The Geography of Innovation: Staffordshire’s Challenges Ahead

In this post, I will look at how higher education, a skilled workforce, culture and networks affect whether a particular place becomes an innovation hotspot.

Starting with house prices, the chart below shows how a high-tech hub can have a long-term effect on house prices. The median price paid for a house in Staffordshire in 1995 was £49, 950 . In 2016, it was £165,000, an increase of 230%. However, in Cambridgeshire the median price rose from £60,000 to £257,500, an increase of 330%. What is responsible for Cambridge’s stratospheric price rise?

Median House Prices Staffordshire vs Cambridgeshire

Since the late 1990s, Cambridge has become a high tech hub, and house prices have correspondingly increased. Also known as “Silicon Fen”, Cambridge Science Park was set up in 1970 as part of a Trinity College project, and there are now estimated to be over 1000 high-tech companies in the CB postcode. Cambridge University is a source of science graduates who can easily move into a local workplace. Previous research has found proximity to STEM graduates to be a characteristic of highly innovative firms (Coad et al., 2014).

Staffordshire aims to reach these heights, and has founded the Cannock Chase Skills and Innovation Hub with an FE college, the Digital Innovation Partnership with Staffordshire University, and the Smart Innovation Hub with Keele University. Startups thrive on network effects, particularly those created by universities who actively encourage

commercial activity. Partnerships with educational establishments are important in creating innovation eco-systems, but what else is important?
Encouraging talent from around the world is important for start-ups. More than half of the top American tech companies were started by first- or second-generation immigrants. Despite lobbying from the business sector, Home Office immigration rules discourage most type of immigration, and graduating students, who are both more skilled and entrepreneurial than the general UK population, are discouraged from remaining in the UK. Staffordshire may lose out from technology unfriendly national policies.

Local politics and culture also play a part in how innovation ecosystems develop (Mack & Mayer, 2016). It will be necessary for Staffordshire’s agencies take into account the specific political and cultural context. Being a place where entrepreneurs and their skilled workforce want to live helps. Stoke-on-Trent’s City of Culture bid has encouraged the cultural venues, cafes and restaurants needed to draw people in. Grassroots development is encouraged, particularly in developing local networks of mentors and entrepreneurs (Baum, Calabrese, & Silverman, 2000). Projects such as the Mercia Centre for Innovation Leadership, and networking organisations such Staffordshire Chamber of Commerce will be important to share ideas, pilot new technologies and foster creativity.

Staffordshire has proximity to higher education institutions, proximity to both the M6 and M1, and ambitious local leaders who are keen on growth. Staffordshire also has cost-effective housing, while Silicon Valley and Silicon Fen have famously unaffordable house prices. A small-two bedroom house in Palo Alto recently sold for $2m. As Ajay Rothan of Mithril Capital, an investment fund, recently asked “How you supposed to have a start-up if the garage costs millions of dollars?”

Further Reading

Baum, J. A. C., Calabrese, T., & Silverman, B. S. (2000). Don’t go it alone: alliance network composition and startups’ performance in Canadian biotechnology. Strategic Management Journal, 21(3), 267–294. https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<267::AID-SMJ89>3.0.CO;2-8

Coad, A., Cowling, M., Nightingale, P., Pellegrino, G., Savona, M., & Siepel, J. (2014). UK Innovation Survey: Highly innovative firms and growth. Retrieved from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/289234/bis-14-643-uk-innovation-survey-highly-innovative-firms-and-growth.pdf

Mack, E., & Mayer, H. (2016). The evolutionary dynamics of entrepreneurial ecosystems. Urban Studies, 53(10), 2118–2133. https://doi.org/10.1177/0042098015586547

Improving small firm innovation

In July 2018, the Federation for Small Businesses (FSB) released a “Spotlight on Innovation” on the state of innovation amongst small businesses in the UK. The report is a welcome policy intervention on behalf of small businesses, who have traditionally been less likely to innovate than their larger counterparts.

