Scottish EnterpriseScottish Enterprise

EPRC Seminar

21 April 2006

Context Economic Regional development theory/policy

Scottish Enterprise Key features Relationships/accountability Strategy Operating Plan New directions Measuring progress

Conclusions Evolving strategies and approaches Key features of an effective development agency

Introduction

aspiration

GVA across the UK

Source: Martin 2005

Productivity drivers - average ranking

0

2

4

6

8

10

12

South East London East ofEngland

SouthWest

Scotland NorthWest

EastMidlands

WestMidlands

N Ireland Yorks-Humber

Wales North East

Private Sector Knowledge Intensity

GDP per head (% of UK ave)

70

80

90

100

110

120

130

140

1972 1982 1992 2002

London SouthEast West Midlands Northw est

Scotland East North East Yorkshire Humberside

East Midlands Southw est Wales N Ireland

Dynamic self-reinforcing development

Innovation, enterprise, creativity, skills, investment

Source: Martin 2005

Source: National Statistics

technological advance global markets/partners demanding consumers new business models sustainable development pace of change

Opportunities

world class firms competitive industries

existing and emerging research base graduate output international cities natural resources history/culture international reputation identity/size

Strengths size of domestic demand productivity business R &D business starts growth/global firms migration? infrastructure wasted human potential insufficient urgency

Weaknesses

more intense competition new competitors internal fragmentation unsustainable dependency population change global uncertainty

Threats

Strategic issues for the Scottish economy

Source: GRO

A slight digression

Centrifugal v centripetal forcesEfficiency plus equity objectivesGreater focus on sustainable productivity growth

Innovation/enterprise/learning (‘innovation systems’)

More emphasis on understanding regional potential/market failure – endogenous growth

Less a zero sum game of ‘beggar your neighbour’ Less focus on attracting external investmentLess subsidy - more catalyst Benefits - regional, national and multinational

Regional development theory/policy

The Scottish Enterprise Network

Purpose: a sustainable and measurable impact on the Scottish economy

Pursuing national priorities – building on local potential Focal customer - businesses with potential

to make disproportionate impact

Addressing ‘market failure’

A catalyst for more/better/faster investment Finance (<5% total investment)

• ‘investment alliance’ with partners

knowledge/connections

Projects integrated for maximum impact

ContractorsContractors

Scottish ExecutiveScottish Executive

Scottish ParliamentScottish Parliament

Legislation - budget scrutiny – Committee enquiries

Sponsor division - Board appointments – Policy/Strategic direction (dialogue) – Finance – Joint Performance Team –

Operating Plan – operational teams

Strategy – Operating Plan - Staff - performance measures – Network products – delegated authority -

appraisal guidance – evaluation – peer groups – shared services/systems

Local Enterprise CompaniesLocal Enterprise Companies

Scottish EnterpriseScottish Enterprise

Accountability/Relationships

PartnersPartners

Cu

sto

mers

Cu

sto

mers

Delivery Delivery vehiclesvehicles

Strategic dialogue e.g. Scottish Funding Council (HE/FE) - joint projects - ‘LEFs’/Community Planning –

metro plans – industry plans

e.g. ‘Business in the

Parliament’

Smart, Successful Scotland - refreshed

Global ConnectionsGlobal Connections•increased involvement in global markets•a globally attractive location•connecting to the rest of the world•more people choosing to live, study and work in Scotland

Growing BusinessGrowing Business• a a culture of enterprise and more businesses of scale•increased innovation and commercialisation of research•success in key sectors•e-business to create business advantage

Skills & LearningSkills & Learning•improve the operation of the Scottish labour market•the best start for all young people•developing people in work•narrow the gap in employment and reduce inactivity

•‘Enterprise Strategy for Scotland’ – partnership emphasis•Stronger spatial dimension

Cross cutting themes:•Sustainable development – green jobs strategy•Closing the opportunity gap

EducationFE/HE

Communities ScotlandJC+

Sector Skills Councils

Private Investment (Individuals, Companies, Industry groups, Trades Unions, voluntary organisations etc)

Skills & Learning

Public dependencies (Executive, Local Government, Funding councils, EU Partnerships etc)

GlobalConnections

GrowingBusiness

Infrastructure - waterPlanning

Promotion of Scotland

Success through Partnership‘An investment alliance’

Scottish Enterprise Network - Investment catalyst (<5%)

Business developmentResearch, K-transferSMART/SPUR/RSA

Determined to SucceedVisitScotland

Sustainableeconomic

development

Growing BusinessEnterprise: Young peoples start up grant, ‘women into business’Company development: Business Gateway, high growth start up

unit, account/client management, Companies of Scale, lean management

Innovation: Proof of Concept Fund, Enterprise Fellowships, Intermediary Technology Institutes, R&D Plus

Growth Capital: Co-investment fund, Business Growth Fund

Global ConnectionsInternational markets: Scottish Development International (R&D

focus), Global companies programme, Globalscot, Talent

ScotlandInternational connections:

‘Broadband for Scotland’, Route Development Fund

Attractive location: Investment plan (e.g. Clyde Waterfront)

Learning & SkillsLabour Market : Careers Scotland,

FutureSkills ScotlandCompany programmes: Investors in

People, construction skillsSkills Programmes: Modern

apprenticeships, Training for Work, Get Ready for Work

Major redundancies: PACELinking Opportunity and Need

Operating Plan Summary

Type of intervention

More ReactiveBuild capacity to change

More ProactiveStimulate change

•International•Account management•Infrastructure•Investment capital•Investment incentives•Market intelligence

