chapter three collaborate to compete “When giants dance, they must have partners. They must become intimate with customers, turn suppliers into collaborators, and find venture partners to combine offerings or grow markets.” Rosabeth Moss Kanter: “Can giants dance in cyberspace?” 3.1 Successful businesses compete aggressively. The next chapter describes the regime the Government is putting in place to encourage such competition. But alongside competition, businesses need to be willing to collaborate – to learn from others, including their competitors. Successful businesses improve their performance continuously, through adapting ideas and techniques developed outside the business and promoting co-operation within the business. Even businesses that regard themselves as world-class have made extraordinary improvements in productivity and profitability from benchmarking and as a result of changing the ways they work. 3.2 In a knowledge driven economy, partnership is essential to competition. To exploit our capabilities in people and technologies, businesses have to collaborate across sectors, throughout regions and with education. . Few companies have all the skills needed to develop technologically complex products and to market their products and services effectively. . Businesses are increasingly involving suppliers and allies in product design, development and delivery. . The most dynamic regional economies, such as Silicon Valley, have businesses which rely on each other to solve shared problems while still competing intensely. . Networks which link businesses to universities and research institutes are an increasingly important source of innovative ideas in all industries (covered in more detail in Chapter 2). . Modern and successful businesses are already drawing competitive advantage by adopting co-operative approaches to employment relations, which unlock the skills and knowledge of their workforce. “The most powerful process any company can adopt which delivers immediate, measurable and sustained productivity improvements is the transfer of Best Practice. If manufacturers adopted this easily understood principle and secured only the average best practice levels achieved by our leading competitors, the UK could achieve an increase in GDP of around £60 billion. If the balance of the economy adopted the same guiding principle the increase in GDP could be around £300 billion.” “Fit for the Future. How competitive is UK manufacturing?” CBI National Manufacturing Council, September 1997 3.3 Improving company performance is a job for business not Government. However, it is not always easy for business to see the benefits of networks and collaboration when they are focused on short-term competitiveness. Government has an important practical role in helping to promote partnerships. . UK companies need to match the best in the world, by learning from the best in the world. They need to benchmark their performance and adopt best practice. . Government has an important role in helping business collaborate sectorally, regionally and locally to raise performance to these exacting world-class standards. . Successful businesses need the right environment within the business to engage in these activities and unlock the talent of their employees, for example, through Investors in People. Government can promote best practice here too. 3.4 The Government’s strategy – collaborate to compete – starts with learning from the best in the world. Learning fromothers:best practice Businesses need to benchmark their performance to help identify world-class performance and best practice. However, many businesses do not recognise the need for best practice, do not know where to start or how to build it into the business. A sustained effort is needed to spread the culture of benchmarking and best practice throughout the UK. The Government is providing substantial funding for the CBI’s Fit for the Future campaign which aims to stimulate a massive increase across the country in the number of businesses adopting best practice. The campaign will provide an “umbrella” for national, regional and sectoral best practice initiatives. 3.6 The Government recognises that benchmarking and best practice cause particular difficulties for smaller businesses. Business Links and the equivalent support organisations in Scotland, Wales and Northern Ireland, and trade associations already give special help to encourage the use of these techniques. The Government is updating the UK Benchmarking Index and expanding the Inside UK Enterprise and Connect for Better Business services. The Government’s aim is to ensure that 50,000 businesses a year, including the 10,000 new innovative start-ups helped by Business Links (see paragraph 2.17) undertake some form of benchmarking or other best practice activity for the first time. The Government is supporting the use of the Business Excellence Model as a framework for businesses to adopt a systematic approach. It also supports benchmarking of energy and raw materials use through the Energy Efficiency and Environmental Technology best practice programmes. Within this framework and Fit for the Future, the Government will encourage improvement in individual processes such as marketing and people management. casestudycasestudyBased