Tuesday, April 24, 2012

WALES AND EXPORTING

No term used to epitomise the British economy more than “trading nation” and so, given the desperate need to increase trade to drag the country out of its current economic doldrums, it was good to see our most senior politicians at Westminster and Cardiff Bay recently zigzagging their way across the Asian continent.

As is usual in these high-level trade missions, much of the press focus is on the links with multinational companies that have invested strongly in this country. Yet, perhaps more important to the future of the Welsh economy is the potential of indigenous businesses and their ability to sell goods and services internationally.

So how is Welsh business performing in this regard?

According to the most up to date statistics from the Welsh Government, Wales accounts for just over five per cent of the international trade of all UK regions, which is higher than its share of businesses across the economy. Indeed, exports worth £13.4 billion were generated in 2011, an increase of 14 per cent on the previous year and a figure higher than the UK average growth of 12 per cent (although lower than the 18 per cent recorded in Scotland).

Whilst this is a highly creditable performance for a small economy, it is no cause for celebration. Wales remains largely dependent on just four industries that account for over 80 per cent of the value of exports, namely energy (30 per cent), engineering (29 per cent), metals (13 per cent) and chemicals (8 per cent). Fortunately, analysts suggest that these sectors will continue to grow over the next few years and announcements such as Tata’s £800m investment into the Welsh economy will ensure that overall exports should continue to grow over the next few years.

However, if Wales is to develop its economy, other industries must also show growth over the next few years and it is disappointing that the key sectors highlighted by the Welsh Government for special support continue to have little impact on exporting performance.

For example, sectors that have experienced an overall decline in exporting activity during the last year include automotive, biotechnology and pharmaceuticals, and the largest drop in performance was experienced by the telecommunications industry with a 30 per cent decrease over the year. It is also worth noting that the destination of our exports has changed considerably during the last twelve years.

Back in 1999, Welsh exported 73 per cent of its goods to the European Union but by 2011, this had fallen to 42 per cent, considerably less than the UK as a whole where 53 per cent of exports cross the Channel. In contrast, 29 per cent of all our exported goods go to North America, far higher than for the UK as a whole and, more importantly, our trade across the Atlantic has grown by 16 per cent during the last year. In terms of emerging markets, whilst Wales’ trade with Latin America has grown by 45 per cent, we have only experienced a growth of 8 per cent in the key markets of Asia and Oceania (as compared to 21 per cent for the rest of the UK).

Therefore, the current exporting scoreboard for the Welsh economy is a mixed bag of results. Whilst overall exporting growth is buoyant, it remains focused in a narrow range of industries dominated by large companies such as Tata, Airbus and Dow Corning.

This suggests that there is still much to do in terms of getting small and medium sized enterprises (SMEs) in Wales to internationalise their activities. The data also fails to provide good news for those policymakers who have focused their efforts on supporting those key sectors that should have the ability to grow in international markets. Given this, it may be pertinent for each of the sector panels appointed by the Welsh Government to examine how the companies within their remit can adopt a more international approach to their business and develop their massive overseas potential.

It is therefore clear that there needs to be a more strategic approach to targeting key markets. This not only applies to regions such as North America which are proportionately more important to Wales than the rest of the UK, but also in emerging countries in Asia where we are underperforming. In this respect, the Welsh Government should examine how it can work more strategically with the UK Government to better target these markets.

If we are to develop a more export oriented economy, then it not only the quantity of exporters that must increase but also the quality. For non-exporting firms, there are various interventions that can get them to start thinking seriously about internationalising their activities. These not only include seminars and workshops, export information provision and sponsorship to trade fairs but also opportunities for greater networking, especially with foreign customers. This is a role that large multinational companies based in Wales could undertake given their operations in other countries. Academic institutions could also draw on their extensive networks to link Welsh firms with alumni overseas.

For those Welsh companies already internationalised, they may need less government support with regard to developing overseas business relationships although policymakers, through supporting sector-based co-operative arrangements, can get key Welsh businesses working in the same industry to mutually support each other in export markets. Again, this is something that the Welsh Government, through its new sector panels, could facilitate and thus increase the reputation of Wales’s products and services overseas.

Therefore, if government, industry and academic institutions can work together to develop a new approach to support the internationalisation of business, there could yet be a Welsh renaissance in trading overseas.

