in high-tech manufacturing industries and knowledge-intensive services sectors. Positive smaller returns are also found for firms in industries at the lower end of the technology 8 spectrum” (BEIS, 2021).

The findings of several reviews into the purpose of the FE and Training Sector in the UK over the last twenty years, and the recent policy context, have underlined the British government’s commitment to ensure that businesses will be given a ‘central role’ in designing nearly all technical courses by 2030. Current thinking has therefore tended to approach the issue of innovation from this angle, i.e. how can VET providers develop their relationships with employers and other stakeholders to ensure a close fit with the skills needs of the regions in which these providers operate? Whilst VET providers have traditionally focused on skills provision, much is now being considered about how they can take an increasing role in innovation ecosystems.[1]

A 2016 Skills Commission report, for example, highlights FE providers’ potential to deliver different and creative approaches to solving problems and to serve communities and businesses in their localities. (Bowater, 2016). A well-functioning ecosystem “supports innovation from idea through to commercialisation, adoption, and diffusion” (Vorley et el. 2022)

A number of models for how VET providers can best engage with their ecosystems have been considered and presented in recent publications. For example, work by the Gatsby Foundation outlines the work of FE Colleges across six sets of innovation themes or offerings such as knowledge diffusion, brokering access to equipment, facilitating further skills training and development, hosting business-focused programmes, consulting, and networking. The publication also provides case study examples of colleges in England under each theme (Baxter 2020)

Many institutions have for some time now recognised the value of working with Local Enterprise Partnerships (LEPs) and employers to shape the curriculum offer to meet the needs of local businesses and other stakeholders. This approach “demonstrates how FECs both have and can contribute to supporting businesses more directly, and benefit from co-creating an offer that aligns with the priorities of the broader ecosystem.” (Nelles et. El. 2022)

Nelles et. el. (2022) state that FE and Training providers should consider their ecosystem when deciding on their strategy for supporting innovation. In areas, for example, where there is a low concentration of HEI/FEC density, it is likely that “providers will offer more flexibility in the courses that they offer, curriculum design, and the roles that they see themselves playing in the innovation ecosystem.” However, where there are numerous other HE and/or FE providers in the area, i.e. where there is a higher density of provision, “roles and opportunities might be more limited. In this environment, some FECs may specialise in different niches on the spectrum of FE skills provision – focusing on specific themes/industries, or types of skills/qualifications. Some may opt to remain relatively general and compete on the basis of cost, location, reputation, or other factors. In a denser context, FECs are less likely to function as leaders – a role that is more likely to fall to larger research-active universities – although they may be viewed as valuable participants in and contributors to governance networks.”

Where providers might have the potential to function as Specialised/Niche Skills Providers, they should be encouraged to seek partnerships with local HEIs and other FECs to coordinate their roles to refine their skills contribution to fill important gaps and to participate in cluster governance networks where appropriate.

Nelles et el. Go on to state that VET providers should be encouraged to participate in local networks where possible, and coordinate with their peers to either develop individual specialisms or to create shared infrastructure to manage partnerships with the private sector, administer work placements and infrastructure, and to advocate for FEC interests in broader 36 networks.

Further information

[1] These ecosystems include the actors that FE and Training providers interact with and include employers and employer representative bodies, local or regional authorities, Further Education and Higher Education partners and/or competitors and schools.

Takeaways for leaders…

As a result of cumulative FE reviews and recent government policy, FE and Training Providers are increasingly required to support and facilitate innovation in their ecosystems.

There are numerous merits to FE and Training Providers supporting innovative practices.

There is a strong focus on how providers can take innovative approaches to better engage with employers and other stakeholders in shaping and responding to local and regional skills needs.

The literature on this topic contains a number of models to support leaders when considering current and future ways in which VET providers can support and promote innovation.

ii. What are the barriers to fostering innovation in the FE and Training Sector and what are the potential solutions?

In 2020, the Association of Colleges (AOC) asked college leaders this question and found that colleges are held back from supporting business growth and innovation by a lack of funding and a clear remit from government. (AOC 2020). Three quarters of colleges cited funding for the capital to develop innovation spaces and to employ business innovation account managers to work with SMEs was holding them back. In responding to this concern, the AOC is one of the many voices calling for better collaboration between further education colleges in local areas to share best practice and resources.

A common barrier to innovation cited in the literature is the lack of a ‘culture’ which encourages all staff to take risks and to think creatively.  In the FE and Training sector, this barrier is due in large part to the highly regulated framework in which providers operate. The Gatsby Foundation present a useful paradigm to leaders for when considering how to build culture (Baxter 2020).

“For top-down innovation culture, senior leaders publicly endorse positive behaviours that result in new innovation. They write strategies that call out the importance of innovation in their organisations and place a special focus on specific results or milestones they want staff to achieve. In parallel, they reward those who engage in this way and deliver results for the organisation. For innovation culture to build from the bottom up, the organisation needs to have individuals who like to experiment, do things differently, work in a new way.”

