About ten years’ ago, I published an article in the journal Industry and Innovation, with the compelling title: ‘Little Ships’: The co‐evolution of technological capabilities and industrial dynamics in competing innovation networks. It was something of a labour of love: as I worked through the archives, I was retracing childhood experiences of small boat sailing in the late 1960s and ’70s, when we used to race around a local gravel pit in our plywood ‘Mermaid’ dinghy. For reasons best known to themselves, the academic community remained largely immune to the charms of the ‘little ships’, and my paper has sat gathering dust. So here’s a brief and shameless attempt to convince you that it’s really worth a second glance (n.b. a limited number of free access copies available here).
For centuries, there were basically two ways to construct a wooden boat – planks that are butted together and sealed to make the vessel watertight (‘carvel’ construction), and the tightly overlapped plank (‘clinker’) construction used for the traditional fishing boats – and Viking longships. During the first half of the 20th century, two related technologies arrived on the scene, which largely displaced these traditional approaches and their associated craft skills. Plywood, which is itself an ancient technology, made several leaps forward, thanks in part to the early aviatiors, who used it to fabricate strong yet lightweight fuselages.
My paper charts the rise of two rival plywood-based technologies in the wake of the Second World War: ‘hot moulding’, which produced many beautiful but relatively expensive boats, and volume produced plywood kits, which fuelled a popular boom in cheap and simple ‘build-her-yourself’ boats (the ‘Mirror’ dinghy, for example, was named after the British tabloid newspaper which provided early sponsorship, while the ‘Mermaid’ was supported by a magazine that was emblematic of the period, ‘Do it Yourself’).
It’s a distinctly ‘socio-technical’ story of competing innovation networks, in which a variety of actors played a significant role – including my Dad, who built two kit boats (as did our next door neighbour) and helped found a local sailing club, which continues to operate today.
These networks applied the ‘platform’ technologies of hot moulding and kit-based construction in distinctive ways, both in terms of design, manufacturing and marketing. In the event, ‘build-her-yourself’ achieved temporary victory, through a combination of cost-related factors and due to its ability to enrol a more diverse range of actors. Longer-term, both were superceded by another type of moulding, making use of reinforced plastics. However, both technologies continue to prosper in associated industries – furniture making for example – while the broader lessons of the ‘little ships’ episode may still have something useful to say to the next generation of designers and entrepreneurs.
It’s now 30 years since Michael J. Fox and Christopher Lloyd set off on their DeLorean-powered time travelling adventure – taking a trip back to 1955. In some of the film’s most memorable scenes, the characters encounter a world that’s somewhat familiar (it’s the hero’s home town after all), and yet utterly different. Back to the Future was released in 1985. In the same year, a group of researchers established the Quarterly Survey of Small Business in Britain, and began the task of monitoring emerging trends and examining the experiences and opinions of the UK’s small business owners and managers. I’ve been only been involved with the Quarterly Survey for the last five years, but have seen several important developments in that relatively short period, including the growth of mobile and cloud computing and the long aftermath of the financial crisis of 2007. However, it’s rare that we step back an look at the longer-term changes that have reshaped the business landscape over several decades. In December, we published a special issue to celebrate the 30th anniversary of the Quarterly Survey. We assembled contributions from a variety of sources, including several of the people who were instrumental in creating this research project. Our aim was to shed some new light on this important period in the history of small firms’ research in the UK; to explore the main changes and continuities in the small firms landscape over this extended period; and lastly, to draw some lessons for future work in this important research field.
I won’t attempt to paraphrase these varied contributions, but as the current editor I found it an eye-opening experience. I’ve always been interested in adopting more ‘historical’ approaches to studying small businesses and social enterprises. Short-termism is an all-too common feature of policy making in our field, and its detrimental effects are equally obvious. However, while I’m convinced that there is much to be gained by ‘taking the long view’, I also recognise that longitudinal and historically-informed studies pose serious challenges for policy-makers – and for researchers. My colleague Rob Baldock has written eloquently on this topic in the anniversary issue and I reflected on it briefly in my concluding remarks:
‘The current editorial team certainly enjoyed working with such a wide range of contributors, and the 30th Anniversary special issue has also provided us with a valuable opportunity to reflect on the past and to consider our future directions. Looking across the report as a whole, the following themes stand out:
Though it may be something of a business cliché, it is hard to overstate the sheer pace of change over the last three decades. As highlighted in earlier sections, the spread of digital technologies has had a particularly dramatic impact on small businesses of all kinds, helping to create new markets and re-shape business models.