The FSB survey was conducted in 2017 consists of 1279 responses from its members, who range from sole traders to those employing up to 250 staff. The FSB sample is smaller than that of the 2017 UK Innovation Survey (13,194 responses) and the 2017 Longitudinal Small Business Survey 2017 (6619 responses); unlike the two government surveys, the FSB surveys is not stratified by region within the United Kingdom, nor by industry. Also, the FSB’s survey is not longitudinal, meaning that it cannot report on trends, such as the UKIS’ evidence that, across most nations, industries and firm sizes, innovation levels fell from 2015 to 2017. Given that innovation trends vary considerably by nation and by industry, this is a limitation of the FSB’s survey.

Finally, there is no data available on the gender, ethnicity, sexuality or other characteristics of small business owners in the survey. Given that underprivileged groups are likely to start businesses because they are denied access to mainstream employment (Marlow et al. 2017. Ram et. al, 2017), it is important for researchers to consider how regulation, market processes and discrimination affect innovation in small businesses.

However, the FSB survey is detailed, informative and throws up some interesting findings.

  1. Avoid the term “innovation” which alienates small business owners

“Innovation” was felt by small business owners to be a technocratic term which did not apply to small business owners. Instead small improvements, also known as incremental innovation, are more likely to the type of innovation practiced by small business owners. In addition, small business owners do not always consider their non-technological innovations to be an innovation. Policy-makers should therefore highlight that new or improved processes, services, organisational changes, and new marketing strategies also count as innovation.

  1. Leadership challenges remain a barrier to innovation

43% of small business owners did not innovate because they had a lack of time. Another 27% could not decide whether or not it was worth the effort. Both time management and decision-making are key aspects of successful leadership. Small business owners would benefit from tax credits to help them take time out of their business for leadership and skills training. Programmes which include tailored mentoring will be crucial to improve leadership skills, such as “Be the Business” from Lancaster University or the Mercia Centre for Innovation Leadership.

  1. Knowledge transfer and innovation diffusion are crucial for success

Sole traders and micro-businesses, which make up the vast majority of SMEs, are more likely to adopt ideas from those around them. Transferring knowledge from customers and suppliers to small business owners will help busy business owners to consider which innovations their firm could adopt. Organisational innovations and improvements to customer experience can be more readily adopted by very small firms than technological innovations .

In summary, the FSB report highlights the importance of using inclusive language when talking about innovation, improving leaderships skills, and sharing knowledge from business networks to be important if small businesses are to improve their rate of innovation. Given that nearly ¼ of small businesses have made no significant business improvement in the last 3 years, there is clearly work to be done.

 

Innovation in Family Firms

The first “Innovation in Family Firms” workshop was organised by Dr Udeni Salmon from the Mercia Centre for Innovation Leadership at Keele Hall on May 1st 2018. The workshop was organised in conjunction with the Institute for Small Business and Entrepreneurship (ISBE) Special Interest Group for Family Business. ISBE is a joint academic and business network which brings academic insight to real-world small business and entrepreneurship practice.

The workshop consisted of three research-informed sessions, which brought lessons learned from academic research to the family firm owners and managers who attended the session.

Dr Udeni Salmon led a self-exploratory session where family firm owners were asked to identify their “Innovation Type”. Based on her PhD research, Dr Salmon has developed a taxonomy of five types of family firm innovator: the – Spontaneous Radical; the Statist Altruist; the Patient Opportunist; the Curious Traveller and the Cautious Conservative. Family firm owners were given advice as how best to make the most of the innovator type so that they can progress both radical and incremental innovation in a sustainable and collaborative way. Family firm owners were quick to recognise not only their “innovator type”, but also those of their family members who had founded the firm.

