Limits to the Entrepreneurial State
22 September 2014 by David Bott
There seems to have been a revival of interest in “state intervention” lately. There are well-argued economics texts and derivative newspaper articles – and politicians vying to lead us into the new prosperity. What most seem to have in common is that they cite Concorde as an example of successful state involvement. Despite just spending 6 years working for a complete Concorde enthusiast, I am still not sure it represents the sort of state intervention that will lead directly to growth. Although I was constantly told it developed capability that enabled later commercial success for many of the companies involved, I would suggest that, as a stand-alone project, Concorde showed a commercial loss. There are easily identifiable reasons – it failed to understand that the market it addressed would be affected by political factors, it did not fully understand the complexities of the technical issues it addressed and it did not recognise the time needed to complete the programme. It was still a beautiful plane and those who were fortunate enough to fly in it (I got 2 trips!) will forever rhapsodise about the experience.
From my experience of the last 6 years, when mobilising government support for the sort of innovation that leads directly to growth, there are factors that need to be addressed – and underlying them are the need for more coherence or alignment across the range of government interactions and consistency of support over longer timescales than most politicians seem to be comfortable with.
Let’s start with coherence and alignment. There are many ways that innovation can be encouraged (I recently tried to unpack them through the metaphor of disease transmission), but clusters, grants, networks and communication need to work in concert for maximum effectiveness. However, the need for “responsive” government and the desire to demonstrate freshness can lead to a lack for proper co-ordination between initiatives and confusion in the target community rather than the intended (required?) coherence.
This desire for constant action also endangers the need for a consistent approach over time. Tackling the sort of “big” problems where mobilising the whole country is required invariably takes time – and often more than originally envisaged. To keep faith with a project or programme that is falling behind (a possibly badly specified) timescale is not easy for politicians when the media is looking for their every mistake!
However, there are areas where government intervention is not merely a political fashion, but part of the job description! As a society, we look to government to provide certain “services’. These include energy supply, food supply, health and care provision, housing and transport infrastructure – but there are others. These are areas of activity where the problems are clear – although their precise definition is sometimes problematic. And government has many levers that can be used to drive innovation. Government spends 47% of Gross Domestic Product in the United Kingdom, a significant fraction of which it uses to address these 5 areas of societal challenge. It also drives regulations – that can strongly affect a market (for both good and bad!) by proscribing minimum performance or maximum waste or many other product or service characteristics. Similarly, tax policies can change the costs of products or services and drive consumer behaviour.
The definition of the challenge is, as I have already said, an important first step. It is easy to cast the net wide and end up with too many unfocussed ideas. On the other hand, it is seductive to narrow the definition and “limit the creativity of the community by the specifiers lack of it”. What we always strove for in Technology Strategy Board competitions was what someone dubbed the “Goldilocks definition”. Somewhere between too narrow and too broad is a definition of the opportunity that unlocks the ideas of the wider community and produces truly novel solutions. It was our experience that this definition starts with an understanding of what success would look like rather than coming through any particular technology path.
When it was set up as a non-departmental body at arms length from government in 2007, the Technology Strategy Board inherited a mechanism designed to take advantage of this situation. The previous Advisory Technology Strategy Board (2004-2007) had asked the Innovation Unit in the Department of Trade and Industry to develop an integrated approach along these lines. These baskets of activity were called Innovation Platforms. They sought to align a variety of activities in the areas and were strongly interactive with the commercial supplier communities. The first ones were compromised by being selected within government – Network Security started as a thinly veiled attempt to evaluate identity cards and Integrated Transport Systems and Services was largely about road user pricing. Although we tried to take these activities in a more generic direction, the death of the specific policies led to the death of the programmes – although many of their features and activities were re-used within subsequent programmes. The next round of Innovation Platforms benefitted from what we had learned with the first 2 and were thoroughly evaluated by the Advisory Board before they were launched. I am sure they are still very proud of the work carried out under the Low Carbon Vehicle, Low Impact Buildings and Assisted Living Innovation Platforms over the last 7 years, and have communicated some specific success measures. These programmes benefited from alignment with government regulation and procurement policies (although we never seemed to be able to engage the Treasury in how they can help) and strong interaction between government and the commercial sector. Subsequent Innovation Platforms have focused on other government priorities – Agriculture and Food and Stratified Medicine – and there are surely many other opportunities for this approach
There is a constant debate about whether any innovation agency would be more effective by simply responding to ideas that people submitted. My belief is that the activities in what we called the thematic areas were more effective because they made us more than just a funding agency. In thematic areas we could help companies with ideas of new products or services, or those with new capabilities looking for markets with needs they could satisfy. The Innovation Platforms are the pinnacle of this, where government and business can work together to ensure that delivering the products and services that address societal challenges can also make money!! Why would we not do more??