I started to reflect on Several ecosystems I have a working experience of, London, Brighton, Edinburgh, Glasgow, Cambridge, LA, Helsinki and how Jersey compares and what they might do next.
Ecosystems are by their nature are incredibly complex and difficult to get right, even the big boys get this wrong….
Small business is the backbone of our economy....President Barack Obama , August 17, 2010
New businesses are the lifeblood of a healthy economy....PM David Cameron , November 20, 2013
Both these two statements have something in common: they are both wrong or at best, misleading. ( I pause to contemplate what Trump might say in 2017 and shiver). Small, businesses, new businesses, knowledge-based businesses are not the key to economic health. Yet despite this, stimulating growth via SMES or small business has been at the heart of economic and industrial policy throughout the world, only recently being upstaged by startups.
In recent years, we have witnessed a significant global shift in attitudes towards entrepreneurship. This is reflected in the dramatic proliferation of start-up programs: Start-up…America, Chile, Russia, Britain, Weekend, etc.. Start-up has become the entrepreneurship buzzword. There is hardly a country or city that is lacking a start-up program with scale up being the natural evolution of the successful start up on the journey to be the elusive unicorn.
Unfortunately, this is a very narrow view of entrepreneurship consisting primarily in the starting-up of an enterprise. Equating entrepreneurship with start-up is not wrong, it is just very incomplete. It is also problematic because it implies that the most difficult task of the entrepreneur is launching his or her venture. It also infers that this is just a numbers game and so the more start ups the greater the chances of a successful exit. Quantity over quality.
On reflection a balanced approach seems obvious and when you look at that from a jurisdiction point of view one should seek to create an environment that seeks to support and enable growth for all stages, existing, new, early, mid and late stage policy that is designed to kick start rapid growth regardless of age profile.
It is both important and interesting to reflect that high growth firms are the ones generating jobs, and these are from a small number of firms and yet they account for the majority of job creation. These firms are also on average older than you might expect, studies of show that their growth often occurs after several years of steady progress but then in sudden, largely unforeseeable spurts for reasons ranging from market shifts, buyouts, recapitalisation, new management and sometimes luck. Of course there are the exceptions such as Google but across all sectors this is simply not the case.
Jersey then has a delicate balancing act to play, we can learn a lot from the others, and despite often insisting we are different when we are not. We do not have to implement their programs in the same way, but we can and should learn from them. Scotland, for example has been particularly successful in providing a comprehensive mix of funding, support, mentoring and cross pollination of complementary business. They have combined this with universities housing super computing capability who are engaged with the commercial world and hence form a critical part of the Eco system. Coupled with with Scottish enterprise who provide an excellent service and the offer is intoxicating. Innovate Uk is equally proactive and successful, incentives for investors have been undeniably successful with SEIS and EIS being two of many, but funding is not the only ingredient. The UK's armoury includes access to talent coupled with a welcoming environment for skills based immigration, add to this an engaged business community which stimulates, mentors and provides real world interaction provides a compelling jurisdiction.
This did not happen over night and Jersey policy makers then should see themselves as nurturing, the architect of enabling platforms, these are not command and control these are much more about creating the right environment to encourage collaboration, more on that later. In small island economies it is even more important (in fact imperative) that private and public sector leaders are aligned, it is futile to go to market without, political alignment and the necessary commercial delivery mechanisms.
If Jersey is to take a leap forward then it needs to foster, through policy and practice a complex entrepreneurship ecosystems in which high growth firms (existing or new) can take root and thrive.
This is not as easy as it sounds entrepreneurial ecosystems differ from traditional policy. Entrepreneurial ecosystems are complex, they comprise of many different stakeholders. I have seen people insist Jersey is treated as a product and others who refute that approach completely and recommend it is a service delivery business. This is difficult for governments, with a heterogeneous mix of the stakeholders and markets, industries and interests there is no one size fits all.
To complicate matters further there is a different order of elements and culture from traditional business norms. This is a complex, multi-level system where local interactions among individual ecosystem stakeholders on subjects that are not necessarily aligned to their paymasters but help the overall ecosystem. This type of interaction is anathema to command and control systems that government policy and traditional industries expect. An analogy with cloud computing and entrepreneurial ecosystem is that spare system-wide resources (Memory and CPU) are used to support other systems that enable a variety of projects in the hope that the effort is repaid forward at some point in time. In essence spare resources might help generate high-growth new ventures and as a result the ecosystem benefits as a whole. A rising tide lifting all boats.
How can we improve things? Instead of top-down, co ordinated bottom-up appears to work better. Engaging stakeholders and the wider world to see what would make an attractive environment and acting on that, not standing back, two way communication is vital. Instead of one big intervention, coordination of myriad local ones, undertaken by the stakeholders themselves. The biggest source of ecosystem inertia is insufficient stakeholder participation. As no one owns the ecosystem outcomes, it is too easy for all stakeholders just to wait for others to act and then reap the collective benefits. To overcome this problem, you need an ecosystem facilitation approach that builds sufficient commitment and mutual awareness among stakeholders. And even with sufficient commitment, you still need a backbone organisation to keep the momentum alive. In the eGaming environment it is common for a government or QUANGO to provide support in this way and welcome new inward investment.
In entrepreneurial ecosystems, the best role for the policy-maker is an ecosystem orchestrator and a facilitator that facilitates the build-up of ecosystem momentum through deep stakeholder engagement. Engagement means listening supporting and communicating. Perhaps this illustration describes it better.
Finally QUANGO's can attempt to pick winners, where there is overlap on the venn diagram of capability, desirability and potential customer need. But I do not subscribe to the notion they can pick winners, they should encourage all comers, whilst focusing on market sectors generically with tailored messages, and delivering a sustained external marketing effort and reviewing the results and pivoting when feedback loops signpost new directions.
The challenge for Government and their QUANGO's is defining what business model(s) to adopt for innovation and to develop a framework for identifying opportunities. Strategies can have a mix of options the most obvious three are:
The main drawback for a focused business is that it must rely on a single product, service, or customer segment, and it may omit key customer needs. It could be argued this is where Jersey is today with finance.
Search for commonalities across products
In the late 1990s Amazon expanded from books into music, video, and games, all of which required the same logistics capabilities that books did. This allowed the company to cover the risk of failing to acquire enough share in any one of these categories with a potentially superior share in another. Commonality is more complex at a jurisdiction level but Jersey has some opportunity with agility in law making and regulation. In fact this is probably one of our most important assets.
Create a hedged portfolio Just as financial institutions try to create portfolios of investments that will hedge one anothers risks, jurisdictions can select an assortment of markets to reduce the overall riskiness of the economic model.
Clearly, the approach works mainly for product and market combinations in which demand fluctuations are negatively correlated.
There is an emerging and vibrant egaming sector in Jersey, these business are primary industries that are digital exporters, they supply world class content to house hold names globally and in the case of Twelve40 thorough our lottery business our clients support good causes in countries well away from our shores. The industry is supported by the local law firms, corporate service providers and telecommunications providers. This then, perhaps, is the start of a hedged portfolio which has significant potential for growth as well as supporting the local finance, telco and tech sector.