in Sussex, Servomex employs 300 people in the design and manufacture of advanced gas analysers and monitoring systems. These are used in the process, medical A commitment to best practice equipment and environmental industries to improve plant efficiency and product quality, maintain safety and help meet demanding environmental standards. The company attributes their success to a commitment to best practice over a five year period. The basis of this approach has 40 been a concentration on key strategies, focused marketing, fast track product development, lean manufacturing and strong financial control. Underpinning this strategy is off-line technology management and a total quality culture. The on-going programme is being maintained by use of the Business Excellence Model to highlight scope for progress. After an initial period of investment in better practice, the company can show consistent profit growth and they have generated £2 million cash from improved control of stocks and work-inprogress. Learning fromothers: sectoral partnerships 3.7 Sectoral partnerships, including supply chain initiatives, networking and clusters play a critical role in sharing knowledge and upgrading skills among complementary businesses. Government support includes Regional Supply Offices which work with development agencies to help supply chains develop clusters of businesses to meet the needs of client purchasers and to understand the benefits of sharing market knowledge and best practice. 3.8 An excellent example of how world-class best practice can transform manufacturing quality and productivity can be found in the automotive sector. Supported by the industry and DTI, the SMMT Industry Forum is helping businesses in the automotive supply chain to achieve dramatic improvements in performance, for example, doubling of productivity, stock turns improved by 260 per cent and defects reduced by 65 per cent (see box). The project uses hard quantitative measures, based on those used by the vehicle manufacturers, to assess the performance of participants’ manufacturing processes and measure improvements following the activities. networks South Wales Forgemasters show how they can learn from local and national networks; such as the SMMT’s Industry Forum, the Cardiff Innovation Network, Welsh Automotive Forum, South West Wales Suppliers Association, the Welsh Automotive Training Consortium and Borg Warner’s Supplier Association Initiative. Membership of the Confederation of British Forgers/ DTI-sponsored Forging 2000 has opened their eyes to the culture of continuous improvement, collaborative partnerships and the adoption of lean manufacturing techniques which they witnessed on Forging 2000 overseas benchmarking missions. The benefits of this investment and their work with Borg Warner is beginning to show through – in the last 18 months turnover has increased by 15 per cent. Learning from casestudycasestudy As Managing Director, Roger Meacham says of the Borg Warner collaboration “the aim is to create a sense of purpose, strategy and policy; to help each other develop and learn together by sharing knowledge and experience to eliminate wasteful non-value activities inside and between companies. This applies to all our networking activities.” 41 DTI wants other sectors to learn from this impressive example. DTI is therefore making a major commitment to helping sectors which want to improve their performance by funding up to ten proposals to adapt the Industry Forum model to meet their particular needs. The SMMT Industry Forum The SMMT Industry Forum is an industry-led partnership involving many of the best-known names in the automotive industry. It aims to raise the sector’s competitiveness by delivering shop-floor improvement programmes based on world-class best practice, led by expert engineers from major vehicle manufacturers. One of the companies that has benefited from Industry Forum is Isringhausen GB in Wrexham. It manufactures seats for commercial vehicles and has 130 staff and a turnover of £15 million. Although the company had made some progress in improving productivity on its own, major opportunities for improvement were identified by a small team from Industry Forum. Sixty wasteful activities were identified, of which the most important was excessive walking due to poor layout. After an in-depth examination of the work during a one week workshop, two lines were reconfigured. As a result, the number of operators on one line was reduced by 33 per cent (to be re- deployed in other areas) and output was increased by 20 per cent – a productivity improvement of nearly 45 per cent. 3.10 Other sectors are also looking at how collaboration can improve performance. The cross- Whitehall Creative Industries Task Force is looking at ways of encouraging take-up of business support among creative entrepreneurs and at the impact of many of the issues raised in this White Paper on the creative sectors. Early in the New Year, the Government will publish a tourism strategy, developed in partnership with representatives of the tourism industry. This will set out a raft of proposals to improve the competitiveness of tourism businesses, such as enhancing management skills and training and promoting better use of new technology. Strong regionalpartnerships 3.11 Collaboration at regional level is vital in order to create regional strength. The right local environment for business success requires strong regional leadership to: . develop a strategic long-term vision for promoting competitiveness in the region . ensure national support for competitiveness is tailored to regional and local needs . support the development of clusters, networks and other partnerships. 