Key Sector Growth Strategies - A Better Approach for Straitened Times

Friday, 7 December 2012
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Anyone who was involved in UK economic development during the 'RDA era' will be familiar with the ways in which Regional 'Key Sectors' (or 'Priority Sectors', or 'Growth Sectors') were developed and promoted at that time...
Most Regions selected Key Sectors because they had been identified as 'high-growth' or 'high-value'. In some cases, the Region in question possessed an existing 'USP' in a chosen sector (e.g. an established concentration or cluster of companies that had developed organically over time). In other cases, choice of Key Sectors had more to do with aspiration or, possibly, bandwagon-jumping - during the 1990s and 2000s, everywhere seemed to sprout a Bio-Incubator, a Digital Media Centre, and a stylish 'Hub' for its Creative Industries.

The 'old' way of developing and promoting Key Sectors...

But more than that, the economic development infrastructure of the time (i.e. large and multiple development agencies with big budgets) dictated a particular approach to the development and promotion of Key Sectors. Government agencies typically decided which sectors to prioritise. Personnel from those abundantly staffed organisations (e.g. planners, surveyors, project managers, marketers etc.) then typically conceived and managed Key Sector growth projects, often all the way through from building specification and site planning to sales and marketing. In many cases, private sector companies could have delivered some of those services more efficiently and effectively, but, as I recall it, private sector complaints were limited. Key Sector growth projects were, back then, subsidised heavily by UK government and EU funding, and there was plenty of work, and money, for everyone.

...and what was wrong with it...

There were lots of things wrong with the way Key Sectors were developed and promoted in those days, and there are plenty of lessons to be learned. But, in my view, it's too simplistic to lay all the blame on over-expanded public-sector development agencies. Rather, the problem lay in the way that public and private-sector partners worked together, or didn't. Here, in summary, is what I mean:

1. Key Sector growth projects were often conceived by the public sector in isolation, to deliver against purely public-sector strategic objectives (e.g. GVA growth or high-value job creation)

2. Key Sectors were often selected on the basis of aspiration, not market demand (i.e. supply-push (is it going too far to say 'central planning?!) not demand-pull).

3. Private sector partners (notably developers) usually hadn't really 'bought in' to Key Sector growth projects, whether they were stand-alone developments (e.g. Digital Media Centres) or wider 'cluster' or sector development and marketing initiatives. They simply delivered developments (with subsidies) for which the commercial business cases would never have stood up, and regarding which they were often deeply skeptical.

4. When Key Sector growth projects went well, private-sector partners were, naturally, happy to reap the rewards (i.e. subsidised profits).

5. When projects failed, the public-sector alone was blamed for failing to respond to market demand.

In other words, these 'Strategic Partnerships' were never really partnerships at all. And now, all over the UK, failed Key Sector grand projects stand as monuments to innumerable failed initiatives, in which public-sector strategic objectives were never successfully aligned with private-sector commercial realities and market demand.

But, the world's different now...

Public sector agencies now have far less money, so the means simply aren't there to deliver grand projects dreamt up by economic development theorists with scant regard for local market forces. In my view, once both 'sectors' have overcome the shock of significantly reduced budgets and subsidies (which they should have done by now!), this presents a real opportunity - to develop and promote Key Sectors in ways that deliver genuine returns on investment for both public and private sector partners.

So, here's a proposed approach to developing Key Sectors for these straitened times:

1. Identify the key goals of both public and private sector partners at the very start of the project.
E.g.: GVA and job creation (public sector) and increased rental and asset values (private sector)

2. Identify where those goals overlap and set shared project goals accordingly.
In other words, align public-sector strategic vision with private sector awareness of commercial realities.

3. Ensure that all Stakeholders are fully and publicly committed to the shared Vision and Goals
I.e. No blaming the other guys if things go awry!

4. Ensure that all Stakeholders do what they do best, and not what others do best.
E.g. Public sector agencies should co-ordinate and market Regional initiatives, but shouldn't duplicate services that the private sector delivers more effectively.

5. Now that private sector drivers (i.e. profit) have been incorporated into project goals, and private-sector partners are fully 'bought in', make sure they show their commitment through funding contributions.
E.g. if everyone agrees that a Key Sector marketing initiative makes commercial sense, and developers are likely to benefit from increased site occupancy, why should the public sector foot the bill alone? (And from the private-sector perspective, contributing funding ensures genuine influence and project accountability).

6. Don't underestimate the value that public sector development agencies and Regional 'Vision' can add.
For example, a Regional concentration of distribution sites, marketed in the conventional way, may just be 'land for sheds'. However, marketed together, through a regionally coordinated Key Sector growth initiative, they can become a 'global logistics hub', creating a more powerful proposition that will benefit both the Region and individual developers. Because of their disparate corporate interests, private sector partners are unlikely to achieve this alone!
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