Recession + : Why Innovation is Inescapable KPMG Global Tax Event 2009 Charles Leadbeater

Leading Innovation Now is a bad time for innovation  No spare resources  Consumers looking for value not style  State capitalism, regulation, nationalism  Excessive innovation of the wrong kind got us this mess  Batten down the hatches, weather the storm, don’t take risks

Leading Innovation Yet innovation is also inescapable  Crisis drives improvisation, breaking old routines  Incremental innovation = adapting to changed environment  Shifting to permanently lower cost business models  Innovation in finance = state ownership and beyond  Age of the unthinkable - state owned GM - is not the time to stop thinking

Leading Innovation Why strategic innovation is inescapable Recession +

Leading Innovation Why strategic innovation is inescapable  Recession + other factors already in play drives strategic innovation

Leading Innovation Why strategic innovation is inescapable  Recession + web = no media business has guaranteed business model (Web = greater transparency & unpredictability = more open governance)  Recession + China and India = shift east in demand, money

Leading Innovation Why strategic innovation is inescapable  Recession + green agenda + China = challenge to manufacturing  Recession + government debt = public services at lower cost  Recession + demography = new markets among the young old

Leading Innovation Why strategic innovation is inescapable  Recession alone will drive innovation especially to lower cost models  But Recession + will open new markets, create new business models  New needs, organisations, technologies combining  Who in the 1930s believed in the American Dream of the 1950s?

Leading Innovation Yes but… We’re tax people, what has all that got to do with us?

Leading Innovation Innovation : Myth and Reality  Myth: innovation is all about specially talented people working in special places, dreaming up creative ideas, out of the box  Reality: innovation is all about combining the talents of lots of people, often borrowing and developing the ideas, collaboratively in the cause of solving a difficult problem

Leading Innovation Combination and conversation  The best way to have a new idea is to borrow it  Combining two existing ideas in a new way  That comes through collaboration and conversation  Invariably creative conversations include clients  Services innovation = creating solutions with clients as well as for them  Think With

Leading Innovation Thrive on curiosity, crisis and challenge  Curiosity - follow your nose, find space to keep learning  Crisis - breaks down barriers, takes people out of the box  Challenge - welcome constructive challenge and give it  Be confident enough to risk asking stupid questions  The question you ask often determines the answer you get.

Leading Innovation Ideas are never enough, commitment counts  Having good ideas is just the start, developing them is difficult  Coping with, admitting, learning from failure  Learning to assemble teams of different skills  The swimming pool test