Long-term, engaged research initiatives such as the Quarterly Survey can provide unique insights, both at the time the original studies are conducted and in retrospect when the evidence is re-examined and, in some cases, re-interpreted with the benefit of hindsight. For example, I was particularly struck by the comments of our long-term respondents about the benefits of participating in the survey (Section 4.2). In addition, even the briefest glimpse at the three decades of Quarterly Survey findings can prompt new interesting research questions that would merit a more in-depth historical analysis (Section 3.1).
There are considerable technical and methodological challenges in sustaining any research project over an extended period, given the many changes that are bound to occur (Section 3.2). Research of this kind is also fairly resource-intensive, highlighting the importance of similarly long-term financial and institutional support.
The digital revolution has also transformed our own ‘industry’ – conducting and publishing applied business research. There are many new, quicker ways to collect and analyse data, printed reports have been largely displaced by electronic documents, while social media and podcasts have challenged conventional approaches to dissemination such as press releases. Above all, there has been a massive increase in the amount of information available to our readership. The quality of some of the newer entrants may be variable, and the provenance occasionally doubtful, but much of this information is timely and well-packaged in ‘media-friendly’ formats. With most specialist small business publications also migrating on-line, there is a danger that the more complex or detailed messages are getting lost in all of the resulting ‘noise’. These technological changes raise a number of questions about how best we respond, as researchers seeking to create rigorous, independent and reliable knowledge in this field. Drawing on lessons learned from the last 30 years, I would suggest three pre-requisites for any similarly ambitious, long-term research project: (1) a stable institutional base, combined with what would now be termed a ‘sustainable business model’; (2) a ‘blended’ (online and face to face) approach that enables researchers and practitioners to engage constructively over an extended period; (3) effective communication strategies that enable the research team to connect with a wider audience. The Open University is now home to a thriving community of researchers, many of whom have research and teaching interests around small businesses, social enterprises, innovation and entrepreneurship. We are actively developing new approaches that will continue to promote the core aims of the Quarterly Survey, while also addressing these wider changes – watch this space!’
The full report is available on our website – I hope you may be tempted to download it to see for yourself.
A lorry on the A1(M) crosses the border from England into Scotland (Matt Buck - Flikr Creative Commons)
We have heard a lot about the implications of independence for Scottish business. According to the latest government statistics Scotland has 340,840 micro, small and medium-sized businesses, representing 99.3% of its private sector enterprises. But what do the people who run the 4.8m SMEs across the rest of the UK think about an independent Scotland? The decision rests with the Scottish people but, as the commentator Jonathan Freedland has pointed out: “Just because it’s their choice doesn’t mean the rest of us are not allowed a reaction.”
The view from Scotland
Opinion remains divided within Scotland’s business community. In May, a large membership survey by the Scottish Chambers of Commerce yielded interesting findings on the main perceived risks and opportunities of independence.
While more than half (53%) of respondents identified a way their business could benefit, 47% selected “no opportunities”, a sentiment that the authors describe as “particularly acute” amongst those trading mainly with the UK.
Meanwhile, the most commonly-cited risk was uncertainty (38%), yet almost a quarter (23%) did not identify any risks for their businesses.
Argument has raged over the consequences of a Yes vote for particular industries within Scotland. On August 27 2014, 130 chief executives, board members and entrepreneurs penned a widely-reported open letter to The Scotsman in support of the Union. The next day, another letter appeared in The Herald, in which 200 similarly distinguished business leaders made the case for independence. However, much less attention has been paid to the implications for businesses in England, Wales and Northern Ireland.
Contrasting UK-wide views
Some have argued that independence would benefit businesses and communities in the rest of the UK. For example, Professor Nathu Puri, a co-signatory of the pro-independence letter, states:
Scottish independence will be a major step forward towards that goal [of rebalancing the British economy] in the interests of not just Scots but business and jobs in Wales, Northern Ireland, the Midlands and the north of England.