Friday, April 20, 2012

WALES VS ICELAND - WHO WINS THE TOURISM MEDIA BATTLE?

Yesterday, I posted some videos from a Finnish company called Place Marketing, which focuses on promoting towns and regions.

Given this, it is worth looking at two recent examples of marketing for two small nations, namely Wales and Iceland.

Despite being a full blooded Welshman,  I know which one I would go for (unfortunately).




 

Thursday, April 19, 2012

RECRUITING OVERSEAS STUDENTS - THE FINNISH WAY

Having been in Finland for the past few days,  I managed to catch up with a former flatmate from Dublin, Jonne Saivosalmi, who now runs a company called Place Marketing, a media company that focus on promoting towns and regions in Finland.

Some of the work they do is groundbreaking and I would love to see them pitch for work in Wales, especially given their quirky and innovative approach which is a million miles away from the advertising usually procured by Welsh organisations.

Take, for example, their campaign to promote higher education to overseas students in Oulu in Northern Finland. 

Not an easy sell, I can assure you, but they bring it off perfectly for their target market as the videos below demonstrate.



1. Jason from Oulu on Vimeo.



Yu-hsuan from Oulu on Vimeo.




Gisbert from Oulu on Vimeo.

Shanila from Oulu on Vimeo.

Monday, April 16, 2012

AN ENTREPRENEURSHIP HALL OF FAME FOR WALES?

Earlier this month, Fortune - the global business magazine - published its list of what it considered to be the definitive list of the twelve greatest entrepreneurs of our time.

Those recognised by the publication, in rank order, were Steve Jobs of Apple; Bill Gates of Microsoft; Fred Smith of FedEx; Jeff Bezos of Amazon; Larry Page and Sergey Brin of Google; Howard Schultz of Starbucks; Mark Zuckerberg of Facebook; John Mackey of Whole Foods; Herb Kelleher of SouthWest Airlines; Narayana Murthy of Infosys; Sam Walton of Wal-Mart; and Muhammad Yunus of Grameen Bank.

As with all such subjective lists, it was controversial. Dominated by American high technology founders, the list had no women entrepreneurs and only two individuals recognised who are based outside the USA. It didn’t even include Sir Richard Branson despite his various entrepreneurial ventures ranging from Virgin Records to Virgin Atlantic and being the individual that most young people, at least in the UK, would wish to emulate.

Yet apart from being something that any group of people would sit and argue over in a pub whilst having a few beers, what is the value of having such a list of successful entrepreneurs?

Part of the answer lies in research findings that demonstrate the importance of role models in encouraging entrepreneurial activity. This stems from early studies that showed a positive correlation between the decision to start up a new venture and having parents who were entrepreneurs and ran their own firms. Research on networks has also indicated that peer groups can help to influence the decision to become an entrepreneur. In fact, those geographical areas where there are already successful entrepreneurs will continue to grow and prosper because of the presence of such role models who can provide information, resources or just simply inspiration.

There are of course, various ways in which to utilise such role models to encourage greater entrepreneurship. Some have argued that lists of entrepreneurs such as Fortune’s are largely irrelevant to most businesspeople. This is because the average entrepreneur who would prefer to look closer to home for inspiration will rarely consider such iconic individuals such as Jobs, Gates or Zuckerberg as role models. I wouldn’t necessarily agree with such a sentiment but there are two excellent examples of successful, but different, approaches in Wales to utilising successful local individuals and companies as inspiration for others to follow.

First of all there is the Wales Fast Growth 50, which has provided role models for other Welsh firms during the last fourteen years in the Western Mail and other publications. Secondly, there is Dynamo, a programme developed by the Entrepreneurship Action Plan for Wales to bring local entrepreneurs into schools, colleges and universities to talk about their experiences in starting and managing businesses, thus encouraging young people to do the same. Both, in their own ways, have helped to celebrate Welsh entrepreneurship across the nation and provided examples of successful practice to those thinking of starting a new firm.

Yet, I believe that if Wales is to fully embrace entrepreneurship across all aspects of its economic and social life, there must be a more coherent way to recognise the achievements of those who helped build this nation since the industrial revolution. Around a decade ago, I discussed the potential of developing a Welsh Entrepreneurship Hall of Fame with the Welsh Development Agency (WDA).

