Examination of Witness (Questions 40-53)|
TUESDAY 6 MAY 2003
40. When you were answering Lord Cavendish you
mentioned something about collaboration. I presume you were talking
about collaboration in industry between what are essentially competing
41. Do you think there is anything government
can do to encourage this kind of collaboration and make sure competition
is perhaps softened.
A. I do not think they are trying to soften
42. I did not put that terribly well.
A. What we are trying to do is pick up the strengths
of the different parties in all of this to the common good. Not
all companies these days have the capability to target some of
these areas. It has not come out really, but we are talking about
risk here and big rewards sometimes equal big risks. The advantage
of collaboration is that you can spread the risk to an extent.
A lot of the research programmes we are talking about are not
research programmes developing the final application product,
but the platform that all companies can use and then lead off
into products they need for their own ends. I was thinking of
collaboration in that sort of area and linking in with suppliers
and the like.
Baroness Cohen of Pimlico
43. It seemed to me that when you started you
were really supporting what I am now proposing to describe as
the MIT model. Get a good enough university, get it co-operating
with industry and away you go. That is not exactly what we do
in the UK. There is a huge variety of things to support entrepreneurship.
Which of those do you find most useful and which do you terrifically
wish you had? Which one we have not yet invented would be most
useful, perhaps starting from the ones you already find very useful?
A. The first thing to say is that anything we
can do to engender entrepreneurship, whatever it might be, whether
it be co-ordinated, unco-ordinated or irrelevant to an extent,
is good because this is the sort of thing which needs a lot of
energy to move the snowball in the first instance. That is what
we are talking about here. We are talking about the culture change
around the whole entrepreneurial behaviour and that means everybody
contributing to what they can. All the policies which are trying
to be achieved here are positively helpful in that whole area.
It helps though to have a policy which puts entrepreneurialism
into context. There is a philosophy which you could have which
is to let a thousand flowers bloom type. As long as we get the
environment right and as long as we get the training and development
and the encouragement and support, then things will happen and
you will end up with an entrepreneurial society because it will
happen as almost an act of faith. My experience is that it works
much better in a context and you do all the things I have mentioned
but you do it in the context of a direction and a target. I mentioned
some of the Framework 6 areas before, or some of the areas which
the regional economic strategy are trying to deliver. We want
entrepreneurialism in that area. We want to do something in that
area of science, we want to pull it together in this. In that
process we want to be able to create a spirit and a culture of
entrepreneurialism. The variety is good; it would be really very
helpful to have almost a national agenda for entrepreneurialism
which is to say these are the themes where we want to create an
entrepreneurial behaviour. It is so easy to get hooked onto new
business start-ups and we were recently looking at how our region
behaves in new business start-ups. The south-east is usually the
top in new business start-ups but then you realise that a lot
of them are building companies and plumbers who are servicing
an overheating economy and that looks great because they are new
businesses, which in the North American sense they would be. Other
parts of the regions do not have those because they do not have
the need for extra plumbers and builders and everything else which
goes with it. It is a very dangerous thing to have the thousand
flowers bloom philosophy if you want to create something sustainable.
I believe what we are on is a sustainable build of a better future.
That is really what this is about.
44. A lot of our initiatives go towards improving
finance as opposed to the supply side, labour and management skills.
Is the balance quite right or do you need more of one than the
other? How do you feel about the finance initiatives, might be
the best question?
A. They both have their place; I would not like
to say one or the other. There is an issue around some of the
financial areas, around the smaller end of the scale, particularly
both the smaller end of the scale and the further distance from
market end of the scale. For example, the Treasury has put extra
funding into regional venture capital funds and it has a £0.5
million total limit to any individual company. That is working
enormously well in terms of developing because there is a gap
there which is just too small for traditional venture capital
funds to go for. Often some of those things are related to what
is called concept funding which is that somebody has had a good
idea, but it is not yet to the stage where they can see a business.
How do you get funding for that sort of thing? There is an important
area with a financial gap in that.
