| Previous Section | Index | Home Page |
Mrs. Gillan: Does the hon. Gentleman agree that it would be disastrous if the budget for business links were reduced next year? The Minister has already confirmed that this year it will remain the same as it was under the previous Government, but the budget for successive years is under review. Will the hon. Gentleman join me in expressing concern about the possibility of that budget being reduced?
Mr. Cotter: I agree with you about any reduction in the effectiveness of business links. However, I think the idea is that business links are supposed increasingly to become free-standing and to finance themselves, so the scheme will progress in that direction. I would join you if the Minister, unless she says otherwise--
Mr. Deputy Speaker: Order. The hon. Gentleman must take his seat when I am on my feet. I believe that he was agreeing not with me but with the hon. Member for Chesham and Amersham (Mrs. Gillan), who intervened in his speech.
Mr. Cotter: I am sorry, Mr. Deputy Speaker.
Mr. Cotter: May I give way to the Minister, Mr. Deputy Speaker?
Mrs. Roche: May I deal with a misunderstanding on the part not of the hon. Member for Weston-super-Mare (Mr. Cotter) but of the hon. Member for Chesham and Amersham (Mrs. Gillan)? There is no separate spending review for business links--although, of course, every Government programme in every Department is subject to our overall comprehensive spending review. I am sure that the hon. Lady knows that full well, but I thought that I had better pick her up on that little point.
Mrs. Gillan: It is not a point at all.
Mr. Cotter: What we look for within the business links system is advice, and I shall touch briefly on some
important details. Many small firms are not well aware of how to produce their own management accounts. That is the sort of system that I would hope business links could promote among small companies.
Perhaps one way of helping companies in a financial direction would be a "lend an accountant" scheme. Trainee accountants, in their last month or so, could go out into industry, especially to small companies--not, perhaps, to learn from a company so much as to give it some idea of how it should operate as a small company. Another important factor to which the Minister referred is mentoring, which is vital in terms of business links. A rigorous code of banking practice should be drawn up and the powers of the banking ombudsman reviewed with a view to extending them, to guarantee that banks provide a better SME service.
One further interpretation of innovation is the process of improving business management, which I maintain means more than cuts, downsizing and the bottom line. The challenge is to manage constructively. The management consultants who reported on my small business commented that I had in my business plan a commitment to create jobs and to keep people in work. Why not? It is sometimes easy to sack employees, but it is more difficult to keep people in work. It is easy to create a downward spiral.
I am a member of the Deregulation Committee, which gives me a role, I hope, in bringing innovation to business practice. We need to bring an innovatory approach to how we run and regulate our businesses. I know that the Forum of Private Business has some ideas on reducing the burden of red tape on health and safety. There is a great tendency with the bureaucracy of regulation for it to grow rather like creeping ivy, to slowly strangle business. Regulation often seems to feed off itself; for example, in the past, catering organisations have been required to clean their ceilings twice a day. Frequently, that is not required--it is regulation gone mad, and I hope that the Minister looks at that matter. I am all for health and safety in the workplace, but regulation can be a barrier to innovation, and we should examine the proliferation of rules for the sake of rules.
Mr. Nigel Beard (Bexleyheath and Crayford):
I congratulate my hon. Friend the Member for Wolverhampton, South-West (Ms Jones) on her maiden speech. I found her account of the origins of Wolverhampton both interesting and informative. I had thought that Wolverhampton had something to do wolves--either the sort that whistle or the sort with four legs. I now know that I was wrong. I welcome my hon. Friend's insight into, and experience of, small businesses, which will be a great advantage to the Labour party in fulfilling its election commitment to small businesses.
The term "research and development" is often quoted as a founding contribution to innovation, but without too much differentiation between what are two quite distinct
activities. Research is a process of finding out new knowledge that becomes the raw material and provides the ingredients of development. Development means taking new or existing knowledge and applying it to solve a problem or to create something that people will buy. Innovation involves making a new product that is commercially successful.
We in Britain often congratulate ourselves on the excellence of our research. That is justified: the number of Nobel prizes that we win is out of all proportion to our population, and British research papers are respected worldwide. That is a mark of our ability to produce original work and ideas which may then become the raw material for commercial development anywhere in the world.
As I said in an intervention on the hon. Member for Esher and Walton (Mr. Taylor), there is substantial anxiety about the recent erosion of our basic research. The foresight exercise certainly enables us to identify ways in which science may be boosted, and more work needs to be done, but anxiety remains about the future of the foundation of our scientific knowledge.
The phrase, "invented in Britain, commercialised in the United States" is legendary and should also cause us anxiety. Britain excels in research but has an extremely mixed record in development. Japan, with a much poorer record in original research, excels in development. The United States has an excellent record in research and development and in commercialising the results.