3.12 In Scotland, Wales and Northern Ireland the devolved administrations will lead these efforts, building on the long track record of Scottish Enterprise, Highlands and Islands Enterprise, the Welsh Development Agency and the Northern Ireland Department of Economic Development. In England, where regional economic leadership has been weaker, the Government is establishing the Regional Development Agencies (RDAs) to promote economic development in the regions. 3.13 Business-led RDAs will be lead bodies at regional level for co-ordinating inward investment, raising skills, improving the competitiveness of business and for regeneration. They will develop and promote a strategy for improving regional economic performance and enhancing their region’s competitiveness. RDAs will have an important role to play in taking forward many of the priorities identified in this White Paper: raising regional skills, encouraging links between business and higher and further education, working with Business Links to develop regional centres of expertise, encouraging business collaboration and facilitating the development of clusters. 3.14 The English regions have prepared competitiveness strategies which benchmark regional performance, often against regions in other parts of Europe, and propose action plans for promoting growth. The RDAs will build on this work in developing and implementing their own regional economic strategies. DTI will provide an extra £10 million over three years to the Agencies to spend on priorities they identify for increasing competitiveness, such as promoting innovation and supporting business partnerships, networks and business clusters. collaborate to compete 3.15 To make sure business support in England is as effective as possible, the Government has asked the RDAs to review the coherence and quality of business support in their area, against the local and regional priorities they identify in their regional economic strategies. Sectoral organisations will be able to do the same. DTI will work with the RDAs and sector organisations to develop a coherent framework for business support. DTI will evaluate, on a continuing basis, the effectiveness of support by measuring the percentage of businesses participating in DTI supported activities which report beneficial changes in their business practices as a result. 3.16 In June 1997, the Secretary of State for Scotland asked Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE) to bring forward their planned review of strategy to take account of the Government’s new priorities. The SE emerging strategy has involved extensive consultation and identifies four key goals for the Scottish economy; innovative and far-sighted businesses, positive attitudes to learning and enterprise, economic development and inclusive process and competitiveness. It also contains encouraging messages on skills, inclusion and the “knowledge economy”. Similarly, HIE’s review has taken account of local authority and partner agencies’ views. Their revised framework for development will continue to pursue three current objectives; strengthening communities, developing skills and growing businesses. The HIE network is committed to a set of principles which include sustainability, working in partnership, accountability and value for money. Both strategies are expected to be launched early in 1999. 3.17 In July this year, the Secretary of State for Wales published Pathway to Prosperity – A New Economic Agenda for Wales. Its objective is to build a high quality economy and to spread prosperity throughout the whole of Wales. It stresses the importance of lifelong learning, entrepreneurship, innovation, social cohesion and equality of opportunity. Pathway to Prosperity recognises that good quality business support services and access to venture capital are vital to the development of SMEs. Business Connect, which delivers business support in Wales, is being reorganised and strengthened. Know-How Wales will promote technology transfer in Wales (see paragraph 2.41). 3.18 In Northern Ireland, a fundamental review of economic development strategy was launched by the Northern Ireland Economy Minister in January 1998. It will produce a new strategy to accelerate economic growth over the next ten years. The review is being carried out as a collaborative exercise; well over 300 representatives of the private, public and voluntary sectors have been actively involved in the process. The findings of 18 different working groups are currently being distilled into a single draft document for presentation to the new Northern Ireland Assembly. It is the intention to have the strategy in place by mid-1999. National backing for local strategies 3.19 The Government will ensure that local economic development efforts get strong national backing by refocusing Regional Selective Assistance (RSA) to support the policy of developing forward-looking regions. The main features will be: . focusing support more on high-quality, knowledge- based projects which provide skilled jobs; this applies equally to inward investment and domestic projects . introducing a new Assisted Areas Map, taking account of the responses to the recent public consultation. 