Baroness Cohen of Pimlico: You have a good deal
of international experience. Do you believe there are lessons
for policy support of entrepreneurships in other countries from
which the UK and Europe could learn? Take it that Lord Fearn asked
45. Have you had much experience abroad? What
about the American economy? Do we lead in Europe or is Europe
behind? What about the Far East?
A. In running international businesses I see
all regions of the world and how they behave. You can easily fall
into stereotyping feelings about how the Chinese are the most
entrepreneurial bunch you would ever wish to meet and that sort
of thing. In terms of our economy, there are two lessons which
I have picked out to share with you. First of all, I think we
can learn from the US in terms of our attitude to entrepreneurialism
failure and bouncing back and all those sorts of things which
are potentially a very positive move which we can make. All the
moves around being declared bankrupt and coming back, all those
sorts of changes, which can be changed relatively easily and no
stigma attached, are part of a culture change which the US does
not have and it would be positively healthy if we did not have
it either. The other example is around Australia, which for a
nation of that size has been remarkably successful in choosing
the areas in which it wants to be world class. We can all choose
sport as being the area where we all grit our teeth, but as I
understand it, that was a really distinct policy where you could
say they wanted to become world class in sport in this, this and
this and that and they achieved that by a clear focus on what
they wanted to become and a consistent approach to making it happen.
If you draw those lessons into the areas we are talking about,
entrepreneurialism, innovation, new business start-ups, you can
draw the same lessons for whatever you want to become, what it
looks like, but let us be consistent about delivering it so that
we are building on whatever we have. It is about communication
as well, so that the country knows that is what our targets are
and we are all going for it. Those are two lessons which I picked
46. Who is ahead in Europe then? What about
Italy? Are they ahead?
A. I would not downgrade the UK if it is a question
of who is ahead. As previous speakers said, we have a lot to be
proud about in this country, but we are still a long way behind
the best. That is not just Europe we are talking about here. In
terms of Europe itself, I like the attitude of the Netherlands
whenever I see how they tend to behave in creating business and
I am particularly thinking of intrapreneurship here and big companies
spawning other companies. They have done extremely well in allowing
companies to come out of the bigger companies and be supported
and survive, which has then given them a life of their own. You
can pick other examples around Europe. Take Germany, some of the
ideas around things like the Fraunhofer institutes which are research
centres targeted at particular areas. They are potentially a very
interesting concept for us. We in the north-east tried to replicate
some of that by our centres of excellence, by saying that a bridge
is needed between universities who tend to think five years plus
and industry and business who want it today. How do we bridge
the gap? Answer: centres of excellence, or in their case Fraunhofer
institutes. These are public/private funded bridges. I would not
like to generalise by saying Germany is better but there are good
examples in different countries that we can cherrypick from and
build on our own success.
47. We did hear from the Professor, and very
forcefully actually, that in some of our universities salaries
are very, very low, I presume compared with other countries. Do
you find this? Not about your own company, of course.
A. Being on the Council of the University of
Durham and being a prudent finance guy, I think they are paid
perfectly well. Strike that from the record. I am sure that there
is an issue around academic salaries, particularly the research
active international market for individualsput it that
way. I would agree that if it comes to a market university economy,
then we are not going to win and what we have to have is academics
who, I hope, do not just do the work for the money. They do it
for other reasons and maybe our universities can offer a lot of
the other reasons which allow them to enjoy their work and create
the research that they want.
48. I thought you were diplomatic on a number
of occasions and you commendably stuck to positive messages throughout.
The Institute of Directors in their paper to us pointed out that
until fairly recently the Department of Trade and Industry (DTI)
alone ran 183 different programmes, 59 of which provided grants
direct to business. In the submission to us by the Small Business
Section of the DTI, we were told that the DTI have identified
the need to greatly simplify support services and is going to
close its existing schemes. Frankly, in your evidence to us, you
say nothing about what the government does or does not do other
than universities. You have given me the distinct impression that
the government might as well close most of those schemes down
because they have not mattered much at all to you and the businesses
you are seeing. The final point the DTI paper drew to my attention,
which you have not seen, but I shall read it to you, is on intrapreneurship,
known as spin-offs, says the DTI. "Although intrapreneurship
exists in the UK", which I think is probably right, "most
examples have occurred within companies and so go unrecorded and
unobserved. If there is reticence on spin-offs", by which
they mean intrapreneurship, "it is more likely because the
firm feels guilty about downsizing or embarrassed at discarding
a business which is subsequently successful. There are no specific
government support measures for policies to promote intrapreneurship".