Professor Claire Seaman then shared her insights from Scotland, including the practical steps that she has taken to develop family firm innovation, such as connecting family firms with academics, policy-makers and communities. Professor Seaman shared her research for the family business networking group Family Business United Scotland. Professor Seaman is currently developing Scotland’s top 100 family businesses. These firms make a huge contribution to the economy by generating £1billion in profit before tax, creating 11% of onshore GDP and by employing 100,000 people.  The participants noted the similarities between Scotland’s rural and small-town family firms, and their firms, based in Stoke on Trent and Staffordshire. Family firm owners suggested that a similar family firm networking club for local businesses in Stoke and Staffordshire would be most helpful.

Dr Natalia Vershinia then discussed her research into the role played by gender in family firms. Family firm owners were able to discuss the ways in which women in their family firms were either empowered to speak their minds, or were silenced. The role of gender in innovation was also discussed including the way that women in family firms were allowed to make and implement suggestions for new products and processes in the firm.

Finally, Dani Saveker, founder of Families in Business and member of a family firm introduced her Global Life Alignment System. The GLAS system can help individuals, including family firm owners, to balance their life and their work. The participants agreed that the pressure of running a family firm can create a life that feels out of balance. Dani was able to share some practical suggestions for how they could use the GLAS system to bring their world back into harmony.

group photo
Family Firm Leaders and Researchers share insights and solve problems

Comments from participants on the day were highly positive:

“I am definitely going to share details of the innovator type with my sister.”

“I found it really helpful to learn that the challenges my family’s business face are not unique to us.”

“I need to find my “Why”. Why am I working so hard? What is my journey all about?”

“I’m going to take a concrete action to connect with the other people from the workshop.”

“I feel energised! I’ve definitely increased my knowledge.”

In summary, there is an appetite from family firm leaders for research-informed learning to help them with the challenges of innovation in a family firm.

MCIL Evaluation: how are we doing so far?

Mercia Centre for Innovation Leadership – how are we doing so far?

An evaluation of the first cohort of the Mercia Centre for Innovation Leadership has provided some important feedback as to the value of the programme for SME Business Owners. The full report is available on request. Please email u.salmon@keele.ac.uk

Overall, SME business owners find the MCIL programme has helped them to improve in key business areas, the majority in strategy development (78%) and product/service sales (78%).

MCIL Improvements Graph Nov 2017
Percentage of Participants Reporting Improvements in Key Areas

The majority of SME owners reported that their business was growing prior to MCIL, consistent with a cohort who had chosen to join a programme focused on growth and innovation. Of these, 49% subsequently reported that their businesses had increased their growth rate during the 6 month programme, 56% reported that their business was continuing to grow at the same rate, and 6% (one participant) reported that their business was growing more slowly than when joining the cohort. The additionality of the project on growth outcomes at this early stage is therefore restricted to the 49% who said their business was growing faster than before joining the project.

While the data from Cohort One is small (n=18), early indications are that the MCIL programme has delivered tangible business, personal, and learning outcomes for the majority of the cohort, primarily through a strategy of collective learning (Wang & Chugh, 2014). Consistent with other entrepreneurship education programmes (Garavan & O’Cinneide, 1994), the need for a balance of learning strategies

SME business owner-managers value the multi-faceted nature of the MCIL programme, which allows them to practice a variety of learning styles.

In particular, MCIL participants valued:

  • Building networks to assist with sharing best practice
  • Implementing practical tools to assist with growth
  • Developing the capacity for strategic thinking

The more reflective participants commented on the importance of spending time away from their business, and also of the use of networks to drive sales. EU and UK policy has highlighted the importance of networks in export-related growth (European Commission, 2015; House of Commons Library, 2014). Many participants, in both micro and medium-sized businesses, reported an improvement in confidence. The social nature of the programme was therefore an important factor in their learning.

Cohort One MCIL Graduation Photo

Subsequent cohorts will benefit from the lessons learned detailed in this report. Watch this space for more updates from the MCIL programme.

What is the single biggest mistake an SME owner can make?

Today’s blog post is by David Lowe, Entrepreneur in Residence at the MCIL programme. David talks to us about the MCIL programme, how it helps entrepreneurs and shares his many years of insights from working with business leaders.

davidlowe photo
David Lowe

What is your role on the MCIL project?

