Unpicking the productivity puzzle – What have we learnt from the UK’s Business Basics Programme?

By James Phipps & Rob Fuller on Wednesday, 28 February 2024.

This is an updated version of a previous blog published in 2022  following the publication of our full evaluation report.

The question of how to raise productivity among small and medium-sized enterprises (SMEs) has long presented a challenge to policymakers around the world. The UK in particular has some of the most productive businesses in the world, but also a large number of SMEs with relatively low levels of productivity.

In 2018, the UK government’s business department worked with Innovate UK and IGL to launch an innovative approach to this problem, creating a fund to experiment with interventions to boost productivity among SMEs. Under the Business Basics Programme, business-support providers – including public-sector and private sector organisations, universities, local councils and others – were invited to test approaches to promoting adoption of technologies and management practices that are thought to have the potential to increase productivity. Seventeen of the projects funded were set up as randomised controlled trials (RCTs), intended to generate robust evidence about the effectiveness of the interventions. The other 15 projects were conceived as proof of concept pilots, aimed at exploring the potential of interventions at an earlier stage of development.

These initiatives varied in how successful they were. Some projects didn’t take off, due to implementation difficulties, a lack of engagement from SMEs, or – in the last two years – the disruption caused by the Covid-19 pandemic. But this was to be expected: the Business Basics Programme enabled organisations to take risks with novel ideas and to learn lessons while testing at a relatively small scale. The commitment to evaluation meant that teams were able to identify the sources of ‘failure’ and generate evidence to inform the design of future programmes.

On the other hand, several of the interventions have proven effective – meaning that they demonstrated at least the initial changes in business behaviour that is believed will drive productivity and growth in the longer term. Here are some of the most positive results we’ve seen from RCTs funded under Business Basics:

  • An online training programme on Operational Coaching for SME managers implemented by Notion Ltd resulted in SME managers approximately doubling the amount of time they spend coaching more junior employees, and a corresponding decrease in the time they spend on day-to-day management. As an online, self-guided training course, Notion’s programme has the potential to be made widely available to SME managers at low cost. You can read more about the programme and the results of the trial here.
  • In a programme run by researchers at City, University of London, SME managers were trained to use a ‘scientific’ approach to decision-making – meaning that they would formulate and test theories and hypotheses about their business models. This led to participants making more pivots in their business strategy when necessary and to faster growth during the subsequent months, although most of these positive impacts are observed only among more established SMEs. This approach has now been shown to be effective in several trials in the UK and Italy, with further large-scale RCTs being carried out around the world. More details are available here and here.
  • The Business Boost programme carried out by Start and Grow UK consisted of a series of workshops aimed at young microbusinesses with high growth potential. This was found to have had positive impacts on businesses’ adoption of modern management tools (such as the use of SWOT analysis and a business canvas), and in setting out a positive vision and strategy for the business. Two of the distinctive features of this programme – peer-to-peer interaction during the workshops and one-to-one follow-up sessions with mentors – were highlighted in feedback from participants as being particularly valuable. There are more details in this blog post or the full report here.
  • Start and Grow UK worked together with Lancaster University Management School on a trial of a second programme, Evolve Digital, a series of facilitated peer-based workshops for small family-owned firms. The programme was successful in building participants’ confidence in their ability to use digital technologies. Significantly more of the participants planned to adopt the use of new technologies within six months than did a control group that had access to self-guided materials only. Read more here or in the full evaluation report.
  • The benefits of facilitation and peer interaction were also highlighted by the Manufacturing Connect Lancashire project. SMEs that attended two online events – in which they had the opportunity to interact with existing technology users and application experts – were more likely to complete the programme than did businesses that offered access to the content in the form of self-guided online materials. Overall, a quarter of the participants reported positive impacts in terms of their intention to adopt productivity-enhancing technologies, with some moving to immediate adoption. The evaluation report is available here.

In each of these cases, there is strong potential for rolling out the interventions at larger scale, using this as an opportunity to examine the longer-term impacts that were beyond the scale and scope of these initial trials.

In addition to the RCT results, many of the interventions that were tested at a smaller scale under Business Basics were well received by participants and are good candidates for further testing. These are some of the promising approaches that have generated interest when shared with policymakers:

  • EDGE Digital Manufacturing’s Digital Breakthrough South East project, which involved a diagnostic survey, workshops to set strategy and a plan for digital adoption, and referrals to other organisations for further support
  • The Digital Benchmark Index developed by Winning Moves
  • Tenshi Consulting’s Ideact programme of training on design thinking
  • Health and lifestyle assessments for SME employees, carried out by Sheffield Hallam University
  • Workshops on digital technologies for agricultural SMEs provided under Yagro Ltd’s Tech Check project
  • Exposure visits for SME representatives to larger companies in their area, organised by Cheshire East Council.
  • The ‘Person and the Business’ package from Devon County Council’s Engaging Rural Micros project. This involved one-to-one support from an experienced business counsellor, focusing on the development of soft skills and a growth mindset.
  • Tailored one-to-one advice and support on HR and people management issues, implemented by the Chartered Institute of Personnel and Development under their People Skills+ programme.
  • Petroc’s initiative to arrange placements for further education students (i.e. those in post-secondary education) within SMEs, to support them in adopting digital technologies.

Of course, even the programmes that were less successful in terms of immediate delivery,  have generated a wealth of insights about how to design and implement business-support programmes and what pitfalls should be avoided. IGL has reviewed what can be learned from the Business Basics portfolio in the programme’s final report – do have a look.

We believe that the Business Basics Programme has demonstrated the value of taking an experimental approach to policymaking, making it possible to fail early and learn fast. If you’d like to talk to us about the potential for experimentation, whether applied to individual interventions or within an overall programme such as Business Basics, then get in touch with us at [email protected].