Innovate or become irrelevant is what the future holds for local economic development policy and practice. In this era of low public investment, local economic actors and leaders need to become star entrepreneurs, deal makers, innovators, networkers, facilitators, and brokers.
There are tremendous challenges facing the UK and world economy. Policy making and policy makers must innovate themselves or become irrelevant. Localism is about rising to this challenge.
In July, I was asked to speak at an event at The Work Foundation about innovation and cities. Having done some work on this several years ago with NESTA, I summarised that as well as some thinking about how local areas are going to have to deliver change and progress in their economies with not a lot of government funding around. You can view my presentation slideshere. In this blog I’ll summarise what’s new in my thinking.
BEYOND PLACE SHAPING
I think we’re well beyond the model of development and regeneration that revolves around property investment, and high levels of public expenditure – typified by the tag “place shaping” often used to summarise the previous government’s approach. For the next few years at least, we need to inject such a level of dynamism and entrepreneurialism into local economic development that has not been seen before.
Once the buzz around new structures such as Local Enterprise Partnerships and Enterprise Zones, and the promised new fiscal tools for local authorities starts to wear off, localities will still need to make positive things happen.
To make progress, leaders will need to prove that they can deliver tangible economic growth and benefits. In the absence of all but the smallest dollops of public cash, they will have to do this via private businesses and the use of existing assets and relationships.
THE NEW REALITIES
First of all, there’s no money – central government funding for subnational economic development and regeneration activities is now at 20% of previous levels.
There’s precious little public capital expenditure – to wave at businesses and to use as incentives.
There are great expectations – of localism and LEPs. Expectations are that they will replace RDAs, despite having only a tiny fraction of the resources, virtually no executive staff, and none of the statutory powers.
Localism is a golden promise. There could be a new era for local economic development. But to make this happen we need local powers and finance ASAP, but we also need new capacities and innovative projects and activities to make these powers and new resources go as far as possible.
The competition is fierce. And its your neighbouring local areas, the devolved nations, BRICS and almost any other nation you could mention. For example, France just announced €35 billion of funding for science and technology.
Big brother isn’t watching you – Whitehall is in the middle of being vastly slimmed down. LEPs and local authorities aren’t as duty bound to follow the same rules as Whitehall (as RDAs were).My advice is to interpret Localism powers as widely as possible. Its a time for trying new things and to abandon the precautionary principal that is tatooed inside every whitehall civil servant’s eyelids.
CAN INNOVATION AND ENTERPRISE HELP?
Place shaping is still important but… we need to RAPIDLY deliver economic development and growth now. The economy has been through the most serious recession since the great depression, and recovery is lacklustre. If we are to undertake any activities to help promote and develop our local economies – they need to make tangible impacts now.
Innovation and enterprise is much more about markets, networks, and relationships. New ventures – don’t necessarily require expensive new premises or high speed rail. For example, when I did research back in 2001 about the property and premises needs of the IT and computer games cluster in Dundee there was almost universal feedback from businesses that they needed cheap offices with fast reliable internet access. What they didn’t want was to pay double the rent for a shiny new office in a science park. Dundee had lots of cheap office space and with direct access to the fibre optic cable network that ran from London all the way up to Aberdeen.
We’re in a ‘game changing’ time for people who are involved in developing their local economies. Its not so much about chasing central government cash any more, and ticking the right boxes. Its about creating a reason for your city, county or town to be “sticky” for innovation and entrepreneurs. Each city needs USPs and characteristics that make entrepreneurs and innovators want to stay/come.
There’s less emphasis needed on being ‘entrepreneurial’ with government sources of grants and finance. Less energy needs to be put into designing economic strategies and priorities that dovetail with government policy pronouncements. Instead, we’re going to have to convince the business community that when we take their business rates, or congestion charge funds, we will make very productive use of these funds that will definitely have a payoff for businesses in the long run.
Of course, some local authorities have a good track record of being very business friendly and entrepreneurial, such as Reading Borough Council. The new situation is quite challenging – as localism will quickly have to prove that it can make every investment count for the local economy and business community.
More emphasis on services innovation is needed
The UK is an economy which is dominated by service industries. We are constantly harping on about how service industries are our global USP etcetera. Yet there are no active UK policies for innovation in services. Instead we have remained focused on science and technology and the static model of scientific discovery and commercialisation. The traditional approach to product innovation is incremental, formal, has fewer actors and is based on formal relationships and roles.
Services innovation is different to traditional product innovation. Services innovation occurs through new business models that are flexible and creative. Innovation in service delivery and new customer interfaces is common – as seen in the use of new ICT apps and ICT infrastructure. For example, itunes is hailed as revolutionary – because it provided a business model which solved the difficult conundrum of monetizing online music sales, and married consumer demand with new technology.
There is also innovation through new service-product offers. Futures, foresight, centres of excellence, and new service launches are often based on radical change.
Services innovation comes about through informality, networking, and interdisciplinary interaction. There is an emphasis on distributed capacity – there are many sectors and many actors.
Services innovation R&D spend and activity are less formal and less tangible. Services innovation requires very different policies and actions to those for traditional science and technology based innovation.
THE WAY FORWARD? A NEW ERA FOR PROMOTING ECONOMIC GROWTH AND DEVELOPMENT IN LOCAL AND CITY ECONOMIES
In an era where there are fewer resources, and we need solutions, there is but one choice: local economic actors must become entrepreneneurs. When there is little capital, and we need rapid economic growth and recovery, based on the private sector – we will need to emphasise the following factors:
- CATALYSE: There is a need for entrepreneurial actors in the city or local economy – who can bridge public, private, non profit, education sectors
- SOCIAL: More emphasis on “people” side of innovation and entrepreneurship – networking, brokerage, deals, forging joint ventures
- PRIVATE LEVERAGE: clever use of private sector – probono work, networks, CSR, 3rd sector initiatives
- MAX EXISTING ASSETS: both hard and soft – underused university/public buildings, diaspora networks, ‘city ambassadors’, new FE college flexibilities
Local economic actors and leaders need to become star…
- entrepreneurs – local economic development is now far far more about thinking up new ways of delivering local growth and prosperity and then findings the resources and assets to help this, and much much less about thinking about reasons to apply to your local RDA or the Department for Communities and Local Government for Grants; or about signing up to a Multi-Area Agreement.
- deal makers – local economic development will have to be much more ‘hard-nosed’ in terms of cutting deals with commercial companies and developers. However, there will also
- innovators –
- networkers –
- facilitators –
- brokers – nowadays, we need to make the most of our existing local assets, talents, networks and businesses. We will have to broker relationships, and combine these assets and talents in new ways.
Of course, local economic actors have long practised this – but mainly towards parts of government to try and unlock and spend public money. Now they need to reorient themselves to private sector entrepreneurs and investors. They have no other choice.
POLICY MAKERS MUST INNOVATE OR BECOME IRRELEVANT
There are tremendous challenges facing the UK economy. Policy making and policy makers must innovate themselves or become irrelevant. Localism is about rising to this challenge.