The benefits to business of a single UK market should not be underestimated.
The CBI’s response to the Scottish Government’s 2013 White Paper on Independence also highlights the, “highly interconnected” nature of the UK’s constituent nations. It concludes that breaking up this internal market would increase costs for businesses and consumers, citing as examples the need to create new cross-border arrangements in relation to issues like tax, employment and company pensions.
So what do SME owners and managers really think? We researched their views on the implications of independence as part of a forthcoming Quarterly Survey of Small Business in Britain study. During July and August we collected a total of 225 responses from our online panel, a modest but broadly representative sample in terms of firm size, sector and region.
Rather than seeking personal opinions on the prospect of independence, we opted for a more concrete, business-specific question as a better indicator of the practical importance of this issue. More than half (58%) thought that Scotland’s membership of the UK made little difference to their own business.
This result suggests lower levels of concern than those reported in a BCC membership survey (published in May), where 85% of respondents stated that Scotland should remain within the UK. However, it does leave a sizeable minority (35%) who see Scotland’s membership of the UK as having a significant – either “good” or “very good” – impact on their business.
In order to probe for underlying reasons, we asked respondents for practical examples to show how Scotland’s membership of the UK had an impact on their own businesses. Comments from rUK firms who see Scotland’s membership as a “good thing” highlight three main concerns.
One is potential barriers to cross-border trade: “We trade to a significant degree in Scotland. Anything that makes this harder would potentially be negative.” Another business-owner commented: “I would hate to add any complexity to my Scottish sales. I sell a lot to Scottish buyers … Scotland leaving worries me a lot. I think it will be a disaster.”
There is also the concern that transaction costs will be higher as a result of an independent Scotland: “The prospect of having to treat deliveries to Scotland as exports horrifies me, especially if Scotland does not continue as a member of the EU.”
And many just have a general sense of uncertainty about how an independent Scotland will affect their business: “We need stability. Any large upheavals will produce uncertainty and interrupt workflow. Splitting up the UK will be a nightmare and we will be poorer for the split.”
Another said: “[Our] pensions are held in a group scheme headquartered in Scotland. Were Scotland to break away the fund would have to be split, with the possibility that economics of scale fall for both sections. It would be lose-lose.”
Scottish business owners in this sample also referred to cross-border trade and currency: “Most supplies come from outside Scotland. Currency union and lack of trade restrictions are absolutely necessary.”
Scotland’s decision to be independent or part of the UK is an important issue to many small and medium-sized businesses within Scotland and in the rest of the UK. The data suggests that concerns may not be as high as some believe or have reported. But, with more radical devolution waiting in the wings, these firms are likely to face some interesting challenges, whatever the outcome of the referendum.
Hard Evidence is a series of articles in which academics use research evidence to tackle the trickiest public policy questions.
Richard K. Blundel is editor of the Quarterly Survey of Small Business in Britain, which has previously received external funding. He does not work for, consult to or own shares in any company or organisation that would benefit from this article.
I’ve been working on two parallel projects recently, both of which examine the resilience of smaller businesses. “Hidden Histories: Britain’s Oldest Family Businesses”is a new series for BBC Four television and The Open University, produced by Chris Durlacher and Rebecca Templar of Raw TV. The programmes are compelling and it’s been fascinating to hear how the owners of these three featured businesses have navigated numerous crises, both ‘internal’ and ‘external’, and somehow managed to keep themselves going over several centuries. Of course, three hundred year old family firms are exceptional cases – most small businesses fail very quickly and only a small minority survive more that a few decades – so you might see them as too exotic to be of much relevance to the rest of us. However, we’re also researching a similar topic for the current issue of the Quarterly Survey of Small Business in Britain, asking our respondents about their experiences of resilience and recovery over a shorter time-frame. So what can we learn from these different experiences? The survey will be out shortly, but in writing up our main findings, I’ve been struck by three key themes:
1. While unsurprisingly, the ‘credit crunch’ and subsequent economic uncertainty is the most highly-rated ‘real threat’ experienced by small and medium-sized firms, more than a quarter refer to extreme weather conditions as affecting their businesses in this way. The comments paint a painful picture of businesses damaged by floods, storms and heavy snowfall over recent years.
