Successful businesses and economies are increasingly built on intangible or ‘knowledge assets’ rather than physical ones. Intellectual property (IP), data, insight and research and development (R&D) all contribute to innovation that can create new opportunities.
The recently published Mackintosh report included an implementation strategy to capitalise on the remarkable innovation and insights in the public sector and help to shape the future of our country as we emerge from the coronavirus pandemic.
So, how can the public and private sector work together to unlock innovation? That’s the question we asked at a recent ThinkIn event that we developed in conjunction with Tortoise Media. The event was a live and unscripted conversation that brought together senior figures from the public and private sector.
We began by outlining our own research with senior government decision-makers. We found that most believed their organisation has become more or equally open to collaboration or to new ideas since the pandemic began. This presents a great opportunity if public sector innovation can be properly harnessed.
Charles Price, Deputy Director of Knowledge Assets at the Department for Business, Energy and Industrial Strategy (BEIS) started the conversation by commenting that the Mackintosh report shows that the public sector already has impressive R&D capabilities, so also has a lot of intangible or knowledge assets. The report estimates that £104 billion of knowledge assets are held by central government. Charles says there is now increased focus from government to use these assets to provide value to taxpayers.
Charles went on to talk about collaboration which became a key theme of the event. He said: “What turbo-charges innovation is collaboration and working across different fields.”
Hetti Barkworth-Nanton, CEO of Ploughshare, picked up on this point to explain how her organisation collaborates with the Defence Science and Technology Laboratory (Dstl). She said: “We work with Dstl and have access to a vast array of innovation from life sciences to cyber technology. In very simple terms we have access to IP and get it out of the lab and into the hands of users. We license it to existing ventures for them to invest in or create our own venture that will invest in the technology. We licensed a ground-breaking fingerprint technology to Foster + Freeman who took the capability to market and invested in it, which gave us an up-front licence fee and committed to marginal royalties to Ploughshare and the public sector.”
Hetti went on to explain that there is definitely increased interest across government departments wanting to do the same with their knowledge assets; “The desire was already there from government, and the Covid-19 vaccine development has shown the public sector what can be done in a crisis and the excitement has gone on to fuel interest in innovation.”
Professor Sir Ian Boyd, Chair of the UK Research Integrity Office and a board member for Fera Science Ltd, explained how the organisation is a good example of what can be achieved when the public and private sector work together. Fera Science used to be the Food and Environment Research Agency but is now a joint venture between Capita and Government. Sir Ian explained how the joint venture successfully transformed a department that the Government couldn’t make work sustainably on its own; “Capita took a third of the cost out of the business and maintained or improved the service because they had well tried business processes which were pretty tough for those used to civil service culture. It’s the focus, systems and business processes that make a huge difference .”
Patrick Elliott, Chief Strategy & Product Officer at Capita Government Services, explained how Axelos is another example of how collaboration, and bringing together different skills and expertise from the private and public sector, can be a success. He said; “Going back decades the Government ran big programmes and developed project management methodologies such as Prince 2, so Axelos was set up to create more value from the large investment made by the taxpayer in developing those methodologies. Axelos is a joint venture between Capita and the Cabinet Office and its licence methods and training are now used in 150 countries and in 19 languages and by 90% of biggest organisations in the world. Without partnership it wouldn’t have happened on that scale and at that pace.”
However, Patrick explained that the UK is still behind other countries when it comes to pushing ahead with collaborative partnerships; “Prior to the Mackintosh report we released our own report on government venturing. When you look across the world, France, Canada and Singapore are further down the road of recognising that to deliver best possible returns you need partnerships with the private sector, so we see more potential going forwards. Capita has a lot of experience of doing this with Fera, Axelos and Constructionline, but it doesn’t always have to be a joint venture, it could also be through licencing.”
Patrick pointed out that more needs to be done to explore potential opportunities up-front; “This requires an agile, innovative and fail-fast approach to see if there is an opportunity. If there is, that’s when it can be switched to a more formal procurement process. If more private sector organisations had more awareness of the capabilities that sat in the public sector, they would be able to approach it for help to find solutions to some of the problems they see.”
Hetti Barkworth agreed; “We want to see the private sector coming to us and saying we have these challenges; how can you help? It doesn’t generally happen when you look at technology transfer work, which is more typically driven by a capability-push rather than a problem-pull approach, but I’m convinced that a much smarter model could bring huge benefits.”
The discussion then turned to the success of the vaccination programme in the UK, which was first led by Kate Bingham, who has a venture capital background. Kate has spoken about the need for a “partnering mindset that is very different from what’s normal in government.”
Patrick Elliott agreed; “Culture takes a long time to change, but fundamentally it’s about taking risks and accepting failure. A culture where accepting failure is the norm is perhaps more difficult in the public sector than private sector, which is why a fusion between both is so important. If the risk appetite isn’t high enough, you won’t be able to get the high returns. When we can get the right partnership working it can be remarkably effective.”
Sir Ian noted that cultural change and innovation appetite will vary by issue and through time and it is therefore important to identify the special circumstances which exist in a particular situation and at a particular time which make innovation and venturing possible. In circumstances such as Fera, the catalyst may be actually reducing the risk of institutional failure.
Hetti Barkworth-Nanton followed on from this point by explaining how incentives can help; “Our inventors and innovators are less likely to want to leave the public sector and follow their innovations into the private sector. The Government is also very nervous about giving out equity from the spin-outs we create, so we are not giving significant chunks of equity to inventors. We need to flip that on its head, so inventors want to take risks to drive innovation.”
To conclude the event, Andrew Mackintosh, author of the Mackintosh report gave his view on the points raised. He firstly said how pleased he was to see the conversation open up, now the report has been released and that echoed what he found in his research; “This issue of culture was at the heart of the report, but there is also a central pillar on incentives. It was quite clear in the research that there was a general feeling that this is ‘not my day job’ and nor would I keep the benefit from any upside. So, incentives are needed to start sending messages to the heads of government departments to say it’s ok and necessary to start thinking about the use of assets in another way. This session has reinforced that culture is 1st, 2nd and 3rd on our list.”
Our ThinkIn event showed that there is a desire from the Government to use its knowledge assets and show a return to the taxpayer, but the challenge is how to judge returns financially, socially and culturally. Our event showcased some of the models that can and should be explored. The exciting take-home point is that it seems we could now be at a substantial turning point in how the Government approaches innovations, which could provide huge value for citizens, businesses and the UK economy.