Re-shaping support for SMEs

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Making the most out of young businesses Lessons are arriving from all sides about early-stage businesses (Village Capital, Nesta, Scaleup Institute, Growth Builder, IDEO). What do they tell us? Shouldn’t Innovate UK be taking a bigger role in the support of innovation practice?

 Most striking is the extent to which Accelerators – a fast growing phenomenon – have become the province of corporates. They force new businesses to focus not just on good ideas but on important (commercial) issues; they know their own field – its problems and opportunities; they provide invaluable support; and they are willing and capable investors (Wayra Lab, Cisco, John Lewis, and many others.)

However, this does leave great swathes of the population and of the economy untouched by support for innovation eg the public sector, several industries, large parts of the country and the everyday lives of most people. The Nesta report identifies some; and Geoff Mulgan, its Chief Executive, has focused on others, not least in the public sector.

The main sources of funding for Accelerators are now Corporates, the Public sector and Philanthropics. Venture Capital is a source for only 8% of Accelerators (and 2% of Incubators). The Nesta Report reveals that in the UK both Incubators and Accelerators rely heavily on public funds – from a variety of sources (in many areas and sectors for a substantial proportion of funding and in some, completely.)

It is now well recognised that the greatest opportunity for the development of entrepreneurial eco-systems is in ‘sectors that have a deep and local focus’; and the Scaleup Institute is busily working with LEPs to help them to do so.

However, innovation strategy and practice are evolving; and there is still little experienced management of proactive support.

Recent research by IDEO revealed something surprising: neither a more traditional approach to product development – coming up with three good options, analyzing them, and choosing one to move forward with, nor the lean startup approach – taking a best guess, piloting it, and then pivoting based on what works – is the most effective way to launch a new product. Instead, when teams iterate on five or more different solutions, they are 50% more likely to launch a product successfully.

‘Entrepreneurial support organisations are critical infrastructure for cities, communities and for corporates; and they too need clearly articulated support’ says Village Capital, a major US philanthropic business. The most common form of support is mentoring, but the promotion and management of mentoring (and of support in general) is a role that is extremely rare, but much needed, and rarer in Incubators than in Accelerators. Moreover a different format of support programme is also emerging – in the form of regular monthly meetings – especially of hi-growth businesses – based round collaborative learning.

There is at present no body that adequately encompasses Incubators and Accelerators – to help steer policy, identify best practice, and foster training and development in innovationeering. Innovate UK should take urgent steps to create an appropriate KTN.

John Whatmore, May 2017

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Open Innovation’s innovations

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Open Innovation’s innovations
Corporates are articulating their needs and opportunities for innovation; and using intermediaries to search for innovators with ideas, and to provide candidates with a period of intensive development.

Innovation has been the top priority for corporates and their CEOs for a year or two now, but it has proved tough to deliver. Searching the firmament for young stars that might support life while one’s colleagues get on with the existing business is a lonely task. So Scanning the periphery requires altogether different tools and the mindset of an enthusiastic poly-math. Revolutionising an established business is a rare feat.

For at least the last decade, the rapid evolution of enabling technologies has provided competition with a new source of opportunities. Now the nature of innovation has produced another stimulus to technological competition. ‘Disruptive’ innovations threaten not only to outdate single organisations (eg Kodak) but to reshape entire industries (eg publishing).

So organisations are now looking for their new products and services, processes and business models across the entire spectrum of technologies; and their research and developments functions are turning into search and deploy functions, whose task is to scout for new technologies that might serve the functions and customers of the business in entirely new and different ways – before their competitors do so for them.

The knack is of course not only to identify some new invention that might lead to marketable new products or services etc, but also to be able to develop it rapidly into a useable or commercialisable form and bring it to market or into use. These distinct aspects of the open innovation movement can be seen in the more systematic and extensive use of scouting for interesting ideas; and in the use of periods of intensive development for potential candidates.

Several organisations have adopted the approach of articulating their needs and opportunities for innovation, and inviting interest from entrepreneurial talent. A consortium of corporates in the Food and Drink Industry assembled a shopping list of areas in which innovative ideas were sought, and then ran a day with the Cambridge Institute for Manufacturing to which interested parties were invited for discussions. BAe has run a similar day under the auspices of the KTN; and Philips (with techUK) has just invited interest from people and organisations with potentially innovative products or ideas in the areas which they have identified as among their needs and opportunities for innovation.

FinTech Lab London was sponsored by a group of banks whose interest was in developing possible new products by participating in an Accelerator (with Accenture) – in which carefully selected small business were brought together for 13 weeks of intensive development and introduction to relevant people in the banks – a model that other clusters will undoubtedly follow. Startupbootcamp has recently run a similar Accelerator in London under the Fintech banner – for SMEs with IT products that might be of interest to financial institutions. Other examples include Traveltech, Wayra Lab (Telefonica) which runs a continuous programme of Accelerators – each of 16 weeks, John Lewis, and Barclays Bank. (As short periods of high intensity, Accelerators have an application process that is open to all, but is usually competitive; they provide pre-seed (subsistence) funding; they focus on small teams, not on individual founders; they provide fulsome support, with intensive mentoring; and work with cohorts or classes rather than single businesses; all in exchange for equity.)

BioCity’s latest initiative in Nottingham combines a search process with a development programme, and we will probably see other clusters, and perhaps other organisations following this route in the near future, and looking to established intermediaries, perhaps local organisations working in partnership with local incubators (franchised by Techstars or Startupbootcamp?), to help them organise their searches.

John Whatmore
January 2015

A new Accelerator – in retail

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John Lewis, the latest corporate to launch a technology incubator
Organisations of many kinds are increasingly looking to incubators for their innovations – new products, services, processes and business models, but incubators from which they can quickly elicit something useful. Accelerators like this one – to be held at Level39, Canary Wharf’s innovation centre – are becoming increasingly specialised – to sector, such as this one in retail.
John Lewis is to launch a technology incubator called JLAB that will give one start-up a £100,000 investment in return for an equity stake in their company, and they’re hosting the programme at Level39’s Innovation Quarter, in Canary Wharf, where innovations are nurtured in a menagerie
of Hackathons, hatcheries, Accelerators and Incubators.
This development follows in the footstops of Finovate and Fintech Lab London, the former a programme that invited a large number of SMEs with technology that might be of value to the big banks to come and make the briefest of pitches – all in one day. Fintech Lab London brought together a small number of carefully selected SMEs to enable them to introduce their products to the big banks through a 13-week programme in which chaperones from the banks helped them to meet relevant people in the banks.
John Lewis has partnered with entrepreneur Stuart Marks, who invests in companies specialising in big data. “There are one or two retailers that have their own in-house development teams. The one that comes to mind is Tesco, who have developed Huddle internally. But there is no one in the UK that has done what we’ve done – this is not a corporate venture fund, this is about inviting companies from the outside to come in but with a very John Lewis centric approach that is unique”, said Stuart Marks.