Select Committee on Business Support and Business Links

1 December 2006

Submission from

Enterprise Hub Network

Submission from the Enterprise Hub Network to the SEERA Select Committee Enquiry into

SEEDA’s Management of Business Support in the South East Discussion Point 1 – Are these priorities the most appropriate for guiding the development of business support in the region? These five key priorities reflect the knowledge asset base in the SEEDA region, the need to set international aspirations whilst at the same time taking account of sustainability. Our experience across the Enterprise Hub Network is that the business support landscape isn’t yet that easy to navigate around for client companies. SEEDA have acknowledged this with the Joining Forces programme – but there is still some way to go before the average SME sees a fully integrated approach to business support that it trusts and is willing to engage with. In general in the SEEDA region there is a relatively small amount of public sector funding in total for business support activities compared with other parts of the UK, and this funding is spread very thinly across too many different organisations and initiatives. SEEDA can provide leadership and set the agenda where they are primarily responsible for the funding streams – but they have less impact on the programmes and initiatives that have been developed by the HEI’s in the region which can duplicate existing provision. Work will need to be done to encourage the HEIs to participate collaboratively in the business support simplification agenda. HEIF funding rounds have encouraged the universities to focus attention on a proliferation of short term programmes. This has encouraged them to grow substantial teams of staff on short term contracts with short term objectives; to concentrate on property based incubation models whilst the Enterprise Hub Network has learned that focussing on the businesses rather than renting space widens access to support; to proliferate proof of concept and seed funds which are typically closed to non-HEI generated businesses. These HEFCE funded programmes have added another level of confusion in the market place. The business simplification agenda is enabling SEEDA to take stock of the various programmes that they fund and to ensure that as they go forward the contractual arrangements encourage an integrated and collaborative approach. There needs to be clear delineation between the services provided by Enterprise Hubs, Finance South East, the Sector Consortia, the Innovation Advisory Service, the Manufacturing Advisory Service. The referral and brokering mechanisms to these services from Business Link and between the organisations must be simple, agreed to and well understood by all parties. This can be influenced by ensuring the targeted outputs from each service provider are focused clearly on each provider’s market, that they are aligned and they encourage mutual support of the clients. Shared brand development

work that looks at the services and organisations from the perspective of the clients is crucial to this exercise. One of the priorities is to focus on developing technology and science businesses. Whilst this is a very sensible approach given the knowledge base of the region the experience in the Enterprise Hub Network is that many of the innovative businesses with potential that we are supporting are using technology rather than selling technology. It remains very challenging for the HEI’s to take science and technology from the laboratory and to find sizeable and real markets. The core of the Enterprise Hub clients come from another direction – where an individual or entrepreneurial team have market knowledge, spot a commercial opportunity and then develop a solution and business model to meet the need. The gaps in the funding escalator for these non-HEI start-ups are bigger, and the principals have often left their previous employment to get their ideas off the ground. SEEDA have identified the funding challenges for businesses at these early stages. Mechanisms to achieve a more streamlined early stage funding escalator are being considered. Discussion point 2 – Is SEEDA striking the right balance between investing in success and lifting underperformance. The Enterprise Hub Network has been identified as a SEEDA supported programme which is investing in success. With relatively modest amounts of funding over a five year period it has been possible to create a network that spans the region and means that an entrepreneurial team with a scaleable and innovative new business model should be within easy reach of support from an Enterprise Hub. However this support network does struggle with the dilemma that local partners have sometimes insisted, due to the flagship status of the programme, that an Enterprise Hub is essential to local economic development where the territory for growing companies that fit the Enterprise Hub profile is pretty infertile. The funding of a single Enterprise Hub is very modest when compared with other forms of business support. It provides the salary for a Hub Director and some part time administrative support. So a lone Hub Director ploughing infertile ground can make little impact. Meanwhile it has been demonstrated that where the opportunity has arisen for two adjacent Hubs to join forces or for a double Hub to be created where local partners agree to cover a wider geographical area, the formation of small Enterprise Hub teams is able deliver considerably more support which can be targeted very effectively. It would be helpful if it could be acknowledged by more local partners that moving towards an Enterprise Hub Network model of about ten sub-regional Hub teams covering the 22+ locations across the region would deliver a more productive business support service, investing in success, and that Enterprise