2. It’s easy for the realities to get hidden in the statistics – some of the stories of particular firms are really sobering, with owners and managers having to deal with multiple crises simultaneously, including bad weather, economic uncertainties and the sudden failure of major customers.
3. We should be spending a lot more time thinking about resilience. The widespread obsession with high levels of growth tends to obscure the real issues for business owners and managers, where growth may be one ambition amongst others, but the main thing is to keep on going through both good times and bad – and that deserves a lot more recognition (and respect) from political leaders, media commentators – and the rest of us.
Small and medium-sized businesses have had to navigate incredibly demanding and often hostile and unpredictable markets over the last few years. And as was the case for UK households, some have had it far worse than others. So, with George Osborne’s Autumn Statement expected to trumpet signs of a fairly dramatic upturn in the economy, it’s a good time to turn our attention to the current state of Britain’s smaller businesses. How well have they survived the economic crisis – and other extreme events – over the last five years? And are they in a good position to respond to improving conditions in their respective markets?
We’re conducting research on these issues for the next Quarterly Survey of Small Business in Britain. One interesting early finding is around the level of investment in equipment and technology, a useful indicator of the current state of a business, as well as its future prospects. The responses to this question suggest that almost half of businesses (45%) consider themselves fully-prepared for the next few years, while many of the others (20%) think they already have the necessary investment plans in place. Of the remainder, the majority (24%) seem to have retained their growth ambitions but are timing their investments cautiously. This leaves around one in ten respondents (10%) who do not have the equipment and technology they need. The businesses in this group are split fairly equally between those who have decided against making any investments and others who would like to invest but – for a variety of reasons – are unable to do so.
We also asked business owners and managers to explain the reasons for their responses. Looking at those who have decided not to make the investments needed for future resilience and growth, the explanations seem to focus around lack of resources and continuing uncertainty over the economy:
“We cannot afford to make any investment at this time but look towards making those investments during the second part of 2014.”
“We would like to invest in new equipment but do not feel the market is stable enough, nor the demand yet sufficient to take on debt to finance the purchases.”
“Boring old cash flow.”
Those businesses with an intention to make new investments in the near future seem to have very specific capital expenditures in mind:
“We have started our investment plan, acquiring new high tech automated plant, with a view to new additions early next year.”
“[We are] putting into place automated systems to reduce work load and so allow efforts in more constructive areas.”
“[We] will need larger refrigerated storage and a stock management system.”
And lastly, one of the striking features of the businesses that already have all the equipment and technology they need it that their investment plans seem to be part of a longer-term perspective on the business – both in terms of their aims and on what is needed to realise them:
“Careful and continuous investment over 10 years in our infrastructure.”
“We have continually invested in new kit and therefore our fleet of equipment is modern, efficient and adequate for the business.”
“We have invested heavily in our infrastructure which is now capable of supporting a significantly larger business.”
“We have invested heavily in plant and IT over last 5 years and now have a state of the art manufacturing facility.”
“Our business continues to re-invent itself and we have the finance and the personnel to make it happen.”
So, in conclusion, there do appear to be some grounds for optimism, based on this early result from the Quarterly Survey. It suggests that almost half of Britain’s smaller businesses have continued to invest through the downturn, and that many more have concrete plans to do so in the near future. However, there are also some grounds for concern, as a significant minority are either unwilling or unable to make the investments they need in order to remain resilient, or to grow their businesses over the next few years.
A note on the research: This is an early, provisional finding from a research study on SMEs, which focuses on the topic of organisational resilience and recovery. The Quarterly Survey of Small Business in Britain, Quarter 4 2012 report, “Resilience and Recovery”, will be published in January 2014 (www.open.ac.uk/quarterly-survey). The data presented here is based on a sub-sample of 475 responses to an online questionnaire, which was made available on The Open University website during October and November 2013. This sub-sample is not necessarily representative of UK SMEs by size or sector. The wording of the featured question was: “Do you think your business has the equipment and technology needed to be resilient and / or to support your growth targets over the next three years?”; the five options were followed by an open question that asked respondents to explain the reasons for their response. The full report will include a more detailed analysis of this question and a number of other questions that incorporates data from a larger structured sample obtained through telephone interviews. The survey has been supported by the following corporate sponsors: ACCA (the Association of Chartered Certified Accountants), Barclays Business, the Finance and Leasing Association (FLA) and The Open University Business School. However, the research is editorially independent and any views expressed may not reflect those of sponsoring organisations.
