For those who have followed the UK’s Industrial Strategy the most eye-catching elements are likely to be those addressing the Grand Challenges and driving forward the frontiers of research and innovation. However, I would like to highlight and celebrate a much smaller announcement, the Business Basics Programme, to ensure that its significance is fully acknowledged.
Reports on the UK’s poor productivity performance are hard to avoid. Without a clear absence of productivity-enhancing innovations many have pointed, at least in part, to the slowing diffusion of such innovations, concerns that are not unique to the UK.
This is not just an issue for making up lost ground. If the UK economy is not supporting the diffusion of existing innovations, there will inevitably be a concern for the UK’s ability to realise the full benefits of new discoveries.
A key aspect of this is the apparent failure of many SMEs to adopt tried and tested technologies and management practices. The CBI has talked about the need to shift businesses from being ‘Ostriches to Magpies’ and estimate that tackling the ‘failure to adopt’ could add over £100bn to UK’s gross value added. More recent McKinsey research points to the substantial productivity gains from greater digitisation.
But can policymakers actually boost SME productivity by encouraging the adoption of current technologies and business practices? If so, what are the best approaches to use? In particular, can support aimed at changing the behaviour of individual businesses be cost effective?
Launch of the Business Basics Fund
Earlier this year I found some evidence that allowed me to feel confident to say yes to the first question but precious little to address the second - this is despite a long history of interventions in this area. My conclusion was that it is time to experiment, an approach that Nesta and the Innovation Growth Lab (IGL) have long advocated.
The Business Basics Fund (BBF), that sits within the wider Business Basics Programme, embraces this experimental approach. IGL is therefore very pleased to be partnering with BEIS and Innovate UK with its delivery. Over the next 4 years, the programme will support a range of projects that test innovative ways of encouraging small and medium-sized enterprises (SMEs) to take up productivity-boosting ways of working and technology
"With this move, the UK is taking a lead in applying experimental methods to boosting productivity – much the best way of ensuring that in the long run public money goes on programmes that really do work" - Geoff Mulgan, Chief Executive, Nesta
Through this open calls, the fund reaches those with potential solutions to the barriers that slow diffusion and encouraged them to put these to the test. This approach to harvesting new ideas is often underused and the range of projects submitted to the first round bodes well for the future.
But crucially the fund is not just about finding and trying new ideas. Larger projects have to apply evaluation methodologies that will make it possible to draw robust conclusions on what does or doesn’t work - whether it be the overall impact of an intervention or small tweaks in its delivery. With randomised controlled trials (RCTs) widely recognised as the ‘gold standard’ for proving causal impact, it is this methodology that the fund targets.
As Geoff Mulgan, Nesta Chief Executive, commented at the fund’s launch “with this move, the UK is taking a lead in applying experimental methods to boosting productivity – much the best way of ensuring that in the long run public money goes on programmes that really do work”.
The IGL team, assisted by Nesta colleagues, looks forward to playing our part in making BBF a success. We will help to build a strong portfolio of policy experiments that will provide direct benefits to the supported SMEs but also yield new and robust evidence on the effectiveness of different approaches. We also hope that it will encourage the wider adoption of this experimental approach, contributing to the overall aim of raising the efficiency and public benefit created from innovation, entrepreneurship and business growth policies.
Interested in applying for support to run an experiment or to learn more about the programme itself?
BEIS have now published information on the second round of the Business Basics Fund with details about the funding available, the application process and further guidance.
If you are interested in hearing more about the Business Basics Programme, BEIS’s adoption of policy experiments and wider efforts to raise productivity, then join us at IGL2019 in Berlin on 21-23 May. Where we will be joined by Rannia Leontaridi, Director of Business Growth at BEIS.