43 casestudycasestudy Exploiting research through collaboration Project Alba is a unique collaboration between public and private sector, industry and academic partners which will propel Scotland to the forefront of world-class research and design of next generation semiconductors. It aims to create a working environment which helps business turn such developments to their competitive advantage. The project has attracted a major investment by Cadence Design of the US, which should create up to 1,900 jobs over the next seven years, the involvement of four major Scottish universities and the establishment of an Institute to facilitate the trading of intellectual property. 3.20 The Government will consider new measures to support the growth of smaller businesses in selected areas with particular needs, such as those which suffer from severe economic downturn, coalfield communities, cities and towns with severe joblessness and coastal towns and countryside areas suffering from a particularly steep decline in traditional employment opportunities. Links will be developed with other Government programmes that are designed to combat deprivation in these areas such as Employment Zones, Health Action Zones, the New Deal for Communities, the Single Regeneration Budget and the new Coalfields Enterprise Fund. This will complement action to tackle social exclusion. 3.21 Local authorities also play a key role in collaboration and have a responsibility for taking a comprehensive overview of the needs and priorities of their local areas and communities and working with local business to create an environment where people want to live and work. The local government White Paper14 envisages that councils will develop an increasingly close relationship with the business community, taking their views into account and responding to their needs and demands. Local authorities will work with RDAs to increase local competitiveness. DTI will look at specific ways to work more closely with local government to support new investment and business competitiveness. 3.22 New Business Link “Centres of Expertise” will enable Business Link Partnerships to provide local businesses with access to specialist services which have not previously been provided locally. These will include specific services for the ceramics, aerospace, defence and printing industries and micro business benchmarking and waste/environment/energy efficiency management. Working with the RDAs, 44 Business Link Partnerships will continue to improve the range and quality of expertise which small and medium sized businesses can use to help them grow and become more competitive. 3.23 Inward investment will help build the UK’s knowledge driven economy by bringing in the best ideas from abroad. The Government is determined to maintain the UK’s position as the number one location for inward investment in Europe, including US and Japanese investment. The Invest in Britain Bureau (a DTI/FCO partnership) will therefore increase its focus on attracting high-value projects, including those which support the development of strong sectoral or technology-based clusters, or build on centres of scientific excellence. 3.24 It is also important to attract bright people with scarce skills to work for UK businesses and to set up businesses of their own which create jobs. This requires a positive attitude to immigration. The Government is already taking action to ensure that the process of obtaining work permits is as smooth and simple as possible. Government will examine whether there is scope for lowering barriers that prevent entrepreneurs or skilled professionals from coming into or remaining in the UK. The Government would welcome suggestions from business for improvement. Encouraging clusters 3.25 Business development is often strongest when businesses cluster together, creating a critical mass of growth, collaboration, competition and opportunities for investment. Venture capital and business advisors are attracted to the area. Local education and training institutions can help create a pool of skilled labour to meet the cluster’s needs. 14 Modern Local Government: In touch with the People, July 1998. casestudycasestudyChemicals clusters l facilitate collaboration in areas such as maintenance, waste treatment, education and training programmes Bob Bew, Chairman Teesside Chemical Initiative. The original impetus for location of the chemicals industry around the Tees was based on access to raw materials and customers and a supportive infrastructure. The industry however, recognised it could further exploit the advantages of co-location and formed the Teesside Chemical Initiative in 1995. This is an industry-led body, but with DTI and other public sector agencies it works closely in partnership to: and community development l monitor manpower requirements and technical capability . act as a focus for new investment . identify weaknesses in local infrastructure. 