Monday, November 28, 2011


Last week, Sir Terry Matthews announced the establishment of the Welsh version of his bootcamp for technology entrepreneurs via the Alacrity Foundation.

Based in Newport, the scheme will take on ten graduates to develop products in information technology, eventually creating companies in Wales by the end of the year in which the recruits will have a 25 per cent stake.

Such a scheme is long overdue and may finally begin to address the innovation deficit that has plagued Wales for too long when compared to other parts of the UK.

In fact, the challenge in developing a growing knowledge-based economy were demonstrated by a report released this month on one of the great success stories when it comes to maximising regional innovation potential.

The city of Cambridge in East Anglia has long been seen as one of the major innovation hotspots not only in the UK but in the World. The development of this success was first documented by the seminal 1980s publication, “The Cambridge Phenomenon”, which demonstrated how technology-based firms had been developed around one of the World’s top universities.

The new report, entitled “Cambridge, from the lab to the limelight” picks up the story twenty-six years later on the continuing growth of the region.

Despite being a small educational city with a third of the population of Cardiff, it is estimated that there are now 1,500 technology firms situated in Cambridge itself with around 40,000 employees. Contrast this to 1984, when the Cambridge Phenomenon report identified 300 firms employing 15,000 people.

However, if we look at the greater Cambridge region itself (20 mile radius), there are currently 27,500 firms, employing more than 700,000 people, mostly in high skilled industries. Their contribution to the local economy is estimated to be around £12billion per year, which is roughly a fifth of the annual GVA of the entire Welsh economy.

In fact, seven billion dollar businesses have been developed in the Cambridge area during the last fifteen years including Autonomy, which was recently sold to Hewlett Packard for $12billion.

And the effect of this can be seen in the wider economic statistics. The unemployment rate in Cambridge is 2.1 per cent (as compared to 9.3 per cent in Wales) and the number of jobs in the research and development sector is eighteen times the national UK average.

So what are the reasons for this success?

Obviously, it has one of the World’s top universities with around 7,000 graduate students every year but both Oxford University and Imperial College London are also regularly in the top ten global institutions and have nowhere near the track record of Cambridge in developing technology-based firms.

Some have suggested whilst the University itself is the source of knowledge on which new companies are based, the commercialisation potential is magnified through the presence of a strong innovation ecosystem.

These includes a small but significant network of institutions and associations that foster innovation and support entrepreneurship working alongside a group of successful entrepreneurs who have become the angel investors that fund the new high technology companies in the region.

It is also worth noting that the Cambridge economy isn’t about picking winners but about supporting commercialisation of ideas from wherever they emerge. That is why some of the leading companies are not limited to one or two sectors but are based across a spectrum of industries ranging from biotechnology to gaming to medical technology to materials.

Is the Cambridge Phenomenon unique or can such success be replicated?

In Wales, perhaps the biggest problem is that there still seems to be a disconnect between the different actors in the private and public sectors when it comes to developing a similar approach in Wales, especially in terms of innovation support.

Certainly, the failure of the Technium programme to have any real impact on changing the innovation ecosystem and developing any significant cluster of high technology companies shows that there must be greater partnership and interaction between government and business if such ambitious projects are to succeed.

Of course, there are also problems in Cambridge that can be instructive to Welsh policymakers.

For example, a recent study suggested that one of the key issues is the lack of facilities for new R and D firms to move from pure research into production or manufacturing, which then results in those firms leaving the region or even the country altogether. It is certainly something that urban planners in Wales need to consider carefully if there is to be a focus on stimulating greater numbers of spinouts from the University sector or via the Alacrity Foundation, especially as Wales is the only region in the UK which does not have a proper science park.

Therefore, I am sure that there are lessons to be learnt from the Cambridge experience, especially by those who are working hard to develop Cardiff, Swansea and Newport, all of which have aspirations to become cities based on the knowledge emanating from the local university sector.

Sir Terry’s bootcamp programme is certainly a step in the right direction but there is a real need to consider what other key factors are necessary within the Welsh economy to not only develop the successful technology companies of the future, but to grow and retain them here in Wales.