I recently took part in a short online debate about growth, responding to a piece by Rita Klapper and Paul Upham (the full debate can be found here). These are my thoughts, which can be read as a stand-alone piece though they respond to Rita and Paul’s interesting essay and, in particular, their concluding proposition that ‘growth’ is not something we should take at face value.
Why is growth such a problematic concept? After all, economists, politicians and business people talk about it all the time. To begin with, it’s because (despite appearances to the contrary) we really do lack an adequate vocabulary to tackle a phenomenon that’s so elusive, multi-layered, paradoxical and all-pervasive. Tim Jackson highlighted a good example in his (2011) study, Prosperity Without Growth: Economics for a Finite Planet. The French have at least got a term for slowing things down (‘decroissance’), whereas those working in English have to make to with the clumsy improvisation, ‘de-growth’ (OK, there’s ‘downsizing’ and ‘downshifting’, but the point still stands). Furthermore, the few words that we have at our disposal are shackled to, and frequently undermined by, misleading metaphors.
The images available – biological archetypes of growing organisms (like baby elephants) and evolutionary pathways – are particularly potent and need careful handling. Researchers have an important role to play here, challenging cruder examples of determinism and applying strong pinches of salt where necessary. But that’s not going to be enough. The destructive manifestations of economic growth that overshadow us today are a product of deeply-rooted cultural factors (with the possible exception of Rita’s collectively-minded Finns), underpinned by increasingly globalised economic and financial institutions. Fritz Schumacher’s inspirational (1973) Small is Beautiful: Economics as if People Mattered left one key question unanswered: how you deal with the dynamics? I’m not sure we’re much closer to understanding, for example, how today’s visionary start-up can avoid becoming tomorrow’s destructive corporation; issues like this should be at the heart of our research agenda. In his review of Jackson’s book, the solar energy entrepreneur Jeremy Leggett writes:
‘And for what it’s worth, as a creature of capitalism – a venture-capital-backed energy industry boss, a private equity investor, and an Institute of Directors director of the month – I am convinced that capitalism as we know it is torpedoing our prosperity, killing our economies and threatening our children with an unlivable world.’
Leggett thinks Jackson is good at, ‘showing the generalities of the escape route’, but there’s still plenty for the rest of us to tackle when it comes down to the details. Having said that, there are some great examples of experiments in alternative approaches to growth. For example, I recently attended a local entrepreneurs forum in Totnes (the Transition Town that has become known for its successful campaign against a Costa coffee outlet). As well as having a chance to mix with some really inspiring people, we heard about their local economic blueprint, part of a national pilot that is developing interesting new ways to conduct economic evaluation.
There’s now a lot of talk about some kind of new business bank, with Vince Cable’s announcement this week reinforcing the Chancellor’s comments in a BBC interview at the weekend while arguably going some way beyond. Some commentators, including Anthony Hilton, are sceptical, and it will be interesting to see what SME owners and managers make of the idea – it’s also something we hope to be exploring shortly in the Quarterly Survey of Small Business in Britain. Clearly, businesses have diverse financing requirements, so while economists have frequently pointed to fairly compelling evidence that market imperfections may act as a constraint on ‘growth’ for some firms, it’s also the case that financing growth strategies is not on the radar for the vast majority. This is a highly contentious and technically complex issue, and unpicking the underlying causal factors is far from simple. However, it’s also interesting to see something like a consensus emerging, with a variety of actors, including the British Chambers of Commerce and the Labour Party publishing studies that make the case for some kind of Business Bank. Watch this space!
David Floyd of the ‘Beanbags and Bullsh!t’ blog has just interviewed June O’Sullivan, CEO of the UK’s biggest childcare social enterprise, LEYF. Floyd’s interview raises a number of challenging questions about the kinds of business models that are now being developed in order to deliver social impact in key areas such as childcare. This is a field that is full of strongly-held views and powerful vested interests, but you get a strong sense that LEYF is navigating its way towards a more balanced and streetwise approach to growing social ventures. For example, they seem to be recognising the vital importance of its historical heritage and core values (not just ‘window dressing’), while also taking some fairly radical steps to reconfigure the organisation’s underlying business model.
