Light bulb with Switzerland, innovation in Switzerland

The key points in brief:

  • Switzerland topped the Global Innovation Index rankings for the 13th time in 2023.
  • For most Swiss companies, innovation is essential if they are to stand out from the competition.
  • However, the overburdening of employees, often triggered by the shortage of skilled labor, is putting the innovative capacity of Swiss companies in jeopardy.

Thanks to its outstanding and internationally successful corporate landscape, Switzerland ranks as one of the most innovative countries in the world. In 2023, it topped the Global Innovation Index, a ranking list complied by the World Intellectual Property Organization (WIPO) in collaboration with other global institutions, for the 13th time in succession. The index assesses countries on the basis of various criteria, including their technological maturity, research expenditure, education system and patents.

Switzerland’s success as a center of innovation is generally attributed to factors such as its excellent educational institutions, stable economy and high level of research activity.

UBS wanted to find out from Swiss companies themselves just how important innovation is to them, where they see the greatest potential for innovation and what issue is currently posing them the greatest challenge. Working together with the market research institute Intervista, UBS therefore surveyed a total of 2,500 decision-makers at large Swiss companies and SMEs in spring 2023.

Innovation is essential for nine out of ten companies

As one would expect, innovation is a high priority for most Swiss companies. After all, being innovative is a pivotal factor in standing out from the competition. This isn’t only true for the big players from the pharmaceutical and technology industries, but rather for companies of all sizes irrespective of the sector they are operating in. Some nine out of ten large companies and industrial firms share that their capacity to innovate is important to them, with eight out of ten respondents from SMEs and enterprises working in the service sector being of the same view. Only a tiny minority state that innovation does not play a role for them.

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Product innovations have the greatest potential

Some 50 percent of respondents feel that the greatest potential for innovation lies in the products and services they offer. For 25 percent of the companies operating in the industrial sector, innovations in the production process also play a relevant role. In addition, service providers focus on innovations in the area of IT and digital processes (20 percent) as well as marketing (10 percent). A certain level of potential for innovation is also recognized with respect to sustainability within the companies themselves (especially by service providers). Green technologies, including more efficient batteries and smart electricity grids, show that a combination of innovation and environmental awareness can prove successful.

Innovation capacity at a stable level

Despite numerous challenges, including the coronavirus pandemic, the energy crisis and supply chain bottlenecks, Swiss companies have succeeded in maintaining their capacity for innovation over the past three years or have even increased their innovative prowess. Just one in every ten SMEs states that they have lost ground to their competitors. And one in three SMEs have even been able to improve their position in terms of innovation. Among the larger companies questioned, this figure was as high as one in two. One explanation for the better performance by large companies is likely that they have greater resources as their disposal to tackle immediate challenges without restricting the innovation process.

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Collaboration with clients as a driver of innovation

According to more than half of the respondents, innovation comes about in collaboration with clients. For service providers, in particular, it is by far and away the most important driver of innovation – even more important than their cooperation with other companies. This is also true for the industrial sector; collaborations with clients are cited slightly more frequently than in-house research and development or innovations within the production process. 

Investing in employees

Almost two-thirds of companies believe that the greatest potential for promoting innovation lies in their employees. They therefore invest in the training and continuing education of their workforce. Companies also view changes in how they work with their employees as a useful tool for boosting innovation, moving away from rigid working models in the direction of new and more flexible systems, such as agile working. Conventional measures in contrast, including greater investment in IT, machinery or equipment, are only relevant for a third of companies when it comes to driving innovation. The same applies to research and development, as well as the purchasing of innovation through company acquisitions. Working with other companies was cited by 50 percent of respondents as a way of strengthening their own capacity for innovation.

Find out more in this article about how you can create a corporate culture that promotes innovation and motivates your employees to be creative.

Shortage of skilled labor as an obstacle to innovation

When it comes to the biggest challenges in terms of companies’ innovation capability, there is a broad consensus within the Swiss corporate landscape. The survey clearly shows that the Swiss economy is confronted with the issue of a pronounced shortage of skilled labor. Only a quarter of the companies surveyed stated that they had no difficulties in filling vacancies, while more than half stated that they experienced difficulties in doing so or were unable to fill vacancies at all. While a shortage of skilled labor is apparent across all sectors, it is most pronounced in the catering industry. In the case of skilled trades, the shortage is most marked in the areas of industry and construction.

Better utilization of own workforce potential

Most of the companies surveyed state that the biggest negative impact attributable to the shortage of labor is the excessive burden placed on their existing staff. This leads to a decline in both the physical and mental performance of employees, which in turn reduces their innovative capacity. There is currently no end in sight to the shortage of labor: Almost 40 percent of SMEs and 53 percent of large companies even fear that the situation could escalate further. To combat this problem, however, the top priority for companies is to better exploit the potential offered by their own workforce; almost half of the companies questioned would like to keep their older employees at the company for longer, while 37 percent are aiming to motivate part-time employees to increase their workload by offering better conditions.

Artificial intelligence will not replace skilled labor

Limiting their offering (of marketable products or services) and increasingly drawing on digitalization or artificial intelligence, such as robotics, is only an option for a few as a means of reducing their labor costs. The possibility of making greater use of foreign potential was mentioned even less frequently (15 percent). The idea of relocating to regions with a better labor supply proved even less popular, with only 6 percent of companies bringing up this option. There are, however, clear differences between large companies and SMEs. The latter are less willing to invest in digital transformation, foreign employees or a change in the company’s location. Across the board, there was little support for direct state involvement in the innovation process. However, many companies would like to see a reduction in administrative requirements and regulations in favor of tax incentives for investments and improvements in the education system.

Has your company also been affected by the shortage of skilled workers? Find out here how to win the race for the best skilled workers.

How can Swiss companies maintain or increase their innovative strength in the future?

Generally speaking, it can be said that the innovative capacity of Swiss companies is strongly dependent on the availability and well-being of their employees. A shortage of qualified labor and the resulting overburdening of existing employees could put the brakes on the rate of innovation over the long term. It is therefore key not only to recruit qualified employees, but also to offer them an attractive working environment and to invest in their expertise so as to maintain and promote their innovative strength. Investing in employees increases the capacity for innovation within a company – and thus the competitiveness of Switzerland as a leading center for innovation.

Further information on the UBS survey and more detailed results from the study can be found in UBS Outlook Switzerland, May 2023(PDF, 1 MB).

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Portrait of Alessandro Bee

Alessandro Bee

Economist in the Chief Investment Office of UBS

Alessandro Bee holds the position of a Senior Economist in the Chief Investment Office GWM and is responsible for analyzing the Swiss economy. His tasks include assessing and forecasting economic growth in Switzerland, employment, exports and prices as well as the monetary policy of the Swiss National Bank.

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