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EUROPE not the problem but the COALITION sucking the regions dry

14 Jan

Met with Neil McKinroy, director of CLES to share thoughts on the dynamics underpinning regional economics and finances in northern cities. We met in Pinchjos (see new app on http://www.pinchjos.co.uk) always a good place to meet if your in Manchester. I was interested in CLES’s work on whole system analysis which seemed to coincide with my own perspective on how local economic strategies.

Several good reports have been published recently on regional economies by IPPR North, CRESC which show that the North is not only suffering from continuing industrial decline and public sector cuts but also from government’s own commissioning  and investment policies. Perhaps we need to spend more time on how money flows and what type business is benefitting and which are not. Julie Froud et al at CRESC (University of Manchester) showed in a recent article ‘Must the ex-industrial region fail?‘ that between 1997 and 2010 43%of all private sector jobs created were in London and virtually none were in the North East.  They report a widening gap between incomes between those in Yorkshire & Humber, & West Midlands and the South east-  and  say government is the problem and adding to the  worsening of the north /south divide. http://www.cresc.ac.uk/sites/default/files/Bringing%20home%20the%20bacon.pdf

 IPPR North launched ‘Northern Prosperity is a National Priority‘ in Leeds in November which talks about the untapped potential in the northern cities, given that the North has  an economy twice the size of Scotland – a fact largely ignored in Whitehall and the London media. The narrative about the North is largely negative and the region is in desperate need of its own investment bank. 85% of the Coalition’s infrastructure investment is in the Southeast.  While Manchester, Leeds, York and others have leadership committed to innovation and change, without investment in integrative infrastructure, innovation and sustainable private sector growth they are hampered by the government complacency and forms of outsourcing which are taking out as much as they are putting in.

The purpose of good governance is surely find corrective mechanisms to support connectivity and fairness across the UK and to support the growth of SMEs, innovative supply chains and regional resilience. In the Southwest over 85% of all the private sector economy is in small businesses – which are greatly affected by their access into companies and the public sector. One of the things I learnt from the research on government’s procurement was that local, small enterprises in any sector are frozen out by the current gearing of public procurement, because government  is looking to transfer financial risk to larger corporates that have the assets to cope with delivery problems. This public procurement model is sucking the life out the private sector as well as undermining much public service provision. http://www.mbs.ac.uk/cgi/apps/research/working-papers/view/?wld=239

Another example of how business financing is influencing the flow of capital from local firms into larger companies is in energy innovation. A medium sized company in Chester – developing eco-boilers was told by investment banks that financing the manufacture of the boilers would necessitate that they set up another company to become an energy supplier to compete with existing utilities. They did this and are now a competitor in the energy market, based in London employing highly paid traders; meanwhile the core business of technical innovators are removed from the heart of their business and are waiting for the manufacturing of the boilers to fail. What is clear in this case and many  others, is that the problem for growing companies developing innovative eco-products is not just a matter of finance but of understanding the current power of investment bankers to determine their business models.  Just as public procurement is geared to corporates are the expense of local, smaller companies,  investment finance is determining what is financed, the location of companies and what constitutes innovation.

According to CRESC economies in the ex-industrial areas depend on replumbing the financial circuits rather than national loan schemes etc.  I think the way outsourcing is working at the moment reinforces that view. They suggest that local leaders and activists could champion investment in regional infrastructure in particular social housing & mobilise pension funds into regional infrastructure and initiate new financial circuits.  I would add that regional banks are urgently needed to support SMEs and social enterprise;  current public procurement criteria changed,  devolvement of public finances from some departments into the regions for welfare benefits, FE training etc to regional commissioners,  and critique of the influence of investment bank power over utility companies and innovative new firms.

It is not Europe which is the problem but the current Coalition government – even Vince Cable thinks national schemes not regional potential

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Local Government has become innovative and sexy in Yorkshire

20 Nov

Local Govenment Yorkshire and Humber held their annual innovation awards in Wakefield last week, where compere Danni Hewson a BBC North presenter said, “local government had become ‘sexy'”. As a judge of the innovation awards for four years I know the quality of the LGYH ‘Making A Difference’ applications has improved dramatically, the competition is great with each council submitting proposals for outstanding achievements in community cohesion, improving localities and partnership.

Wakefield did particularly well this year but so did Rotherham and some district councils which is not easy for them when competing with so many cities.  Rotherham won joint first prize for  their response to the economic downturn for the most innovative town centre, recently praised by Mary Portas, with Kirklees for their ‘recession board’ .  Sheffield won for outstanding locality transport improvement and Craven DC for innovative partnership working which has generated 85 social housing units in Greenroyd Mill. Wakefield were rewarded with prizes for the Hepworth Gallery’ and Councillor of the Year’. Bradford’s Magic Project, a partnership between the Police, Fire and Rescue and the local authority is combatting extremism, violent crime and dangerous driving through emotional therapies- won the award for strong and harmonious communities.

Local Government Yorkshire and Humber (LGYH) ensured that these awards open to all services and smaller district councils. South Yorkshire Fire and Rescue were rewarded for their exceptional peer mentoring  and the Public Servant of Year Steph Brown is making a huge difference to young people in North Lincs where she herself had been a ‘looked after child’.

