Localism and economic regeneration in cities

December 22, 2011 10 Comments

(Photo by Jorene Rene)

Through the course of this year, I’ve spoken with stakeholders from a lot of cities in the UK about their goals for economic stimulus and regeneration. Often, those discussions start around how cities can use technology to boost economic growth, particularly for small and medium enterprise – in Sunderland, for example.

In very many cases, cities today have a focus on the “digital economy” as a source of economic growth. That’s not at all surprising given the digital economy is a significant and growing part of the UK’s GDP.

However, the digital economy is a very transferable economy; in his frankly titled 2007 paper “How Many U.S. Jobs might Be Offshorable?“, Alan Blinder of Princeton University concluded that “computer programming” was the easiest form of work to transfer from one physical location to another. So if cities want to build sustainable economic growth in the digital economy, we clearly need to think carefully about exactly what forms of “digital” activity that entails.

There are a number of ways to do that; for instance I  met a very interesting company recently, Lamasatech, who provide multi-touch screen solutions. Their technology is slick, exciting and leading edge. And whilst they do provide software, they also provide unique hardware technology. Their multi-touch surface is much more flexible and portable than other solutions I’ve seen. Access to science and leading edge manufacturing and materials are important elements of a successful digital economy.

In a similar vein, there’s a very interesting cluster of wireless technology expertise in Cambridge, epitomised by the Cambridge Wireless Network, and that encompasses science, design, engineering and technology. Some of the developments they’re working on in low-power, long-range wireless communication technologies such as the proposed “Weightless” standard could have a dramatic effect on the cost and feasibility of Smarter City and Smarter Planet solutions.

What’s particularly interesting about the Cambridge example is that it represents a self-reinforcing regional cluster; the critical mass of expertise in the region leads to innovative interactions which continually generate new value. Any other region attempting to stimulate economic growth in the same area of technology would have a significant challenge in developing to the point where it could compete against the Cambridge cluster.

Jay Bal from Warwick University wrote a very interesting paper in 2007 describing his work building online marketplaces to stimulate the formation and growth of such clusters. His West Midlands Collaborative Commerce Marketplace now drives contracts worth billions of pounds sterling every year into a cluster of small and medium enterprises in the West Midlands.

What’s key in Cambridge and in the West Midlands example is that one way or another the specific capabilities available in a particular region are being brought together in ways that create synergies. By design or by history, such regional clusters also have synergy with their physical environments, nearby academic institutions, the skills base created by the local education system, and other factors to do with “place”. In Sunderland, for example, there’s a long cultural tradition of social enterprise which will probably influence the future economic development of the city.

An interesting organisation seeking to exploit and enable these local synergies is Addiply. Addiply offer online advertising content – but they do it by enabling local businesses to sell online advertising space to other local businesses with whom they share complimentary markets and customer bases. By using advertising to create those local linkages, Addiply’s approach is one way to stimulate synergistic growth in local economies. Addiply’s CEO, Rick Waghorn, recently blogged about how he came up with the Addiply model, and how he thinks Addiply can compete against the big players such as Google Adwords by offering a more focussed value proposition.

As we go into 2012 with no let-up in sight from the tough and competitive economic environment we’ve been in for some time, I think these ideas will be crucial in shaping successful economic strategies in our cities and regions. It will be important to all of us that the cities that we live and work in use them well.

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Smarter Cities need Smarter Social Enterprises

December 14, 2011 16 Comments

The SES “Container City” incubation facility for social enterprise in Sunderland

I’ve just been at a great workshop with a variety of social enterprises in Sunderland, hosted by Sustainable Enterprise Strategies (SES). The objective of the workshop was to identify ways in which social enterprises might harness new technologies to help them respond to – and exploit – the dramatic changes coming to social care and health in coming years – such as personal care budgets, Big Society, Open Public Services and GP commissioning of health services.

Mark Heskett Saddington, Director of SES, started off the day with some striking statistics about Social Enterprises – which include co-operatives, employee-owned companies, mutuals, charities and other such organisations. Mark’s team alone support 100s of traditional and social businesses in Sunderland, employing 1000s of staff, mostly from deprived, high-unemployment areas. Their combined annual turnover is in the tens of millions of pounds sterling.

Across the world, the figures are even more striking. 4 in 10 residents of the USA– the world’s flagship private enterprise economy – are members of a co-operative, including 87 million people who belong to a credit union. 13% of Sweden’s GDP and 21% of Finland’s GDP are created by social enterprises. Worldwide, social enterprises employ over 100 million people with a turnover of £1.1 trillion. That’s big business.

People in the social enterprise community are – not surprisingly – passionate in focussing on the needs of their customers, or “service users”, to whom they are often providing some form of care or support. But they’re also passionate about their business model (though not all of them would call it that).

For example, Margaret Elliot told us how she first started a co-operative in Sunderland in the 1970s, a home care provider called “Little Women”. At the time, it was born of necessity: her and some friends, all mothers, needed to work; but needed to look after pre-school children too. So they started a co-operative and ran a nursery in their office premises. More than 30 years later – and now leading an organisation that is franchising itself across the UK and that employs many hundreds of people – she described social enterprise as “a bug” that people catch. She spoke of the power of giving people ownership of the organisation that they work for; and described how it focuses organisational decision making on delivering value to the end users of services.

The changes coming to local public services, social care and health are going to create a new, transactional market in which social enterprises will need to participate, and in which they’ll need to behave in some ways more like private enterprises do today. For instance, many organisations, such as social landlords, that are currently funded by regular grants, will in future have to compete for individual service delivery transactions paid for by individual end users. That’s a dramatic change; and one that will require new processes and new infrastructures that those organisations don’t have access to today.