Another important issue raised by June O’Sullivan is what she perceives as a lack of public awareness of social enterprise, despite the best efforts of organisations such as Social Enterprise UK. If she’s right, we’re entering uncharted, and potentially dangerous waters. Dangerous because, without a well-informed public and a very well-constructed governance structure, there’s a real prospect of seeing vast swathes of the social sector marketplace becoming the preserve of larger and less scrupulous commercial players.
Fergus Lyon and Heather Fernandez have done some work on the growth of LEYF for the Third Sector Research Centre. I’ve also been working with Fergus in a study that examines LEYF as part of our attempt to take a more historical perspective on the growth of social ventures, presented recently at the Skoll SE Colloquium.
Personal carbon trading is back on the agenda and there are some interesting questions to ask about the way that a PCT-based regulatory system would feed through into entrepreneurial activity. A British politician, Tim Yeo MP, chair of the cross-party Energy and Climate Change Committee, has called for the launch of a pilot personal carbon allowance (PCA) trading scheme, funded by the private sector and possibly the EU.
There’s plenty of evidence that regulation can drive significant market transformation and the sheer scale and scope of national/international PCTs is also likely to open up all kinds of new productive opportunities as individuals and communities seek out innovative ways of reducing their own carbon footprints. There are also lots of questions for researchers and policy-makers regarding the design and implementation of such a scheme. I’ve had a long-term interest in PCAs, sometimes referred to as ‘personal carbon rationing’, and have heard (via a certain close relative) all of the many arguments for and against. However, from my own reserach perspective, some of the most interesting issues concern the kinds of social and commercial entrepreneurship that would be engendered by this kind of intervention. The nature and scale of the response would be critical to the success of any scheme, because it would have a direct impact on the ‘feasibility’ of achieving particular carbon limits, and the rate at which those limits could be lowered. If the bar is set to low, the baby will not thrive. If the spur towards radical or disruptive innovation is insufficient, new entrants will find it harder to enter while the usual suspects will devise ingeniously unproductive ways of milking the system without making changing their existing practice (sound familiar?). If it’s set too high, the politicians will find it impossible to ‘sell’ and the level of resistance will strangle it at birth. However, if they get it right – with a gentle entry level combined with a clear and unambiguous downward trajectory thereafter – the entrepreneurial start-ups, the powerful incumbents and all the rest of us will be in for a really interesting ride.
I recently interviewed Warren East, CEO of the Cambridge-based microprocessor designer ARM Holdings, as part of the BBC/OU co-production, The Bottom Line. ARM has an unusual business model, based around a web of collaborative partnerships with over 300 firms. It’s excellence in engineering design is reflected in the fact that almost 8 billion ARM-designed chips were shipped last year. That’s a staggering number by any measure, and it is reflected in some other startling statistics. For example, more than 95% of the world’s mobile phones contain chips that were designed by this British company.
Warren East spoke eloquently about ARM’s growth and development over the last two decades, highlighting some of its distinctive features and capabilities. We also talked about the environmental sustainability issues associated with the global information and computing technology industries. Clearly, any activity that results in the creation of 8 billion processors, however tiny they might be individually, is going to have a significant impact on the natural world – there are issues around resource extraction, energy use in production and consumption, and associated environmental pollution. The counter-argument revolves around the way in which these materials are used, and in the positive contribution they can make in economic, social and environmental terms. It is also very easy to lose sight of the human ingenuity at work here – the people who slave away to design and manufacture chips that can run electric motors far more efficiently, reduce the power consumption of servers by up to 75%, or help us to make ‘smarter’ use of energy in our homes and workplaces. Of course, such efficiency improvements can often be trumped by increases in volume or throughput – think air travel, for example. They do not, in themselves, remove the imperative for operating within natural constraints, and for mitigating the damage that we continue to inflict on our fragile eco-systems. However, it is also heartening to see just how ingenious our fellow human beings can be, and to acknowledge some dramatic technological innovations that are often taken for granted.