LGYH is recognised by local leaders and chief executives in the region to be the agency that has stimulated and sustained collaborative leadership across the region, a fact mentioned at the Awards by the new LGYH Chair Cllr Peter Box (Wakefield ldr) and Cllr R0ger Stone (Rotherham ldr) former LGYH Chair and the Cllr Tom Fox ( Scarborough ldr).  Carole Hassan LGYH chief executive, a champion of place-based innovation presented awards to the chief executives in the region who had most contributed to regional collaboration.

However, in spite of their success, there was a sense in the room that this could be the last LGYH Innovation Awards event  -like all intermediary bodies LGYH is being significantly downsized and by April 2112 will be much smaller and less likely to have the capacity to play a strategic innovation role in the region. This is a shame because as the quality of the awards show – innovation capacity is not developed by more and more isolated and individual pilots and projects, but through year on year development of a confidence and energy for social innovations that are only possible because of a maturing of connectivity and partnership: between business and public services, across localities and between partners in a region. This is particularly the case in the North – where cities cannot beat the economy into revival through competition, no firm is an island but part of a complex set of relationships between education, training, local government and business. The unique role of local government, stimulated by intemediaries like LGLH, is in being the key to collaborative thinking and practice across business and the public sector. LEPs have a long way to go before they have matured enough to usurp LAs in this regard.

Intermediaries such as LGYH do not have to be bureaucratic institutions to broker  the connections and opportunities for creative exchange or provide the challenge for  more creative solutions, but they do need the resources and the recognition of a role in strategic innovation thinking.

There is a real innovative energy in Yorkshire and Humber for partnership across Parties, between business, communities and public services – but it is unlikely this energy can develop into more innovative governance if the innovative leadership and knowledge exchange capacity,  contracts. Some competitive chief officers may think they can do better alone or with long-distance partners, but international links are not a substitute for locality grown relationships, for this is where innovative shared services, financial tools etc can be taken to scale in way that is not about efficiencies alone but adds ‘public value’ and creates  an wider ecosystem for innovation.

I hope common sense prevails, for amidst the gloom of financial crisis, the Far Right, community alienation and riots, there is a growing confidence in local government that stems not from individual council perfection but from a recognition that collaborative leadership underpins new forms of public governance and provide the backclothe for sustaining public sector innovation. 

Well done LGYH and Yorkshire and Humber Local Authorities

See awards www.lgyh.gov.uk

Innovation in public sector drives private sector growth

22 Oct

On the 21st October in MBS the Manchester Institute of Innovation Research presented findings from a recent survey on ‘Public Procurement and Innovation’ part of a wider study sponsored by the ESRC, BIS, NESTA & the TSB . Professor Jakob Edler and Dr Elvira Uyarra said the team were surprised themselves by some of the findings; particularly that innovation in the public sector was when adopted by businessn was improving their export sales.

Key findings can be found on http://research.mbs.ac.uk/innovation and were presented to a small group of  public procurers in local government, health and the Cabinet Office alongside those from supplier companies such as SERCO and smaller companies such as Renfrew.

Out of a sample of 800, 50% of which were SMEs, 60% of reported that government, in particular, was stimulating innovation in business largely  in larger companies. In other words the procurement process was having more impact than had been expected – particularly where contract specifications made direct reference to requiring innovation. Innovation was more likely suppliers said, if procurers had early interactions with them and was ‘outcome’ focused.

However, the survey also reinforced well-known anedotal barriers to innovation mentioned by the majority of respondents such as,  price, too little early conversation between supplier and public buyer,  risk-averse procurers,  little acceptance of variation and over-prescriptive specifications.  SMES , Social enterprise and third sector organisations were particuarly excluded by the above. None of which was surprising.

David Shields, Head of Government Procurement Services said a lot of the difficulties concerned siloed budgets in government and public services and wider structural barriers  that determine the timescale, criteria and performance measures in contracts. he also said he thought these could be overcome with better procurement practices. “The main issue is how to take to scale?”

Mike Phillips from Renfrew a  design company brokering engineering solutions reported that in his experience public procurers remained risk averse to new solutions. He thought the problems were felt in smaller companies down the supply chain. Innovators who provide solutions, discover that once their innovations are accepted and are adopted by the NHS or DH they are caste back down the supply chain even though they drove the innovation in the first place.

Colin Cram from MERK1 said ” SMES cannot respond to specifications, yet they are the key to recovery and growth, the public sector tends to buy what its always bought and goes along with grand schemes rather than smaller innovators.”  

I agreed that given that SMES are key to local recovery, public procurers had to  find ways of involving SMES and that this was an issue about size as much as ownership; public institutions talk to corporates and do not have the mechanisms for networking with smaller agencies or the contacts for spotting innovation. Whereas they do have the internal human capacity for public procurement. At the local level there is more effort to communicate with  SMES and social enterprises, their being at the heart of more innovative services in health, care and personalised services.