I’m one of four and soon to be five Entrepreneurs in Residence for Keele’s Mercia Centre for Innovation Leadership.  We co-develop and deliver high quality programme content, alongside the academics from the Keele Management School.  We share practical insights to ensure the content of the programme is suitable for practical implementation. We also coach business leaders on the programme on a one-to-one basis to help them grow and develop their businesses.

What skills do you bring to your role?

Strategy is my personal forte, and as a coach/consultant I have successfully assisted a large number of SME’s over the last 14 years to both grow and to innovate. I’m a problem solver by nature, and I’m fortunate enough to have a talent for the assimilation of wide ranging information; either adding strategic value or simply applying my knowledge towards helping to solve the more practical day to day challenges. My colleagues have complementary skills sets: Will Pritchard is experienced in working with start-ups; Carolyn Roberts is a product innovation expert; David Townson is expert in product design.  This means that there is a lot of synergy as well as a lot of energy across the team.

Why do you enjoy your job?

I get a real kick out of helping businesses to solve their strategic problems and to drive innovation. We challenge all of our participants positively, try to ask the right questions, and we help wherever we can with new approaches. I absolutely love what I do.

What is the single worst thing that a business owner can do?

I’d say that the single biggest bad habit that business leaders get drawn into, is where they are doing so much working in their business that they don’t spend nearly enough time and effort working on their business. Indeed, for me, working with business leaders, no matter what the theme or the headline task, it nearly always means actually getting them doing something tangible as opposed to just saying they do it.

Why is innovation important for a business owner?

I also try very hard to get them to buy into the fact that there is very solid evidence of a strong relationship between innovation, growth and profitability: innovative companies do genuinely tend to have higher profit levels for example. Putting it simply…

Innovation = Good

No innovation = Bad

When helping leaders to see innovation as part of their thriving and surviving, I always do my best to ensure that they understand that ‘doing it’ is what actually matters!

Why should an SME owner join the MCIL programme?

Whether working with me or one of my colleagues, we offer energy, enthusiasm, focus, and commitment to making a real difference. We can help businesses get to where they are going much more effectively than they may otherwise have done without us.We are just entering the final phase of delivery for the very first cohort of MCIL, and its plain for all to see that all the business leaders on the programme have benefited as individuals, and that their businesses are all the better for the experience too!

What has been the most exciting MCIL programme achievement?

Beyond the immediate theme of innovation, what’s got me most excited personally is that the companies we are working with are creating jobs! In fact, they are creating significantly more jobs than we’d originally envisaged. This very tangible ripple of new employment that we are helping to drive will have positive associated benefits for the Stoke and Staffordshire area for years to come. This makes me even more proud in terms of being involved in the delivery of this leadership programme.

To set David’s insights into context, try the reading list below.

Further Reading

Working in the Business, not On the Business Geri Stengel for Forbes, June 2012

Dynamic Delegation: Shared, Hierarchical, and Deindividualized Leadership in Extreme Action Teams Klein K., Zieghart, J., Knight A., Zhao Y. (2006), Administrative Science Quarterly, vol: 51 (4) pp: 590-621

 

 

Stoke City of Culture Bid and Innovation

Keele University and the University of Staffordshire are collaborating on the City of Culture bid for Stoke-on-Trent in 2021. I was invited to attend a workshop last week to discuss how we can support the bid.

Colleagues were present from a diverse range of academic backgrounds: criminology, social care, history, human geography, business studies, and sociology. We had a lively discussion on how our varied backgrounds could work together. We agreed on the importance of including people from a wide range of backgrounds who live in Stoke to contribute ideas as to what we could research, to get involved as researchers, and to define what was important about the City of Culture bid to them.

As a business studies academic, I was particularly interested in what the potential impact would be on SMEs in Stoke-on-Trent. Stoke is the largest town in the Stoke and Staffordshire LEP region.  SMEs in this region urgently need support with innovation. Innovation is seen by policy-makers as being crucial, not only for the SME’s themselves, but also for creating high quality jobs and driving economic growth in their region (Department for Business Energy and Industrial Strategy, 2017).