Gateways would be the more appropriate business support programme to promote business creation in underperforming parts of the region Discussion point 3 – Are the mechanisms that SEEDA has developed to achieve its objectives the right ones. An important point that was not made in section 3.2 of the Ancer Spa report is that SEEDA was not prescriptive in setting up initiatives such as the Enterprise Hubs and Enterprise Gateways. It provided initial guidelines for submissions for Enterprise Hubs and then funded partnerships which demonstrated added value and a commitment to the overall objectives. This enabled the 22 Enterprise Hubs to be rolled out in a remarkable short period of time and in most cases to leverage valuable local support. As the Enterprise Hub Network has become established the Hub Directors have identified the need to develop consistency in service provision, whilst at the same time responding to local differences and opportunities. This plays to the objective to improve coherence of business support. SEEDA have supported this move towards consistency through the re-contracting process with each Enterprise Hub’s accountable body, simplifying and standardising the contracted targets and deliverables. However there is more work to be done to stress to the accountable bodies that Enterprise Hubs are not in competition with each other. Joining forces where appropriate to deliver business support is a productive way to use public funding to address the market failure where innovative early stage businesses are unable to attract investment due to the perceived risk. Discussion point 4 – Is SEEDA providing effective leadership in relation to the development of business support services for the region SEEDA has identified that there is confusion in the market place and has already made headway under the Joining Forces programme. However the RDA needs to grasp the nettle and push hard for the further integration of business support services in the region. As the Ancer Spa report acknowledges SEEDA itself has instigated a plethora of different business support services. Initiatives have come out of different parts of SEEDA and the various deliverers have been left to work out for themselves how they should each be fitting into the market place in a coherent way. With limited time and resource each deliverer has inevitably focused on its own targets and objectives, without necessarily thinking about how this comes across to the SMEs in the region. It must be the responsibility of SEEDA to ensure that there is internal cross-departmental agreement on plans for developing coherent business support services and that as contracts are let or re-negotiated they encourage a simplified and integrated approach.

Discussion point 5 - Is SEEDA’s approach to developing the future Business Link structure the right one? The approach to retaining locally focused provision whilst looking to develop consistency and using economies of scale where appropriate seems to be eminently sensible. This is also very much the way the Enterprise Hub Network is continuing its development. We are moving along the path of providing a coherent set of services across the region, consolidating where possible to generate economies of scale whilst at the same time reflecting regional diversity and responding to local needs. Discussion point 6 – The Business Link brand is widely recognised, but not valued by many businesses. How can SEEDA address this issue? If Business Link is to follow the Inform, Diagnose and Broker model effectively the clients need to feel that they have been:-

• Well informed • Business issues have been fully and correctly diagnosed • Brokered to appropriate and effective business support has been

achieved If the client believes the above to have happened then they will value what the Business Link has done for them. As an example a person with a business idea who contacts Business Link should be informed that there are some targeted programmes/organisations in the region that might be able to help them. The diagnosis should then determine for example if the idea is innovative and has growth potential. In this case further information should be supplied about the Enterprise Hub Network and a properly brokered introduction needs to be made to the nearest Enterprise Hub. If the idea doesn’t fit the Hub criteria then the budding entrepreneur could be brokered to an Enterprise Agency, an Enterprise Gateway or Finance South East according to the diagnosis. Once brokered to the Enterprise Hub a whole raft of relevant support can be brought in to play tailored to the needs of the business. Apart from support provided directly by the Enterprise Hub it could include services such as the Investment Readiness and Merlin Mentor programmes operated for the Enterprise Hubs by Finance South East. Hence the client business could come into contact with a number of different support agencies – but would see the services as joined up and well orchestrated. SEEDA can expect to influence the processes that lead to an efficient and effective client journey through relevant business support by:-

• ensuring that the targets for Business Links are aligned with this model; • that the Business Links have induction and development plans in place

for staff that emphasise this mode of operation;

• that the strategic relationships with other publicly funded business support services such as Enterprise Hubs, Finance South East and the Innovation Advisory Service are clearly understood to ensure effective brokering to the specialist support available;

• establishing the messages to be used in marketing material and through the marketing channels to reinforce that Business Links are the portal for information and brokering to appropriate support.