There are two strands to governmental innovation practice, one which is about efficiencies and taking innovation scale and the other about exploring alternatives and supporting pilots. Departments such as the DH and MOJ in particular invest smaller entrepreneurial SEs for their innovative personalised services for offenders, NEETS or those with mental health problems etc and then cannot find a way of commissioning these from the mainstream. The issue of how to take to service innovation scale is a critical problem for public service reform. At the moment too many smaller third sector organisations and social enterprise are losing their contracts rather than gaining them because they are not large enough to compete and do not fulfil criteria of having a turnover over £2million or the financial capacity to carry costs incurred in development that large, public service contracts involve.

Where it is a matter of innovative products central government can commission once  departments barriers are overcome. For instance, at the roundtable Alec from Coston recounted the how they had created a ‘closed loop service’ for waste paper recycling for various goverment depts and were looking to extend their services across the whole of government in order to achieve a level of tonnage that would justify no longer sending waste-paper to Germany for recycling.

Innovative services are delivered through a complex set of relationships that demand continuity – the value of smaller social enterprise is that they have the capacity to respond to changing personal and local conditions; these smaller agencies  are not large to win large contracts from DWP, DH etc,  most had contracts with the Local Authorities. Given public expenditure cuts, local authorities have 25% less to purchase with. 

DWP appear aware of the conundrum of both the need to rationalise the benefits system to reduce costs and of delivering more effective personalised local services, in an attempt to deliver on both counts they are putting pressure on prime contractors to work in partnership with local sub-contracting agencies ( often in the third sector or a social enterprise). 

However, this is not just a managerial solution but also a political one of priorities. It is interesting that a Tory MP, Chris White  is introducing a Bill to support the work of innovative social enterprise by including ‘social value’ as an outcome to be delivered by suppliers within contract specifications, alongside ‘price’ and other outcomes . He said he recognised this is a ‘Dry Bill’ not one that needs supporting non-the less. 

Social Enterprise 2011 on 8the November in London, we need more of these events in Manchester see Guardian.co.uk/socialenterprise.

Will Manchester Innovation Network Survive when Knowledge Capital Closes /

4 Feb

Yesterday, Knowledge Capital in Manchester brought together innovators from across the city; social entrepreneurs, consultants, researchers, digital companies mostly from small organisations. Sir Richard Leese opened the event attended by about 100 people, many reported how the KC exchange network had helped them and regretted that this was their last event.  Along with manyother connecting bodies, KC will close at the end of March 2011 due to public sector funding cuts.  Participants discuss a future exchange network:  most wanted a network between those with common interests,  easy navigation between networks and some investment in bridge-building across busines and  public innovators and with the universities. Manchester Business School had a strong presence at the event which was appreciated and those from fron those leading public engagement from www.manchesterbeacon.orgwww.mimit.org.uk  and corridor connects. People mentioned new initiatives – like James Duggan a post-graduate in Education who is now helping NESTA adn NEF with their Co-production roadshow   http://www.coprodnet.org/wiki/Nesta_Co-productionRoad Show 

There is a need for some minimal resource for organising connection with those outside of the common interest group,  to those ‘who don’t hear about their work or get what they do.’  There is a wall between the mainstream and innovators in all sectors and innovators  find ‘getting to market’ difficult. However, it is not just individual businesses that need to be innovative but those in leadership positions who can help evolve new business and public co-systems. As an example of this was the Sharp Project in the Northern Quarter, Sue Woodward gave a brilliant presentation on how the Sharp Project work, it doesn’t provide space for any creative digital industry, only those  who can see the benefit of collaboration and exchange. 

Exchange does not require heavy investment but it does involve some investment. At present, few in public bodies or business are promoted or rewarded for such activity, yet this is the work that adds most value to the  supply chains, particularly where the chain is weak. The problem for most social enteprise and SMEs  is their lack of access into national or global markets> To emphasise this point  one speaker talked about how the ‘geeks’ in the northern quarter were not at the meeting because they were not comfortable with socialising.  If HE and business recognised the potential of these innovators, who are the same people thay created facebook, google etc they would find ways of reaching out to them.

Perhaps it takes a community organiser like Obama to appreciate the need for building bridges back into communities.  Cathy Garner Director of KC had organised for a link to Professor Richard Seline who linked us into the White House – where the chief economic advisor described the new US strategy for supporting SMEs and entrepreneurs  –  this strategy includes£2 billion investment, tax breaks, incentives, mentors, outreach and investment in connectors. Meanwhile in the UK small businesses such as Pinchjos are being crippled by NI tax contributions, VAT and increases in supplies. 

There is  tendency in Britain to talk about supporting innovative small enterprises but in reality giving them very little. Often this is because the experience of  being an innovator  is not appreciated by those who work in large corporations or public institutions. Small social enterprises do not have the contacts or the time to connect – yet, they can see the benefits of collaboration adn attend the Innovation Network – there should be more capacity within the civil service and public insitutions to reach out, along the lines of the Beacon Projects and an understanding within politics of the need to invest in building connections and developing collaborative capacities. Something we referred to in Place Based Innovation. www.nsg.gov.uk/whitehallinnovationhub.