Two thirds of UK Plc is failing to generate new products and services, causing a productivity lag that is leaving British businesses exposed to global competition.

Only a third have succeeded in launching a new invention in the past three years; according to the latest annual survey Design in Britain 2004-2005.

Of those businesses who say design is integral to their operations, most (70%) have developed a new product or service in the same period while 40% have expanded into new markets as a direct result. These types of companies are growing more rapidly than their competitors, say the researchers.

The bad news for companies, ignoring design is that 60% of UK customers buy on added value, whilst just 30% look mainly at price, according to the survey.

David Kester, Chief Executive of the Design Council, which funded the study, said:

“The message is clear – use design or risk failure. In an increasingly demanding global business environment, UK businesses cannot compete on cost so they need to differentiate themselves by using design. Managers of all UK businesses – from large companies to small or medium sized businesses – need to build design into their strategies for domestic and global success.”

The importance of innovation was addressed at this year’s Chartered Institute of Personnel and Development opening keynote delivered by strategy guru Gary Hamel, visiting professor of strategic and international management at the London Business School.

He told delegates that HR professionals must become ‘innovators’ if they are to survive the sea of change.

A belief shared by speaker and author Kjell Nordstrồm who said in his thought provoking seminar: ‘Karaoke Capitalism’ that to succeed, as individuals and in business, we need to dare to be different.

The Design in Britain 2004-2005 survey is based on interviews with 1,500 companies across all sizes and sectors of UK business.