The brokerage experience of passing early stage high growth potential clients to the Enterprise Hub Network from Business Links is still patchy across the region. Also issues related to the Business Link brand mean that not only potential clients but also organisations that would otherwise be partnering with a local Business Link may be tempted to keep at a distance. Businesses that have found their way to Enterprise Hubs under their own steam, and have had a poor experience with a Business Link, have subsequently suggested that the Hub Director should clearly differentiate the Hub from Business Link to avoid being branded in the same way. Discussion point 7 – Do the current performance measures adequately reflect the level of impact made by those areas of business support within SEEDA’s control? Commenting from the perspective of the Enterprise Hub Network – our contracted performance measures have changed as the network, our knowledge of the client market and our support services have evolved. We are clear that our overall goal is to contribute to the creation of wealth in the region. Our clients are generally at the early stages of business development and they are great users of technology. They don’t set out to take on staff unless they really have to, building virtual teams and outsourcing where possible - so the number of jobs created is not a particularly useful measure. Furthermore not all businesses want to locate in managed office space so “tenancy” figures aren’t that useful either. These were Tier 3 outputs that have since been replaced by more meaningful measures such as Gross Value Add (GVA) and funding success. When we first get involved with a client the GVA may well be negative or zero at best. We can only usefully demonstrate growing GVA if we monitor their financial progress over a number of years and probably beyond the period we are working intensively with them. We also need to be wary of “pulling the plant up” too frequently to check the growth of its roots. However we do see capturing GVA as a worthwhile measure and have started to collect this. Another measure of the services provided by the Enterprise Hubs is fundability. Clients that fit the Enterprise Hub profile are unlikely to have a previous track record and they have business idea with market potential. Finding the funds to grow the business either through investment or sales is a challenge. A primary role for Enterprise Hubs is to work with the client on the various aspects of the business plan, so that they can raise the investment

they need. Therefore, measuring the number and size of investment events is a valid measure of performance. With assistance from SEEDA in developing an on-line client management tool we are gradually collecting more information about the input of assistance to the clients and the resulting outputs in terms of hard numbers and feedback on the impact they believe the support has had. However we are a very leanly resourced network and collecting the data imposes an additional administrative load which can detract from service delivery. Feedback from some clients suggests that the Business Link brand has been adversely affected by the perception that Business Link is primarily interested in collecting numbers. Once businesses feel that they are involved in a box ticking exercise they become very cynical. As Enterprise Hubs we are taking care that our performance measures don’t put off the businesses that the support is supposed to be there for. Discussion point 8 – Is sufficient progress being made and how can progress be accelerated? As the Ancer Spa report highlights SEEDA is covering an impossibly wide agenda, but having accepted this, it has made significant progress in terms of addressing market failure and in beginning a programme to rationalise and integrate business support across the region. Going forward it needs to resist the proliferation of more initiatives and should concentrate on consolidating and developing the programmes in place that are working well. This would include taking more care to acknowledge good programmes already running at local level and to ensure they are supported or included in developing business support rather than SEEDA being pushed by central government to create new initiatives that cut across what is already being achieved. A case in point would be the Enterprise Insight programmes which have in some parts of the region caused issues for the long standing work good work being carries out by the best Education and Business Partnerships and Young Enterprise Schemes. Enterprise Insight might be aiming to achieve something different from these two programmes – but it has caused much confusion on the ground by not taking account of existing programmes. In its early days SEEDA was very entrepreneurial, and it continues to take risks, which makes it more akin to the businesses in the region than they may realise. Perhaps the communications team need to work on this message to counter the assumption that an RDA is an organisation staffed by civil servants with limited business experience.

Discussion point 9 – What can and should SEEDA do to improve its relationship with the region’s business representative organisations. Following on from the point above SEEDA has taken the enterprising approach in several cases of creating entities outside of the RDA to encourage the involvement of businesses in business development programmes. These include the Enterprise Hubs with their Hub Champions who are successful business people, Finance South East and the sector consortia which have all been created as companies outside of SEEDA with the intention of engaging closely with business. One of the problems of relationship with businesses lies with the very limited amount of time that businesses themselves are prepared to put into the engagement. For example when SEEDA has funded the piloting of networks to engage HEIs and business it is the academic partners who initially attend rather than the businesses. A very strong case commercial case has to be built before the businesses can be encouraged to put in their time. A lesson we have learned in the Enterprise Hubs is that we have to restrict many of our events to just our early stage businesses, to encourage them to come and benefit from a peer group network. Perhaps this is the way forward for SEEDA with the business representative forum. These may need to be restricted to businesses, to act as effective peer group networks that are willing and able to engage in a focused and constructive way with the RDA. We perceive that there are just too many initiatives and events organised by both commercial as well as publicly funded bodies. Too few are focused on real business needs and issues. Too many are supply driven rather than demand lead. Companies filter out most events as being low value and their loyalty to networks is hard won. We know that we are only as good as the last event we ran as far developing our networks and adding real value is concerned. Discussion point 10 – Is there anything else SEEDA could do to develop its business led credentials? Being business led suggests that the organisation operates in a business like manner and demonstrates this by the decisions that are made and the way they are arrived at. If SEEDA can do this whilst it is aiming to both invest in success and lift underperformance then it will be seen to have business led credentials regardless of the make-up of the senior executive-team. Successful businesses enjoy clarity of strategic direction and strong leadership to ensure coherence across the organisation and what it delivers. They take risks, but they are not afraid to close projects down that aren’t delivering enough of a return. By implication the leadership inside SEEDA needs to be strong and business like. It needs to back winners and also to be able to say “no” to prevent the proliferation of non-core initiatives.

