CandidCapital

Is the pre-occupation in the UK with commercialising science and technology reinforcing the country's enterprise potential? Or is it missing the point?

These days, if you're someone with an arts degree (which I have - history, actually), you'd be forgiven for feeling distinctly unloved by the enterprise industry. By the 'enterprise industry' I mean the plethora of government departments, quangos, agencies and assembled other pundits who see themselves responsible for liberating the innovative talent of what they usually refer to as UK plc.

The enterprise industry is driven by the contention that engineers and scientists have historically drawn the short straw in the UK: low status and low pay relative to lawyers, accountants, ad men/women and, above all, investment bankers. In support of this they point out that Trinity College Cambridge has more Nobel laureats than the whole of France - a fact which, however tenuously, leads to the inevitable conclusion that we're better at inventing than exploiting new ideas. They see a ghastly malaise in which physics and chemistry departments are closing and bright kids, who want to work in media, banking or consulting, prefer to do business studies, law or even those utterly irrelevant subjects history, english or classics at university.

At this point I'd like to turn to Amar Bhide (Glaubinger Professor of Business, Columbia University, New York) whose ideas on new business and wealth creation seriously undermine this series of assertions. In his seminal article, Venturesome Consumption, Innovation and Globalization (for a summary see Pangloss's article Venturesome Consumption) he describes the US paranoia about losing the 'PhD race' - being out-gunned in the production of new PhD graduates by emerging economies such as China and India and, even worse, by the EU. Yet as Bhide points out, the US continues to have a clear productivity lead over all its competitors. 'Productivity' in his analysis derives mostly from the deployment of IT (information technology) in an economy, be it automated manufacturing, enterprise resource planning, logistics management or even consumer sales automation (i.e. e-commerce). The US remains the innovative powerhouse in the use of IT - with an economy in which less than 10% of GDP is directly spent on IT but where the other 90% of GDP spend is shaped and leveraged by IT. As Pangloss summarises Bhide's ideas on this:

The source of the US productivity edge over Europe and Japan is not simply that the US spends more on IT but also that it spends more cleverly. The higher ‘productivity of IT capital’ almost completely accounts for the overall productivity lead of US companies in IT intensive industries.

4. A competitive market encourages ‘grow or die’ attitudes, making proportionally higher IT spend less unreasonable.

You'll notice that only one out of the four factors listed above is driven by innovative technology itself - the others are about the behaviour of businesses or consumers.

Turning back to the mindset of the UK enterprise industry, it would be fair, I think, to characterise its core beliefs as encouraging scientists and technologists to engage in the leading edge research that the UK has traditionally excelled at - and then commercialise it. Commercialising science and technology is what the enterprise industry is all about and the plethora of agencies designed to do this is truly frightening: TSB, HEIF, RCs, RDAs, UCFs, TTOs, UKIPO, AIMtech, SBRI, ECFs, KTPs. Moreover, when one reads the latest manifesto for the enterprise industry, Lord Sainsbury's Race to the Top, the focus of this great support network is clear - it's on STEM (science, technology, engineering and maths) and the need to get children to study them, graduates to research them and new enterprises to be built around them.

5,000 miles from here, in Palo Alto, where Stanford is a university strikingly similar to Cambridge, the world looks completely different. Sure, policy makers there are concerned about the PhD race - although Prof Bhide is starting the win the battle on that, but the really big difference is summed up in that great west coast venture capital aphorism about the purpose of any new business being to "cure pain or create delight". In the US the customer really is the centre of everyone's attention in business. Of course every business likes to have defensible competitive advantage - and strong IP rights based on highly innovative technology offer that - but the real objective is to have a compelling customer proposition built on excellent service and resultant consumer satisfaction - duh!

So is it really the graduate physicists, engineers and computer scientists that a vibrant economy needs to build great businesses - how much theoretical physics is there in Google, eBay, Facebook or even Apple? The people who build those businesses need to be inventive, adaptive and relentless and have a shrewd understanding of human nature - both to engage their customers and to lead their people. Arts graduates can do that just as well as scientists, maybe better.

By the way I must confess to also having a computer science degree...

9 November 2007

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