A debate on innovation and small businesses must explore why we are so much weaker at development and commercialisation than at research. The problem cannot be remedied by trying to turn our universities into development institutions; that is not their role, which is to widen and develop the fund of scientific knowledge that is available for subsequent application.
Development depends on knowledge of markets, which universities do not have, and which it is not their role to have. Development is undoubtedly the role of industry and other commercially oriented organisations.
Industry does not need universities to be a cheap source of development effort. That would only deflect them from their principal roles not only of expanding the fund of scientific knowledge but of giving people research and development skills for application elsewhere.
Britain's weakness in innovation lies at the junction between technical and scientific knowledge and market understanding. Some members of the scientific community have displayed a supercilious attitude towards development, suggesting that it is an intellectually inferior activity and that only pure science should be promoted. I hope that that attitude is disappearing; if it is not, I hope that we can do whatever is necessary to disabuse those who maintain it.
Bringing the technical and market sides together does not mean simply getting people who work in marketing in industry to talk to people who work in technical roles in industry. The tendency is for the people who work in marketing to regard the long term as anything more than six months hence, whereas those in research and development consider it hardly possible to achieve anything substantial in less than 18 months or two years. If we are not careful, the whole process turns into a dialogue of the deaf.
Where there is accommodation, the end product will often be the incremental change of existing products or processes or a minor adaptation to new markets. I do not want to belittle that. The progressive and gradual adaptation of any business and product is essential.
In talking about innovation, however, we are talking about substantial changes that widen profit margins and enable a company to take more than a transitory lead over competitors. That implies development programmes that anticipate demands three, four or five years hence. It implies an intimate understanding of what would be the advantages that would bring value to customers. The missing ingredient in many development programmes in Britain seems to be that sensitive awareness of what customers will need in the medium and long term--three to five years hence.
Circumstances in different companies will define how best to plug that gap in market knowledge. In some, the research and development activity may well need to be integrated much more fully with business planning and management. Certainly in some companies research and development activity is treated like a firm of plumbers called in an emergency to deal with a leak: they are not part of the weft and warp of that business's activity. All the evidence shows that, where that is the case, companies do not get the best value from their research and development. In other companies, more deliberate attention needs to be paid to finding out what the markets require and what customers will find valuable.
Where the issue is high technology and two technologies have to be developed and harmonised, there is no substitute for companies jointly working on that development so that one side knows clearly what the other will want. There is no other way to gain that knowledge in the detail that high technology development now requires.
That work is essentially internal to any organisation, but beyond that is the phase of development that we could call development in the marketplace. After all the analysis and technical ingenuity of development, there is a need to check with customers the acceptability of an innovation before any large-scale investment in launching and manufacturing it is made.
Japan is very good at that. Most of the products exported here have been tried out on the Japanese market for several years, and many others never see the light of day in international trade for just that sort of reason. That period of trial, error and adjustment is one reason why the Japanese are so good at development. If it is missed out, there is undoubtedly a danger of major investment being wasted and the company's future innovative activity being discredited among those who think it is best to "stick to their knitting".
That is most particularly a danger in large and more mature companies with major products that are already established. In the management of such companies, there is an impatience with the inevitably small volumes and returns of the early days of a development and a tendency to insist that demand increases more quickly, that everything should be born adolescent, and an impatience with childhood. It does not work. That is the mechanism by which many mature companies kill off potentially successful innovations.
For all those reasons, a strong school of thought with good reason behind it believes that the latter stages of development and the early stages of commercialisation are best carried out in some model of a small company, even if it is within a larger one.
Small companies have the flexibility, speed of decision and informality that best suits innovation. Their problem is raising money for what is inevitably a risky business. Funding innovation is more akin to insurance than to banking. The investor will be rewarded if one out of 10 projects succeed--the insurance basis--rather than taking 10 per cent. from all 10 succeeding. Venture capital organisations tend to understand that. On the whole, banks do not.
Small established companies have particular problems in renewing themselves. Innovation does not depend only on new research--it may be things done a few years ago that apply--but it does involve a small company having someone there to absorb the technology from where it originates. Many small and medium-sized companies do not have that capability, although many have a close understanding of the market and their customers.
In Germany, the problem has been addressed through state-sponsored organisations, such as the Fraunhofer institutes mentioned earlier, that undertake development programmes under contract for small companies. The people involved are often recruited into the small companies, and so the organisations also act as a staging post between academia and the industrial small company. Perhaps similar organisations could be established in Britain associated with our regional universities without detracting from their principal role. It may be appropriate to consider using some of the defence research organisations, which are becoming redundant, for the same role.
I wish to touch on the attempts of the Government and European Union to stimulate innovation through grant systems. Too often, the tendency has been to make them conditional on projects that are distant from the market. That has meant that we have stimulated research projects that have added to the fund of knowledge that goes unused.
| Next Section
| Index | Home Page |