Discussion point 11 – Is there sufficient integration between the services provided and what can be done to ensure that the customer receives a seamless service? The journey towards integrated business support has begun and there is a framework in place but the operational aspects still need to be implemented. Business support is provided by people – to people. Until the people involved in the processes are fully cognisant with how the various component parts of the regional business support provision fit together and the messages going out to the market are clearer there will still be confusion and a lack of integration at the operational level. SEEDA has clearly taken on board the importance of not being initiative driven as it goes forward with future business support development. The decision to implement the Treasury directive for a High Growth Coaching Programme through the infrastructure of the existing Enterprise Hub network rather than setting up a separate programme is a good example of this. Discussion point 12 – Brokerage is critical to the business support service. What will SEEDA put in place to ensure that the quality of brokerage delivered is appropriate? Appropriate sharing of information is crucial to effective brokerage. Performance measurements associated with effective brokerage would also encourage the protocols to be followed. As an example what is the incentive for Business Link to broker an early stage high growth potential client to the Enterprise Hub Network rather than other support? Enterprise Hubs are there to support these types of client with a raft of specialist services – yet more often than not their needs are diagnosed and they are then signposted to local funding advisor or an intellectual property adviser or a marketing adviser whereas they could have benefited from the holistic approach that encompasses all of these plus other support if they were brokered to an Enterprise Hub. At ground level there appears to be a need for more encouragement to broker to the Enterprise Hubs. Before the IDB model was introduced some Business Links had developed their own High Growth Business support services, and when the Enterprise Hubs arrived they were seen to some extent as competition. Under the new approach this should not be the case – but it takes time for changes to cascade down through organisations. Discussion point 13 – Is it possible for SEEDA to operate effectively at all three levels? It isn’t possible or effective for SEEDA to attempt to operate at all three levels. It should concentrate on strategic leadership and use the management of the

contracts to steer the delivery organisations and partners in the appropriate direction. Client businesses need to see that they are receiving impartial business support which is fit for purpose. This support therefore needs to be delivered by organisations embedded within in the business landscape, with the impartiality coming from the public sector funding streams which ensure that there are no commercial vested interests involved. Discussion point 14 – How is SEEDA going to ensure that it improves internal collaboration and cross-departmental working. This is not a point that we can easily make suggestions on from the outside of SEEDA. However recent experience from being involved in the steering group for the High Growth Coaching Programme shows that when a cross-departmental project team is brought together around a programme such as this there appears to be a great willingness to collaborate. So we would suggest more cross-departmental project teams be deployed when new opportunities for providing integrated business support arise. Discussion point 15 – Are the twin objectives of regional consistency and local flexibility compatible? The twin objectives of regional consistency and local flexibility are challenging – but compatible if understood correctly and implemented appropriately. As an example – not all locations in the SEEDA region that would like to have an Enterprise Hub have fertile enough territory for this to be a sensible use of SEEDA funding. However bringing together 10 or so sub-regional Enterprise Hub teams would provide a high growth business support service with the capacity to deliver across the region. Any clients that fit the Enterprise Hub profile would be within easy reach of a Hub team. .Members of the sub-regional teams could be located across the local area, retaining or even growing the number of Enterprise Hub locations. Examples of this model are the Aylesbury Vale and High Wycombe Enterprise Hubs which are now serviced by a sub-regional team; Northern and Southern Oxfordshire Enterprise Hubs which have joined forces whilst retaining locations in both parts of the county; the Surrey Enterprise Hub with a team to support companies across the county. By developing these sub-regional Enterprise Hub teams we are providing a more consistent approach across the region with greater capacity, whilst at the same time being able to respond flexibly to the diversity across the region and specific local conditions. So we are addressing the twin objectives of regional consistence and local flexibility.