I have to say that sounds enormously negative to me on the part
of the DTI. Does your optimism still hold? Surely your evidence
to us is almost telling us that all these government programmes
to give money here and give money there, support that, are really
largely irrelevant. Secondly, the DTI certainly appears to place
no significance or importance at all on intrapreneurship. Do you
remain as optimistic as possible about everything?
A. Of course.
49. We have a duty here to be looking critically
at what is going on. It is no good us just saying the world is
A. I am not saying that. I am talking about
priorities here and selection. In the general approach to entrepreneurialism,
we should be positive. When it comes to the specifics of how it
is done, you will have heard from all my evidence that I believe
that there are priorities we must push and go for. If you want
me to be specific about the DTI programme, then the total sum
of public money would be better used on fewer more focused programmes
than the large numbers which are there. I do see that happening
already anyway. It is not as though we are talking to deaf ears
in all of this. That was part of my submission on the Chemistry
Leadership Council which was formed by the DTI to bring us all
together to see what the UK and the DTI should do in terms of
the whole chemical industry in this country and creating the sort
of innovation and everything which goes with that. In terms of
your point about entrepreneurship, I would actually tend to agree
with you. I did not give any written submission to the Committee
in the sense that is not something I do shout about too much except
in specific examples and the specific examples tend to be the
companies which have been successful in making it from the large
company into the smaller marketplace. In my own experience, I
have created those companies and made them happen, but a corporation
generally does not tend to have an intrapreneurship strategy.
50. Should large companies?
A. That is what I was saying about the Netherlands
experience. Some large companies in the last few years in the
Netherlands have had an intrapreneurship strategy where they are
encouraged to look to see what they have within and allow it to
come out and prosper and survive in its own right, either because
it is not part of their priority, but not just ditched. That is
a positive direction.
Chairman: What could the government in this
country finally do to encourage information. To me it is almost
self-evident that very large companies have within them an awful
lot of intelligent people who cannot do everything, they do not
develop everything and they should be encouraged to maximise the
internal entrepreneurial talent within them and the potential
for things which cannot be kept in a straitjacket of the existing
Baroness Cohen of Pimlico: And cannot carry
the overheads of existing companies.
51. Yes. The EU Green Paper did make a point
about intrapreneurship. So far, but subject to when we have hearings
with ministers of the departments, the submissions to us from
government do not seem terribly interested in intrapreneurship.
A. There is a value there. I think you are on
the right lines when saying "should there be?". There
is potentially an untapped value which could be brought out. Asking
what should be done goes right back to what I said at the beginning
which is that it is all down to individuals within; the stone
in the shoe type thing again. A lot of this is large companies
identifying who those people are and giving them the opportunity
to do intrapreneurship activities and not be seen to be counter
cultural, which a lot of them can be seen to be. That needs a
positive statement of support from the company itself.
52. So perhaps Cambridge-MIT could help encourage
larger companies to be more active in intrapreneurship rather
than start-up people from outside.
A. I agree with that. I think Cambridge-MIT
would be a good vehicle for that because the prime reason is that
they get the senior people's attention in some of the big companies
and by focusing in on intrapreneurship as well as entrepreneurship
it just raised the profile of how valuable that potentially could
be. It is not for every company, but for some there will be value
53. Mr Coxon you have given us excellent value
on your part. I am most grateful to you. There are one or two
things inevitably which I have not been able to put to you, but
if I were able to write to you about just one or two small points
I should be very grateful.
A. Okay. Thank you very much.