If all else fails, we can always give them money
26 September 2016 by David Bott
One of the stranger ideas mooted in recent months was to replace the grants used by Innovate UK with loans. One of the things I discovered in my time at the Technology Strategy Board was that government views “revenue” and “capital” as different types of money, and for a while they preferred giving out capital to revenue. This may be part of that tactic, but profoundly misunderstands how Innovate UK has an effect on growing companies.
When the Technology Strategy Board was “spun out” of the Department of Trade and Industry in July 2007, all of us new people (there were, if I remember, only three civil servants who transferred across) from outside government had to spend the first months finding out what we had inherited and not mess it up, but after that we started engaging with the companies we were supposed to be helping to see what we could most productively do! They weren’t “customers” as some called them, but they would determine whether we were successful!
We found a variety of views. There were some who thought government (or a government agency, they didn't discriminate) had no purpose in the commercial world. There were some who, although welcoming the extra money in the system, thought that the decision-making processes were biased and inefficient (spoiler alert – most of us had some sympathy for this view) and needed radical overhaul. We also met some whose whole business plan was based on obtaining a series of grants to support the development of their technology. It is fair to say that there was a wide variety of views on the usefulness of the organisation we now belonged to, and of what it should do to achieve our stated goals. But there were also some consistent signals – some overt but others more difficult to draw out.
At first, we ran the same activities we had inherited. The completion process was itself an amalgam of schemes that pre-dated the Innovation Review of 2003 that suggested the setting up of the centralised government activity that became the TSB. But by listening to the companies we interacted with we added things we thought would answer their needs. At the same time, Government kept giving us new things (usually having taken them from something else they had closed down), which did tend to confuse the issue.
Some changes were small and about what we offered. The Collaborative Research and Development Grants were originally designed to help large companies work with universities, and were not always right for smaller companies at the beginning of the commercialisation journey. So, in 2009, we introduced the Feasibility Studies – short and small, they were intended to help companies try out new ideas and “fail early” or gain enough confidence to apply for larger grants in our focused schemes. Part of the approach was a meeting at the end of the projects where everyone came together to describe their progress and seek out people who could help – universities, other small companies, larger companies and potential investors were all invited. A year or so later, with the death of the Regional Development Agencies, we were given the re-christened Smart grants which covered more or less the same part of the journey, but were not necessarily aligned with our major programmes. We suggested combining them but DIUS/BIS (our sponsor department kept changing its name) always resisted, so we did what we could behind the scenes.
Other changes were more strategic. One of the first challenges the pre-TSB got from its Advisory Board was to take advantage of its closeness to government. Different departments set out on policies to achieve progress in answering societal challenges (it’s what we have governments for – to address our shared problems). In enacting those policies, they will probably change the market in that area, producing new product and service needs. What we set out to do was manage a conversation between those in government who were drawing up policy and those in business who could benefit from, and accelerate, the changes. We called these co-ordinated activities “Innovation Platforms”. A few years later we were asked to resurrect the SBRI scheme, where Government Departments sponsored early stage research and development to address their policies. We thought combining these approaches would be useful, but once again, there was no real appetite in BIS.
But possibly the most important changes were about how we operated on a day-to-day basis and came directly as a result of feedback from businesses. When we sponsored the Missions (someone else’s idea that we gladly supported), the selection process was all on paper. The first time the companies met was on the plane to their destination. They told us they wished they had known more about one another before that. So for the next Mission, we organised a get-together a month before. This enabled them to explore what they could do together and in support of one another. What everyone saw was that some were good at communicating what they were doing and others less good. So we added some coaching on pitching to this event. Then they asked if we could get someone from a previous Mission along to tell them what to expect. By the time we had run a few (and across ICT, Healthcare and Clean Technologies) the Missions were judged by those outside the process to be substantially impressive groups, and by those who went to be a valuable input to their development.
When we launched the first LaunchPad (in Tech City in 2011) and checked on the progress of those who we funded, they were less than complimentary about our support mechanisms, so we took what we had learned with Missions and applied it to LaunchPads. Once again, those who took part thought this was a valuable contribution to their development.
What all of these changes told us was that, although it was the potential of money that opened the dialogue with many companies, it was the other forms of support that really helped them. There were already lots of places to get this sort of help, so all we had to do was co-ordinate. Too often Government programmes are launched with a fanfare and promoted by Ministers as the thing that will really make the difference, but the truth we saw was that what companies need is support appropriate to where they are on their journey and co-ordination between the different providers (often set up over time and unaware of what others are already doing)
Which brings me to the recent drive by the Government (or possibly one Minister?) to replace grants with loans. Although loans might be appropriate for later stages of projects when commercial success is more assured, the reason many companies talk to Innovate UK in the first place is that they want the money. Governments (and their surrogates like Innovate UK) tend to make lousy banks, and even banks sometimes get it wrong when talking to businesses because finance is very different from manufacturing, healthcare and most of the physical industries everyone says they want to support. What was spun out of DTI in 2007 was a funding agency. What we tried to turn it into was what companies said they wanted – an innovation agency. It’s a shame bits of government don’t understand “the market” and want to turn it into something less effective.
The title of this post was stolen from Nick Appleyard who came up with it when frustrated with the focus of money – he knew that what made a difference was the other support we learned to give companies not because we were clever enough to invent them but smart enough to listen to those we were trying to help.