In a world that is “digital by default”, it’s tempting to think that existing marketplaces – such as Amazon and e-Bay – provide a model that can be emulated. But the language and models of those marketplaces tend to emphasise products and cost, not what social enterprises value – the quality of outcome for the end user of a service.

For example, if you search for branded batteries in the Amazon Marketplace, you’ll find some very, very cheap batteries which have what appear to be high review ratings. If you look a bit closer, though, there are a lot of 5 star reviews that simply state “the batteries were really cheap and arrived quickly”. There are a smaller number of 1 star reviews that warn “I only used them for a week, and then they ran out. They’re obviously fakes!”.

In social care, that sort of information simply can’t be hidden at the end of such a long trail. For all its merits and success, Amazon is clearly not a market that balances economic and social outcomes in the way that Social Enterprises will need. Of course, it was never designed to be, so that shouldn’t come as a surprise. Whilst existing online marketplaces provide rich experience we can learn from, they don’t yet provide the answer.

What I’m sure will happen is that social enterprises will co-create their own markets that strike a better balance. Early examples such as “Shop 4 Support” already exist, though the social enterprises I spoke to yesterday told me that the transaction prices in that market are currently often too high for small social enterprise service providers to bear. There will be considerable challenges along the way – dealing, for instance, with managing online identities and personal data in a way that’s appropriate for sensitive services, perhaps exploiting the initiatives announced recently by the Cabinet Office and Technology Strategy Board on personal data stores and identity.

It’s going to be a period of great change; and of great innovation in the use of technology. And, I hope, of exciting new opportunities to deliver improved outcomes for Social Enterprise.

For me, this is very much part of Smarter Cities. It may not involve instrumenting physical systems such as transportation and water; and it may not in the first place require the application of big data technologies (though I think the need for them will come); but it does represent a striking change in the way city systems will work. In particular, it’s about dramatic changes in the interactions that involve some of the people who need the most help.

But if cities can repeat Mark’s success with SES in incubating successful social enterprises creating new jobs in areas of high unemployment, it’s also an opportunity for economic growth. And whilst the focus of most of this post has been on social care, that’s far from the only sector in which social enterprises are active. Lydia’s House, for example, are a co-operative in Sunderlandwho train local employees from vulnerable backgrounds to produce artistic home furnishings with potential for export from the local economy.

In a previous post, I blogged that growing city economies whilst consuming less resources was the number one concern of city leaders today. If helping people to help themselves in local communities isn’t a resource-efficient way to create value, I don’t know what is. That sounds like the sort of Smarter City we’re looking for.

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Smarter Cities: Doing More for Much Less

December 2, 2011 Leave a comment

(Photo by woodleywonderworks)

Most of my time this week was spent in two very interesting meetings. The first, on Monday, was with a team from the UK Technology Strategy Board shaping a proposal for a Technology Innovation Centre (TIC) focussing on “Future Cities” (the transcript of David Cameron’s announcement of the £200m TIC investment programme is here). The second, on Wednesday and Thursday, was the annual general meeting of SOCITM – the society of IT Managers in local government. I’ll come to the themes that meeting addressed shortly.

Before I do that: just over 2 years ago, I wrote a blog post inspired by the October 2008 issue of New Scientist magazine titled “The Folly of Growth”. That magazine – written in response to the 2008 financial crisis – challenged the assumption that the world’s economy could continue to grow at the rates it has historically. It’s basic point was that such growth simply could not continue based on the current level of environmental resource usage per dollar of GDP created, because there simply aren’t enough resources on the planet.

In Monday’s TSB meeting, representatives from Academia, City authorities, construction companies and technology companies all agreed that City leaders – both Council CEOs and elected Council leaders – had a single overriding priority: maintaining and growing their Cities’ economies, whilst using less resources to do so. Three years down the line from the New Scientist’s seminal magazine, that’s a real vindication of their thesis.

At the SOCITM AGM on Wednesday, Martin Reeves, CEO of Coventry City Council and the incoming president of SOLACE, the society of local government CEOs, gave a visionary plenary speech echoing similar themes.

Martin referred to the very, very challenging financial pressures facing local government (and all of public sector) that were magnified by George Osbourne’s Autumn Statement this week which predicted 100,000s more job losses in public sector.

But Martin said that the real priority was not dealing with cost pressure. He said that the real priority is to carry out a radical transformation of local public service delivery in support of the most challenging policy agenda we have ever seen.

I couldn’t have agreed more.

As well as the unprecedented financial pressures created by the realisation that we have long been underestimating and mis-managing risk on an international scale, we also face global competition between city economies to a previously unforeseen degree. More locally to the UK, GP commissioning, personal care budgets, open public services, “Big Society” and several other central government policy initiatives are forcing enormous changes into local public sector organisations.

The changing role of local government of Cities and Regions is, in my view, the most critical challenge we face today. City and Regional councils are not only the organisations concerned most urgently with the local business development and economic growth strategies that create employment; they are also challenged to deliver increasingly complex services to vulnerable, hard to reach communities at lower and lower cost, whilst working with an increasingly diverse base of suppliers and service providers to do so.

I personally believe that – properly and sensitively applied – technology can be a tremendous enabler of successful change in this context. But we are still in the very, very early days of understanding how to make that work, from the technology challenges of assuring identity in a world of open digital services to the financial and governance challenges associated with defining successful models for shared service delivery.

Trial and error is the only model for moving forwards with this agenda. Doing nothing is not an option – it will result in dying cities, following the unfortunate path taken byDetroit.

And no amount of analysis will reveal the “ideal” or “right” approach. We have never faced these challenges before, so there is no proven “blueprint” for success. We will only learn how to face them successfully by trying the best solutions that we can imagine; and constantly changing and adapting them according to the results that they deliver.

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