45 3.26 Clusters cannot be created by public policy. They must be business-driven. However, Government can create the conditions which encourage their formation and growth. In England, the RDAs can facilitate the development of clusters. In Scotland, Scottish Enterprise is currently working in partnership with industry, academia and others to develop cluster strategies and action plans for food, oil and gas, biotechnology and semiconductors. 3.27 In a few cases, where a cluster could be of national significance, a Government Minister will help to co-ordinate action across Government and with business. The first of these teams will look at biotechnology clusters and build on the DTI’s current activities to promote regional initiatives. 3.28 The Government is determined the UK should not lose its European lead in the commercial exploitation of biotechnology and genome research. A large number of businesses are already clustering around centres of research excellence in the UK, including Oxford, Cambridge and Dundee. A working group will report to the Secretary of State in January 1999 on how to develop “Genome Valley” in several regions in the UK with the kind of university-business links, entrepreneurial spirit and investment of Silicon Valley. This report will inform the work of the Ministerial team. Early in the New Year, DTI will also launch a major successor to the Biotechnology Means Business Initiative which raised wide-scale awareness of biotechnology’s potential. The new programme will build on this success by focusing on the implementation of biotechnology by industry. 3.29 The Government is overhauling the planning system to fit better the needs of enterprise while still meeting wider environmental objectives. The Government has already set about reducing planning delays. It will be consulting in England on a range of measures aimed at providing more efficient procedures for major projects and strengthening strategic regional planning. In addition the Government is reviewing how the planning system can best help promote the needs of clusters of businesses in growth industries; and the implications for their expansion for other land uses such as housing and transport infrastructure. The devolved administrations in Scotland and Wales will continue working with the economic development agencies to ensure the planning system is responsive to the needs of new industries, including the development of clusters. In Northern Ireland, economic development and planning strategies are being developed for consideration by the new Assembly. A new culture within companies 3.30 Key features of top performing businesses are the effectiveness and quality of their management and the commitment which that inspires in their workforce. A culture of flexibility, underpinned by principles of fairness and trust, creates the right conditions for a creative workforce and for business success. Minimum decent standards, consulting and informing the workforce, and a real commitment to training can bring benefits for everyone: wider choice in recruitment, reduced absenteeism and staff turnover and greater job satisfaction leading to increased productivity. The CBI also has a key role to play – by developing a clear code of conduct on partnership at work for employers to follow. 3.31 The Government is committed to improving the framework of law for employees and employers. This framework reflects the Government’s vision of a corporate culture in which fairness is second nature and underpins competitiveness. The National Minimum Wage Act, the Working Time Regulations, and the legislation foreshadowed in the Fairness at Work White Paper will strike a scrupulously fair balance. The Government announced in the Fairness at Work White Paper that it would be making funds available for the training of managers and employee representatives and to help develop and assist partnerships at work. Detailed proposals for the scheme are currently being worked up. casestudycasestudyIn ten years, Perween Warsi has grown her company, S&A Foods from a business she ran from her own kitchen to one that now employs more than 700 people. In the process, S&A Foods has won 21 individual awards and accolades for its products, innovation and business success, including being ranked 14th in Price Waterhouse’s Top 50 Fastest Growing Middle Market Companies in 1998. Perween attributes her success in part to the team of people she employs. She believes in developing “a strong family structure” amongst her employees. This environment allows the workforce to feel ownership of the success of the business, which in turn encourages commitment and enthusiasm throughout. This flows into better service to the customers, ensuring they receive excellent cuisine throughout the year. Creating a collaborative culture 47 3.32 Unlocking employees’ special knowledge is also a valuable source of innovation and competitive advantage. This is recognised by some larger businesses which have appointed a knowledge manager, but it is also important for smaller businesses. DTI is supporting a pilot at Business Link Kent to identify the knowledge management needs of different types of SMEs and identify best practice. 