Building a culture of innovation is often a result of the constant interplay between the provider and its business partners. The greater the level of cooperation, the greater the level of innovation. Baxter (2020) provides numerous case studies of FE and Training providers in the UK and further afield. From these case studies, we can summarise the key ingredients to building a culture of innovation as:

  • Strong and supportive leadership and a healthy attitude to risk taking. Leaders who encourage staff to take calculated risks and who give teams the autonomy to make decisions in solving problems. They are supportive of a healthy attitude to risk and this in turn encourages a “bottom up” approach to innovation. “It’s ok to try and to fail as long as something is learnt in the process”
  • Having the capacity to engage in innovation, including giving time and space for people to think when considering their own answers to problems. Ring-fenced funding to build this capacity.
  • Strong teams with the right experience, for example hiring key leaders with a background in industry who can pro-actively support innovation from the bottom up.
  • The importance of developing “Dual Professionals” who have a current understanding of the drivers of innovation in the sectors and industries in which they work.

Unesco (2020) have provided leaders with a balanced scorecard tool which can help to assess the extent of innovation in their organisation and provides a framework for further development. It Includes criteria for:

  • Strategy and management
  • Teaching and learning processes
  • Products and services
  • Ecosystem relationship management

Takeaways for leaders…

There are funding and complex policy issues in the FE and Training environment which do not currently incentivise providers to contribute to innovation.

However, leaders can build a culture of innovation in their organisations through considering a blend of ‘top-down’ and ‘bottom-up’ approaches.

The literature contains many case studies of providers that have successfully developed innovative approaches which leaders can learn from.

iii. Where are the gaps? And how can FE and Training Providers benefit from the opportunities currently being presented?

Funding in the UK for R&D activity comes primarily from business, with the UK government contributing significantly less than the 2019 OECD average. After business, Higher Education Institutions rank second, contributing significantly higher than HEIs from comparative countries in innovation activity (Policy Links, 2022).  Other key actors in the contribution to innovation systems include Catapult centres[1], which have the capacity to collaborate in realising innovation outcomes, LEP Growth Hubs, charitable institutes, incubators and accelerators. The emergence of Institutes of Technology (IOTs) in recent years has allowed FE Colleges to collaborate with Higher Education and business partners to offer leading edge, niche training and development.[2]

Given that HEIs will continue to take a lead in R&D activity, VET providers are increasingly finding their place in this innovative ecosystem through providing ‘hands on experience’, working with employers to bring people with skills and work-based technical competencies to fill skills gaps in their organisations which recruiting from universities does not succeed in doing. In parallel, staff with industry experience can help businesses to develop and can drive innovation using individual or group student research projects at the colleges. Activities in this theme include work-based student projects, work placements and secondments both to industry and to colleges. (Baxter, 2020)

Working with employers to upskill the workforce has been, and is likely to continue to be, a fundamental way in which VET providers can both contribute to, and learn from, innovative practice in the workplace. Lewis (2023) highlights the importance of ‘technicians’ in the workplace as drivers of innovation: “Technicians play a significant role in innovation, contributing both to firms’ absorptive capacity – that is, their ability to make effective use of new technology – and also by suggesting incremental improvements to technology”. Lewis sees VET providers, rather than HEIs, as the key players in working with these innovators:

“Taking seriously technicians’ and VET providers’ contribution to innovation would encourage policy-makers to reorient their attention, which has tended to focus on R&D undertaken by highly qualified research scientists and engineers, towards the need to ensure that employers have timely access to the intermediate-level skills required to deploy new technologies at commercial scale” (Lewis, 2023).

Concentrating on the hands-on skills development of employees does not mean however that VET providers should not engage in R&D development. Indeed, some providers successfully do so, albeit on a much smaller scale than HEIs. As Baxter points out, “Primary research with dedicated funding streams and the associated publishing of data in the form of academic literature and conference papers is already happening at some FE colleges”, citing case studies Warwickshire College Group as an example (Baxter, 2020).

What are the sectors driving innovation both now and in the future? Where should VET leaders look in order to plan the curriculum to take advantage of innovation pace-setting industries and possible gaps?

Disruptive technologies are those that change the game entirely or deliver results faster and cheaper than traditional methods. “Business are seeing the opportunities presented from embracing these technologies, such as artificial intelligence, quantum computing, and blockchain can open up entirely new avenues for products and services.” (Saraev, 2023).

According to a recent LinkedIn article, more than 70 percent of chief financial officers (CFOs) from around the world intend to invest heavily in digital technologies that will bring corporate transformation. And the two areas that are driving digital transformation: cloud computing and big data analytics. (LinkedIn, 2023)

Policy Links (2022), provides a highly comprehensive guide to the sectors that are, and will continue to drive innovation in the labour market and the wider economy:

“When we consider the top 20 R&D investing companies in the world, the industries of specialisation include: pharmaceuticals and biotechnology; automobiles and parts; software and computer services; technology hardware and equipment; and electronic and electrical equipment.”