Higher RiskLonger term

Lower RiskShorter term

High Quality services:•Business advice•Volume training•Careers advice

•'Game changers' e.g. ITIs •Emerging industries, markets, technologies•Enterprise culture•Innovation system

Priority Industriesclearer focusing of demand on

what will grow Scottish economy in an international context

Metro regions•more responsive delivery e.g. business development, skills,

infrastructure•recognition of dependencies

•international scale

Smart Successful Scotland •addressing policy direction•achievement of objectives

A multi dimensional business

Scottish Enterprise Operating Plan

Significant growth opportunities for Scottish economy

Growth potential Significant Scottish strength

and/or potential Corporate/research

SEn role in realising potential Opportunities to develop major

players Industry leadership Innovation system Greater, more focussed

business demand

Priority Industries

Food & Food & DrinkDrink

EnergyEnergy

TourismTourismFinancial Financial ServicesServices

Life SciencesLife Sciences Electronics Electronics MarketsMarkets

Advanced EngineeringAdvanced Engineering Electronics capabilitiesElectronics capabilities(Software, micro,opto etc)(Software, micro,opto etc)

TextilesTextiles AerospaceAerospaceShipbuildingShipbuilding & Marine& Marine

ChemicalsChemicals ConstructionConstruction ForestForest IndustriesIndustries

“ “Regional” PrioritiesRegional” Priorities

National PrioritiesNational Priorities

Global ConnectionsGlobal Connections

Growing BusinessGrowing Business

Learning & SkillsLearning & Skills

Life Sciences ITIProof of Concept Fund (1/3 Life Sciences)

Colleges Biotech Consortium (lab

technicians)

Specialist accommodation

‘BioDundee’

Cities & Regions

Metro Region collaboration for

global scale

Core cities boost regions by providing:

A critical mass of knowledge institutions

A vibrant environment for knowledge creation and transfer

Strategic business and financial services

‘Connectivity' - attracts higher value business functions

Highly paid jobs A concentration of culture,

leisure and sport Transport hubs National and international

profile

Successful 'core cities' critical

But cities rely on regions for:

Space for major economic and infrastructure projects

A wider range of housing options

Distinctive urban centres with niche retail experiences

A wider range of business sites and premises

A wider workforce and skills base

Opportunities for countryside leisure

'Customer' feedback on reputation and performance

‘Cities Regions and Competitiveness’ 2003 (ODPM)

‘Cities are the 'powerhouses' of modern economies’ – global scale

“A region will be successful if its cities are successful and cities will flourish if the wider region flourishes.” European Commission (2005)

“One message for Core Cities and RDAs is that their counterparts in Europe are convinced that to be competitive in the global marketplace in future they have to organise and act at a wider metropolitan or sub-regional level.” Competitive European Cities, Parkinson et al (2004)

Scotland’s economic geography

Network Ops East

Network Ops West

National Planning Framework Scottish Enterprise Network

•Economic geography matters more in setting investment priorities - but boundaries matter less, and will vary

• Need for scale, connectivity (physical and psychological), flexibility, speed + local engagement

Measuring Progress - Inputs to impact

INPUTSStaff/project finance

ACTIVITIESR&D Plus, account management, Co-investment, Proof of concept

OUTPUTSCompanies assisted, spin outs,

investment levered

OUTCOMESBusiness R&DProductivity

IMPACTGVA

Relative ease of measurement

High•Short term•Clearer attribution

Low•Long term•Many influences•Counterfactual

Performance Committee

SSS FrameworkEvaluation aggregation

Macro modelling

Investment Committee

Strategic project milestonesProgramme evaluation

Operations Committee

In year measurementCustomer survey

SSS Measuring progress – 2005 Report

“A significant challenge that remains is to achieve a decisive and sustained breakthrough in the indicators of the strength of Scotland’s business base, through building up the stock of businesses, raising their levels of innovation and productivity and increasing their global competitiveness.”

http://www.scotland.gov.uk/Topics/Business-Industry/Enterprise/17684/9530

Innovation/technology/higher value add technology transfer - knowledge transfer - ITIs

Start ups and business development Small Business Division – ‘Business birth rate’ - Business Gateway – account

management, companies of scale Corporate Investment

Direct investment - co-investment Internationalisation

Exports - international JVs Volume FDI - mobile R&D Attracting financial investment - attracting talent

Infrastructure Physical (e.g. SECC) - broadband/air routes

Property Advanced factories - innovation centres – specialist property Direct provision - co-investment

Industry focus Sectors – Clusters - Priority Industries

Geography focus Area projects/Regional Offices/LECs/Metro regions

Strategic Regeneration GEAR - Clyde Waterfront - LOAN

Skills ‘Unemployment schemes’ – Workforce Development (MAs – Futureskills Scotland)

Measurement Inputs – outcomes/impact

Evolving strategies and approaches

Cross cutting themes:Sustainable development•Innovation source•Resource productivityClosing the opportunity gap•Unrealised potential

Features of an effective development agency

takes a strategic, long term view has a local, national and international perspective integrates a wide range of powers and resources designs and implements bespoke solutions responds quickly and flexibly to opportunities is innovative and enterprising takes calculated risks works in effective partnership with the public and private sector has the human and financial resources to be credible and make an

impact is publicly accountable but arms-length from government

accountable to Parliament - Ministers set policy and strategic objectives…… ……. but step back from detailed planning and implementation easier to take difficult short term decisions which have longer term benefits helps the important to take precedence over the urgent provides environment to develop an innovative, risk taking culture allows more scope to recruit those that don’t see their long term future in

the public sector