3.33 The Government is also committed to joint action with employers and trade unions to ensure occupational health and safety activities provide a skilled, competent and productive workforce. The Health and Safety Commission’s Good Health is Good Business campaign is a good example of this partnership in practice. Working withthe local community “The 21st century company will be different. Many of Britain’s best-known companies are already re-defining traditional perceptions of the role of the corporation. They are recognising that every customer is part of a community and that social responsibility is not an optional extra.” The Rt Hon Tony Blair MP, Prime Minister, 24 February 1998 3.34 Research by the Centre for Tomorrow’s Company suggests that a successful business will better serve its shareholders by focusing on the needs of its customers, employees, suppliers and the wider community15. There is also a growing acceptance by business of the importance of its licence to operate. According to evidence from MORI and the Centre for Tomorrow’s Company, 44 per cent of business leaders surveyed agreed with the proposition that a business cannot succeed without recognising that it is accountable to other stakeholders as well as shareholders16. Commitment to the local community and its economic, social and environmental concerns builds reputation. The Government believes that it is for business itself to consider how, by developing partnerships with the local community, it can achieve the best results. But the Government can promote best practice, for example, Business in the Community’s Awards for Excellence which reward social responsibility and promote best practice and which DTI sponsors together with the Financial Times. 3.35 The Government’s Social Exclusion Unit is leading further work following the report Bringing Britain Together: a national strategy for neighbourhood renewal. It has set up 18 Policy Action Teams to tackle particular issues that affect people who live in deprived neighbourhoods. The teams will aim to develop innovative solutions to the problems identified. DTI leads on the Information Technology team and is closely involved in the teams covering jobs, skills, business, shops, access to financial services and making government work better. 15 The Inclusive Approach & Business Success: the Research Evidence, 1997. 16 Sooner Sharper Simpler, 1998. casestudycasestudyWinning business: community involvement U Products, a small Manchester-based company, won an important order after Race for Opportunity introduced them to Littlewoods. As part of that programme, Littlewoods helped them upgrade their facilities to meet Littlewoods’ standards. U Products plan to build on this success. They want to create job opportunities for young people in inner cities and to create a national distribution network and plough back the profits back into a trust for developing the inner cities. 49 Collaborative projects around the UK Northern Ireland Growth Challenge A private sector initiative to stimulate growth in Northern Ireland. It combines economic analysis, with actions at sectoral level, including projects to promote clusters and networks. The project includes crosssectoral activities in education, training, The Technology Ventures Initiative Technology Ventures is a Scottish initiative being led by the Scottish Enterprise Network and partners to increase the commercialisation of science and technology from research in Scotland. The network has dedicated over £8 million towards this aim and last year supported the creation of over 30 Mid-Glamorgan Education Business Partnership The World of Work programme aims to provide every schoolchild in the central Welsh Valleys with a chance to enhance their awareness of business and entrepreneurship first hand. employment and innovation. Life and Health Technologies Partnership Launched this year with DTI backing, the initiative has brought together universities and the NI Growth Challenge to provide a forum for networking, education and co-ordination to encourage technology transfer and innovation. The IGD Food Project is supported by over 100 technology businesses. It also helped academics and researchers realise the commercial potential of their expertise. The Aberdeen Offshore Technology Park was established specifically for businesses committed to carrying out technology development for the oil and gas industry. Forty businesses have already located there. The expertise now found in the park should encourage further R&D, increasing the sector’s competitive edge. Wales Entrepreneurship Action Plan The initiative is designed to ensure that everybody in Wales recognises and, where possible, realises their entrepreneurial potential. leading businesses and organisations across the agri-food sector. Its key objective is to distil knowledge and expertise about consumer requirements and raise standards throughout the supply chain. The Construction Industry Movement for Innovation is carrying forward the work of Sir John Egan’s client-led task force. Its aim is a deep cultural change in the industry with partnership between clients and contractors all the way down the supply chain. The work will be led by demonstration projects and dissemination of best practice on innovatory working practices. Over 90 projects, totalling £1 billion have been nominated so far.