The think tank provides a useful sector summary:

Electrification: Future growth in the UK economy will depend to a certain extent on the UK’s ability to produce electric and hydrogen vehicles and components as part of the ambitious target for phasing out internal combustion engine (ICE) vehicles by 2030. This transition to electric and hydrogen vehicles represents both an opportunity and a challenge for the UK automotive sector.

Environmental sustainability: the quest to achieve the highly ambitious target of net zero by 2050 presents further challenges and opportunities which will require innovative solutions. Markets for new technologies that can help businesses and countries to achieve this target are expanding, and, according to (source) is “therefore they are a key area in which innovative activity has the potential to contribute to national economic growth and competitive advantage.”

The UK ranks eighth in the registration of climate-change mitigation technology (CCMT) patents, behind Japan, the US, Germany, Korea, China, France and Taiwan.

The transition to a net-zero economy may impact 6.3 million jobs in the UK, with around 3 million workers requiring upskilling and 3 million in high demand. Construction, manufacturing and transport have been identified as the sectors that will be more impacted in terms of job upskilling: it is projected that between 17% and 30% of the jobs in these sectors will require upskilling.

STEM: The pace of change in STEM related industries present similar challenges.

Higher technical education enrolment at Level 4 and above is relatively low in the UK. The government’s White Paper, Skills for Jobs, recognises a “significant shortage of vital technician-level STEM skills”.

To tackle the “significant shortage of vital technician-level STEM skills”, the White Paper made proposals such as expanding the Institutes of Technology programme, continuing with the T level programmes and, more generally, reforming the post-A-level education system.

Further information

[2] For more information, see Home – The Catapult Network
[3] For more information, see Institutes of Technology – GOV.UK (www.gov.uk)

Takeaways for leaders…

There are many ways in which VET providers can contribute to innovation in their ecosystems, including undertaking R&D and providing practical skills incubators and training ground for employers.

HEIs will continue to take a leading role in promoting innovation, but partnerships with VET providers are, and will continue to be, beneficial.

Innovation is a two-way street; working with employers and other stakeholders is mutually beneficial in facilitating innovation.

Leaders should be mindful of the sectors that are driving innovation, consider possible gaps, and take advantage of these.

Call to action

There are many ways in which VET providers can contribute to innovation in their ecosystems, including undertaking R&D and providing practical skills incubators and training ground for employers.

HEIs will continue to take a leading role in promoting innovation, but partnerships with VET providers are, and will continue to be, beneficial.

Innovation is a two-way street; working with employers and other stakeholders is mutually beneficial in facilitating innovation.

Leaders should be mindful of the sectors that are driving innovation, consider possible gaps, and take advantage of these.

References

Association of Colleges (AOC), 2020, Colleges best placed to lead a business and skills innovation revolution, Colleges best placed to lead a business and… | Association of Colleges (aoc.co.uk)

Baxter, E., 2020, Further Education Colleges and Innovation, Gatsby Foundation, fe-colleges-and-innovation.pdf (gatsby.org.uk)

Bowater, A., 2016, Going Places. Innovation in Further Education and Skills, Skills Commission, Going-Places-Innovation-in-FE-Skills.pdf (fetl.org.uk)

Department for Business, Energy and Industrial Strategy (BEIS), 2021, UK Innovation Strategy, UK innovation strategy (publishing.service.gov.uk)

Lewis, P., 2022, Innovation, technician skills, and vocational education and training: connecting innovation systems and vocational education and training, Full article: Innovation, technician skills, and vocational education and training: connecting innovation systems and vocational education and training (tandfonline.com)

LinkedIn (Guyan Consulting), 2023, How Digital Transformation is Driving Innovation Across Industries?, (4) How Digital Transformation is Driving Innovation Across Industries? | LinkedIn

Nelles, J, Walsh, K., Papazoglou, M., Vorley, T., 2022, FECs, innovation and skills: a literature review, The Productivity Institute, PIP012-FECs-innovation-and-skills-FINAL-201022.pdf (productivity.ac.uk)

Office for National Statistics (ONS), 2021, International Comparisons for UK Productivity (ICP). final estimates: 2020. International comparisons of UK productivity (ICP), final estimates – Office for National Statistics

Policy Links, 2022, UK Innovation Report. Benchmarking the UK’s Industrial and Innovation Performance in a Global Context. IfM Engage. Institute for Manufacturing, University of Cambridge, PowerPoint Presentation (cam.ac.uk)

Saraev, N., 2023, Understanding the Innovation Economy, Stormboard, Understanding The Innovation Economy — Stormboard

United Nations Education, Scientific and Cultural Organization (UNESCO), 2020, Innovating Vocational and Technical Education. A framework for Institutions. innovating_tvet_framework.pdf (unesco.org)

Vorley, T., Nelles, J., Walsh, K., 2022, Transforming Foundation Industries: Engaging SMEs in Innovation, Innovation Caucus. Transforming-Foundation-Industries-Engaging-SMEs-in-Innovation.pdf (innovationcaucus.co.uk)