Despite gaining support from academics and businesspeople for the concept, those responsible for marketing within the WDA were not convinced that we should develop a vehicle to recognise individuals such as David Davies, Robert Owen, Laura Ashley and others whose risk-taking, innovation and creativity throughout the last two hundred years have shaped, and continue to shape, communities across Wales. As a result, the idea never got anywhere and before we could resurrect it, the WDA was abolished.

The question is whether such a proposal should be considered again?

Certainly, there should be a drive by the government and the business community to develop more entrepreneurs who would encourage greater prosperity and wealth creation within our nation. The creation of an Entrepreneurship Hall of Fame that would acknowledge, understand and disseminate the achievements of enterprising Welsh men and women as an inspiration for others would be a timely step towards this goal, especially if it included not only industrial giants from our history but also those who, in today’s global economy, are making a real impact in Wales and beyond through their hard work and innovation.

Tuesday, April 10, 2012

THE GLOBAL INFORMATION TECHNOLOGY REPORT - LESSONS FOR WALES?

Last week, the World Economic Forum (WEF) published their annual Global Information Technology Report which measures the extent to which various nations are developing their Information and Communications Technology (ICT) capacity and its impact on competitiveness, as well as economic and social capacity.

It does this by examining a number of factors including the friendliness of a country’s market and regulatory framework in supporting high levels of uptake, and the degree of a society’s preparation to make good use of an affordable ICT infrastructure. 

It also looks at the efforts of individuals, business and government to increase their capacity to use ICT and the broad economic and social impacts accruing from this. As with all detailed reports from the WEF, there are some mouth-watering statistics for those looking to see where the next growth areas are going to develop.

For example, the study finds that mobile broadband is currently generating a tremendous $1.3trillion in annual revenues. More importantly, more than 80 per cent of broadband connections by 2016 will be mobile, with the major growth over the next five years occurring in emerging countries.

But what is of real interest are the national comparisons, which rank different countries across a range of variables. According to the study, those that are most successful in the World at leveraging ICT are all small nations, and Sweden, Singapore, Finland and Denmark have all fully integrated ICT in their competitiveness strategies to boost innovation within their economies. In fact, Sweden’s performance is rated as “remarkable” by the authors, ranking first in four key areas namely infrastructure and digital content, individual usage, business usage, and economic impacts. In addition, Singapore leads the in terms of political and regulatory environment for ICT as well as the business and innovation environment.

Whilst ranked 10th in the World, the UK continues to improve its performance across the board as compared to previous studies, with sophisticated and innovative businesses that are highly adept at harnessing the latest technologies for productivity improvements.

However, given the fact that there are regional disparities across the UK in the provision and access to ICT, it may be a worthwhile exercise for the Welsh Government to benchmark our nation using the methodology adopted for the Global Information Technology Report, especially given the relative success of other smaller economies.

One of the major conclusion from the report is that it recognises that there will be increasing challenges for economies around the World as smart devices continue to become a greater part of everyone’s lives. Indeed, policymakers will need to consider an environment in which the internet can be accessed immediately, people and organisations can contact each other instantly and, as a result of new developments such as social media, fundamental transformations in all areas of society will take place.

As discussed, the fact that the management of information (commonly known as ‘big data’) will be an integral part of these changes, the team behind the new £40 million supercomputer known as HPC Wales may need to reconsider its use in the future as a tool for assisting business to manage these trends rather than just being a tool for academic research, and how ICT can be leveraged to create competitive advantages for the economy as well as increasing social well-being.

Indeed, the report presents an insightful case study how the exponential growth in big data could lead a transformation of both the public and private sectors. With the right approach, Government can utilise this information to target policy, strategy, and investment so as to reduce costs and improve impact measurement. Businesses can also analyse the vast amount of data it gathers to respond to key influencers, manage risks, strengthen brands and increase customer knowledge.

But to do this properly, we need to carefully examine how we are developing and training the workforce of the future. Eric Schmidt, the head of Google, recently expressed his surprise in a recent article that computer science wasn't being taught as standard in British schools. In fact, he simply couldn’t understand why the Information and Communication Technology (ICT) curriculum was teaching children how to use software products such as word processors and spreadsheets but providing little insight into how that software was created.

