A model for Designed Business Support

Market failure

At some times and in some places there exists market failure (i.e. business is not being done where economic opportunity suggests it should be). Where there is a market failure, it is an article of faith amongst economic development professionals that effective business performance can be primed by the application of Business Support – which is thus a common feature of economic policy.

Debates around business support are usually characterised by three questions:

•        Does it make any difference?

•        Is it value for money?

•        Should it be done by public or the private sector?

There is a more fundamental question – should we be doing it at all? The answer requires a return to the basic principles of business management and economic performance.

The core functions of a business

There are 5 core functions to any business: Strategy, Finance, Marketing, Operations and HR[1]. Each is a necessary though not sufficient condition for business success – all need to be present and active for optimal business performance.

Levels of competency in business

In each of the 5 core functions, every business can be classified broadly as Inexperienced, Experienced or Expert, although that level of competence changes over time and with particular situations. For example, a business might be inexperienced in Operations at first and gain competence as they grow, or they may be Expert in marketing in the UK, and Inexperienced in marketing internationally.

Business support requirements

Where a market failure is deemed to exist, businesses need three things to prosper – Information, Advice and Assistance. These three assets are held to be generally deliverable by any competent business support service, and frequently quoted as being the “added value” provided to business.

However, information, advice and assistance are specific business requirements, and demand specific competencies in delivery. For example, “Assistance” might include grants or soft loans, help in identifying opportunities or brokering of network contacts. It does not include displacement (doing the business for the client), substitution (replacing paid services of professional firms) or rent-seeking (creating dependence in the client business.

To match business need, support measures must be well thought-out, imaginative, practical and cost effective. They must provide information, advice and/or assistance where, when and in the manner appropriate for the business, not the provider. This requires a deep, strategic, client diagnostic and some practical gap analysis.

The business support solution

The 3 levels of business competency and the 3 types of business support can be used to form the basis of a matrix for each of the 5 core business functions. This matrix helps in clearly defining the nature of business support that will fulfil the specific business need to acquire a particular business competency.

Below is an example of the Marketing matrix for a business experienced in exporting to the USA and aiming to enter Canada. They may be inexperienced in competitor analysis or product adaptation (sizing, customer preferences),  and therefore need information. They may be experienced in US marketing, yet still need specific advice on how to approach the Canadian market (language, geography). And they may be expert in US compliance issues and managing agents, yet still need assistance steering through a new regulatory structure.

The Business Support Model

The matrix identifies in straightforward fashion the practical nature of support required, and can be used to frame a “shopping list” of services from providers (including professional service firms) to customers, based on specific business need.

This forms a basis for the optimum model of effective business support

1. Clarify the business need – diagnostic and assessment
2. Identify the level of competency – analysis and recommendations
3. Draft the Matrices – service specification and partner identification
4. Deliver the appropriate support – provision and evaluation

There it is. A little strait-laced compared to my usual style, yet there may be something in it.What do you think?

JW

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[1] “Raising the quality of our customers”, Williams J, presentation at UKTI International Trade Conference, London  2003 Two further functions could be included – IT and R&D. These are here deemed part of Operations (IT) and Marketing (R&D).

Yes – and what IS "the one thing"....?

The Government has given us a budget for growth. Enterprise Zones, tax relief on start-up investment, cuts in corporation tax, even rules for planners “to prioritise growth and jobs”. Yet is this the right stuff?

The London Thames Gateway is Britain’s greatest business opportunity for a wide range of sectors – low carbon technologies, creative & digital media, hotels & leisure, logistics, finance & business services – yet, under-performance remains. With 30% of London’s population, east London has only 19% of London’s businesses, and (outside Canary Wharf) less than 2% of London’s foreign direct investment.

This isn’t logical. Research by Oxford Economics indicates that east London could provide an additional £21.4bn to London’s economy from existing businesses, new start-ups and inward investors – and to get this we need to improve in business attraction, formation, retention and performance.

So – what should we be doing? More precisely, what would you do?

Imagine for a moment, you are the Chancellor. It’s March 2012, a year from now, and things have gone rather better than planned. The economy is picking up a little, the country is looking forward to the Olympic & Paralympic Games, and someone in the Treasury has just found £100 million at the back of a draw somewhere (the way they do, from time to time). What an opportunity!

You can do whatever you like with this money. It’s new money, unexpected money, and you can spend it any way you want without jeopardising any other policy, programme or initiative. You can take ten years to spend it, and no-one will be hurt or disadvantaged. It’s the chance of a lifetime – a chance to try something that’s never been done before – an economic growth initiative that isn’t driven by politics.

And so you cast your eye around the country. You see how important London is for the UK economy, you see how important east London is for the future growth of the capital, and now you know where to spend the money. Not easy, though, to know quite where to focus. Grants and allowances? Skills? New technology development? Whilst £100m is a lot, it's still not enough to splurge on pointless, short-term, make-work schemes.

Gateway to London is giving London’s best economists the chance to decide what the Chancellor should do to make sure that east London hits that £21.4bn growth target. We’re inviting economists from the Bank of England, the CBI, the capital’s foremost business schools and economics editors at all the major media to give us their view on the one policy that would make the biggest difference to east London’s growth. And we’re giving them until June to decide.

Let’s see whether the Chancellor and the experts agree – given £100m and ten years to spend it, what is the one thing that you would you do, to drive growth in east London’s economy?

Give us your answers – and stay tuned for the answers from the experts.....

What does it take to create a job?

No, I mean – what does it really take?

We have about 120,000 unemployed people in the London Thames Gateway. We also have about 120,000 businesses. If every one of those businesses were to create just one job, we could banish unemployment in east London.

Okay, that’s maybe a mite simplistic. Whichever way you look at it, though, if every business in east London created just one job, that could provide employment opportunity for most of our people.

Of course, it’s not enough to know the need – to get the jobs, we also need to fulfil that need. So, is there anyone who could say “If you tell us what you need to create just one job, we’ll provide it, or help you get it”?

Well, yes, actually. Including Government departments, councils, enterprise agencies and the rest of us, there must be 30 organisations in east London to help business do better. And that’s without counting all the private sector consultants and advisers who do that stuff anyway for money.

Some of those organisations are already doing good work. Just not enough of them. Otherwise, we’d have no unemployment, right? If the 120,000 businesses could tell us exactly what they need to create just one job each, then the great army of business support ought to be able to find it.

So, here is my two-fold challenge for east London....

Firstly, I challenge those 120,000 businesses to describe exactly what it would take for each of them to create just one job. And I don’t mean a grant – I’m talking about what would generate sufficient profitability to justify paying one more permanent employee. More sales? Lower costs? Tighter credit management?

Secondly, I challenge the great business support network to fulfil those business needs. And I don’t mean writing a strategy or forming a committee or pointing people to a website. I mean sitting down with a business person in their office or factory or home, listening to them, and giving them information, advice and assistance that makes an immediate difference to their business.

We may not be able to create 120,000 jobs in east London in a single year or even three or four. Yet, to get the kind of private sector job creation we need to lift us back into business growth, we need to get real and get moving.

So let’s do it. Let’s get every business to take the East London Job Challenge right now, and tell us what they need to create just one job. And then let’s help them do it.