Building ‘local’ eco-systems to support innovation

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Building ‘local’ eco-systems to support innovation Nesta’s recent report The State of Small Business highlights networks – among key levers of influence, as does the recent report from the Scaleup Institute. Hubs, like Scotland’s CivTech programme can be supported by online networks like MIT’s U.Labs which link groups together effortlessly.

‘Business networks are an important source of resource and advice for SMEs’ says Nesta’s recent report (1). ‘From the perspective of local authorities, business networks…can be established and maintained with relatively little financial commitment’.

‘Network theory points to how networks can provide an SME with cost-effective access to external resources – and many of those interviewed for this report (both SMEs and local authorities) highlighted the practical benefits of sharing knowledge and experiences with peers.’

‘In effect, cooperation through business networks gives small firms economies of scale without diseconomies of size.’ And research has shown that access to business network support among SMEs has a positive relationship with business growth.

The recent Scaleup Institute’s report (2) adds that ‘Scaleup business leaders most value locally-rooted resources to foster their growth. They want more local solutions tailored to their needs: more peer-to-peer networks where they can meet their counterparts, easier access and deeper connections to local educators, university research facilities, and UK collaboration partners whether that be in local authorities, large corporates or Government.’ And recommends that ‘local stakeholders signpost effective mentorship programmes and matchmaking programmes between peers and non-executive directors who have scaled businesses before.’

The Scottish Government’s CivTech programme (3) – for making use of outside expertise for developing new solutions to persistent public issues – made use of  MIT’s U.Lab (4). This programme invites people ‘to form Hubs (any place where course participants meet and learn together) and coaching circles (self-organised groups of five that set their own meeting times and use Google Hangout or Skype to engage in a structured deep listening and dialogue process)’. For the Scottish Government and its CivTech programme, it has proved itself a useful networking tool. ‘We found it to be one of the most effective learning experiences we’ve ever had,’ reports one participant. ‘It builds skills we need in working collaboratively and co-producing outcomes with others; it is a highly participative approach – anyone can take part free of charge; it builds on people’s and communities’ assets and strengths; and it champions the use of improvement science.’

References

John Whatmore, December 2017

 

 

 

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Village Capital identifies issues and then builds teams to attack them

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Let’s try Village Capital’s proven model for tackling big problems in local areas

Since 2009, New York-based Village Capital has sought to tackle real-world problems in local areas, by using the principle of peer-selection, and investing and leveraging capital. It has sought to focus on big problems, and to tap directly into sources of expertise and of funding that relate to them.

Village Capital’s mission is to find, train and invest in entrepreneurs solving real problems. If MIT’s REAP works for entrepreneurship on a national scale (see www.johnwhatmore.com October 2016), VilCap works for it on a more local scale (see also my website Nov 2013).

It has concentrated on certain sectors, namely those that are about the essence of our future:

* access to opportunity for all communities (health, education and financial inclusion), and

* resource sustainability (energy and agriculture); and it has operated mainly in the US, sub-Saharan Africa, South Asia and Latin America,

It has several unique features:

  • it operates entirely by peer selection – of projects, methods and funding;
  • its projects have a sector specific theme that fits with local/regional strengths; and
  • it partners with any organisation that is committed to the same objectives.

Aside from the contributions to life in the places where it works, (which are effectively incalculable), it has supported over 500 ventures in 45 programmes, made 72 investments with a survival rate of over 90%, leveraged over $200mn of additional capital and created almost 10,000 jobs.

Examples include a company in Cincinnati which focused its programme on innovation in water; a company in Guatemala which focused on the future of its agriculture-based economy; and Philadelphia launched a financial technology programme building on its history of financial services R&D.

It is oriented towards social and public enterprise and its underpinnings, and bears little resemblance to the venture capital based model of the commercial startup world (with its idea-lite pop up entrepreneurs). And its methods run counter to the accepted wisdom of that world, in that it relies on expert entrepreneurs and collaborative working.

How do you find and train entrepreneurs are topics that currently concern Vilcap. The parallel here is: is the pool of lead investors/serial entrepreneurs big enough and/or sufficiently widespread; and how can the pool be grown. My work, supported by the then Department of Trade and Industry was clear but not easy to implement: they are essentially learners by experience! (Is failure a useful stepping stone?)

What better model could there be for the Scaleup Institute to espouse, and enable it to work with LEPs to revive the fortunes of run-down areas such as Grimsby, Toxteth or Tottenham?

John Whatmore, October 2017

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