However, the Stoke and Staffordshire region appears to be doing less well than others. The  2015 Community Innovation Survey found that across the government, higher education, and non-profit sectors, the Stoke and Staffordshire region has a particularly low expenditure on R&D.  R&D expenditure is a crucial precursor for innovation. Business enterprise expenditures on R&D is particularly low in the region: Stoke and Staffordshire’s businesses spent only £155 million on R&D compared to neighbouring Cheshire and Warrington’s £1,035 million. The same report finds that Stoke and Staffordshire also has the 4th lowest percentage of businesses engaged in product or process innovation: only 18% as compared to South-East Midlands (the highest) at 34%.

There is clearly a need for Stoke and Staffordshire to improve the innovation activities of SMEs in the region. The MCIL Project (of which this blog forms a part) is a leadership development programme designed to improve the innovation activities of Stoke and Staffordshire’s SMEs.

While Stoke bid is clear that quality jobs and economic growth are reasonable expectations, to what extent can a City of Culture bid encourage innovation?

In the evaluation of the European City of Culture in Liverpool, which ran from 2005 to 2008, the report authors concluded that:

  1. SME businesses in Liverpool and the sub-region were positive about both the change in the perceptions of Liverpool but also about a positive impact on their turnover.
  2. Employment in the creative industries showed a major increase, mostly in contractual, rather than permanent positions.
  3. Retail tourism employment in Liverpool showed above average rises during 2008, but could have been due to other factors, such as a major new retail shopping development.and improved infrastructure.

While increased innovation funding for SMEs may not be an outcome of the City of Culture, there is some evidence that shows that improved “quality of place” has a positive impact on innovation activities. Increased pride in the city, as well as improved cultural facilities and infrastructure, was an outcome of the City of Culture activities in Liverpool. There is some hope therefore that the City of Culture bid in Stoke could indirectly increase innovation activity in Stoke’s SMEs.

References

Department for Business Energy and Industrial Strategy. (2017). Building Our Industrial Strategy. London: Department for Business, Energy and Industrial Strategy.

Garcia, B., Melville, R., Cox, T. (2010), Creating an Impact: Liverpool’s Experience as European Capital of Culture  University of Liverpool

Risual: what a high-growth firm looks like

Risual: what a high-growth firm looks like

The MCIL August 2017 leadership session was all about sales. The two-day session for SME leaders emphasized the importance of ambition and culture in achieving better sales. Luckily, Alun Rogers, co-founder and director of Risual  was on hand to explain how he achieved better sales through a focus on managed growth.

Alun Rogers Risual Aug 2017 photo
Alun Rogers, co-founder of Risual shares his secrets of managing growth

Risual are a Staffordshire based company who provide IT consulting, managed services, and technology to clients globally. Their sales figures continue to be impressive: they achieved a 40.6% increase in sales in 2015, and a 41.4% increase in 2016, based on their latest submission to Companies House. Risual are clearly a high-growth firm.

Alun ascribed their sales success to a number of growth-oriented attitudes:

  1. Being Ambitious: “We wanted to do something and to take it as far as we can”

Alun and his friend Richard Proud set up Risual in 2005 based on a mixture of credit card loans and faith. While ambitious entrepreneurs no longer need to turn to credit cards to source funding (a previous blog post describes the variety of funding sources available: from government grants , to business loans to equity funding), sheer hard work in the early days crucial. Early research into firm growth described the passion of firm owners:

“Small businessmen frequently tend to identify themselves with their firm and to view it as their life’s work, as a constructive creation to which they can point with pride.” Edith Penrose “The Theory of the Growth of the Firm”, 1955.

Illustrating this dedication to their firm, Alun and Richard virtually lived in the business for the first 18 months. They worked 16 hours a day, 7 days a week to pay back their debt and build up client goodwill.

Their determination and effort is typical of the “Introductory” stage of the firm below.

firm lifecycle stages

The lifecycle theory of the firm argues that sales increase as the firm grows over time. As Risual  moved into the second year of their business, they moved into the “Growth” stage. This required them to invest their cash reserves into recruiting more staff.

  1. Focus on Growth: “If you are the product, you don’t scale”

During the next few years, Risual would meet the OECD  definition of a high growth business:  “a firm of 10 or more employees that grows either its employees or turnover by an average of more than 20 per cent per year for three consecutive years.” It is important to note that there have been cautions against using this definition (Daunfeldt, Johansson, & Halvarsson, 2015), particularly as firms grow in different ways. Growth can be organic (as in the case of Risual, which grew through sales) or through acquisition (where a company buys another company and instantly adds jobs and turnover to its balance sheet).

Alun and Richard were looking for organic growth and quickly realised that they needed to recruit more staff in order to grow their business. This was a wise decision. SMEs who recruit more staff than they immediately require (as Alun and Richard did)  are said to have “slack resources” (George, 2005). The slack resources argument suggests that additional staff or funds provide a cushion that allows firms to respond quickly to new orders or to initiate a change in strategic direction. SMEs with slack resources have been found to grow more quickly than those without (Moreno & Casillas, 2007).  Risual now have over 100 employees and are focussed on sales growth and product diversification.

  1. “Stop doing what you love to start doing what you love.”

Over time, Alun realised that he had to focus less on technical innovations (which he loves) to set up processes and structures for the business. In time, this would mean that the business would run itself and he could re-focus on working with technology. One example of how a new process helped manageable growth was in the area of recruitment. Risual use the SWAN formula for staff recruitment which was originally developed by the American Management Association (Thompson & Tracy, 2011). The acronym stands for: Smart, Works Hard, Ambitious, and Nice. Alun explained how he applied these 4 characteristics to Risual:

  1. Smart” people have the right skills for their job.Jim Collins describes the importance of smar people in his business classic, Good to Great, where he wrote about “getting the right people in the right seats on the bus.” (Collins, 2001).
  2. People who “work hard” are essential for growing SMEs. People who are unaccustomed to hard work do not fit with Risual’s culture of doing what it takes to succeed and dedication to the job.

    3. “Ambitious” staff should clearly demonstrate why they want the job.Risual only promote from within. This means that staff do not have to compete with external candidates for a promotion. But staff do have to be self-motivated to provide the leadership that Risual required as a growing company.

    4. “Nice.” Risual’s culture is positive, supportive of others and unconventional. Risual’s values have been crucial to building long-standing relationships with their customers and energizing their workforce. For an example of Risual’s unconventional approach to corporate life, enjoy their “Zombie Employee of the Year” video below:

https://www.youtube.com/watch?v=9NU6ngFwQtM

Risual are now firmly in the “Maturity” stage: confident, with a solid revenue stream from consulting and managed services that funds the innovations developed by their technology division.  Their growth ambitions required hard work, long hours, and structured management processes. They have never lost sight of their values, and have embedded their culture into all aspects of their business.

 

Reading List

Collins, J. (2001). Good to Great: Why Some Companies Make the Leap…And Others Don’t. New York: Random House. https://doi.org/0712676090

Daunfeldt, S.-O., Johansson, D., & Halvarsson, D. (2015). Using the eurostat-OECD definition of high-growth firms: a cautionary note. Journal of Entrepreneurship and Public Policy, 4(1), 50–56. https://doi.org/10.1108/JEPP-05-2013-0020

George, G. (2005). Slack Resources and the Performance of Privately Held Firms. Academy of Management Journal, 48(4), 661–676. https://doi.org/10.5465/AMJ.2005.17843944

Moreno, A. M., & Casillas, J. C. (2007). High-growth SMEs versus non-high-growth SMEs: a discriminant analysis. Entrepreneurship & Regional Development, 19(1), 69–88. https://doi.org/10.1080/08985620601002162

Thompson, M., & Tracy, B. (2011). Now, Build a Great Business. New York: AMACOM.