And this lack of focus on developing skills within schools for what is undoubtedly the key industry of the future having an effect on university entry into the subject. For example, data from the Welsh Government shows that whilst the overall number of Welsh domiciled students has increased by 1 per cent between 2003 and 2011, the numbers studying computer science has fallen by 25 per cent.  In fact, there were only 350 Welsh students studying computer science at a postgraduate level in 2011.

Given this, how are we going to create a strong industrial cluster in this area, as is the aim of the Welsh Government, if the number of students being trained to develop the software and hardware has fallen by a quarter and shows no sign of recovery?

Therefore, the one question for politicians and policymakers in Wales that has still to be answered properly is how ICT can be fully integrated into an economic strategy so that organisations and businesses can capitalise on the new opportunities emerging in this area. Certainly, we cannot as a nation afford to be left behind in this area, especially as it offers a means by which we can reduce the prosperity gap with other parts of the UK.

Wednesday, April 4, 2012

FINANCE FOR ENTREPRENEURS

Last week, I gave a session on growth companies to a group of Irish companies.

In the session on finance, this new sketchbook from Paul Kedrosky, Senior Fellow at the Kauffman Foundation, was a perfect summary on the different sources of finance for entrepreneurs.

Yes, venture capitalists are not at the heart of entrepreneurial finance and most companies are actually funded by the entrepreneur’s savings, cash flow, friends, family and, yes, even credit cards!



Tuesday, April 3, 2012

A FUTURE FOR WYLFA B?

As we all know from the excellent coverage in the Daily Post during the last few days, the business community in North Wales remains shell-shocked at the decision by the German energy companies RWE npower and E-ON to pull out of plans to build an £8 billion new nuclear reactor at Wylfa B in Anglesey.

With the county consistently rated as one of the poorest areas in the UK, the development was seen as the panacea for its lack of economic opportunities, with experts estimating that it had the potential to contribute over £2 billion to the economy over the next fifteen years, creating 5,000 construction jobs and 800 direct jobs at the new power station.

More importantly, it would have given Wales, and Anglesey, the opportunity to become a major centre of expertise in the sector through the creation of value added projects around the new development. For example, helping to create an energy technology park around the power station and ensuring that the skilled workforce needed for its construction are sourced locally were just two simple examples of how the project could have created additional benefit for the Anglesey economy. It would have also enabled Bangor University to become an international centre of research and development excellence in this sector.

But despite the bad news, local and national politicians remain convinced that new investors can be attracted to the site. There does not seem to be any specific technical or economic rationale for withdrawal with insiders suggesting that political pressure may have been the main factor in the decision to pull out of not only plans for Wylfa, but other nuclear developments in the UK. In fact, with the German government recently stating that it would abandon any new nuclear power plants within its own borders, many have been expecting that country’s energy companies to pull out of any new developments in the nuclear industry.

The quality of the project itself was emphasised by the chief executive of RWE npower, who went on record to make the point that not only was Wales one of the "most attractive" new nuclear sites across Europe but that any new investor would be able to build on the work that the current consortium had put together during the last three years.

Another positive development from this story is that both the Welsh Government and the UK Government have now co-operated closely to try and deal with this issue. After recent wranglings between Cardiff Bay and Westminster, they have come together to save a project that could create thousands of jobs within an economic blackspot.

Of course, this was not always the case and during the last administration, there was a difference of opinion between the Economic Development Minister, who supported Wylfa B, and the Environment Minister who was diametrically opposed and even called for a public inquiry into any new nuclear facilities in Wales. Certainly, such confusion did not help engender a coherent governmental approach to the development.

Indeed, Carwyn Jones’ positive comments last week on the project were to be welcomed, as was the news that he had already held urgent talks with the UK energy secretary to try and secure new investors for the project. Therefore, perhaps the one silver lining in the Wylfa B story from last week is that we may see greater co-operation between the two governments and a more cohesive and joined up “Team Wales’ approach that sees any political differences put aside in favour of economic imperatives. Certainly, with the prosperity of the Welsh economy continuing to fall relative to many other parts of Europe, such co-operation is vital for the future of our nation.

Daily Post column April 2nd 2012.

Monday, April 2, 2012

UNIVERSITY MERGERS IN WALES - LESSONS FROM FINLAND?

Last week, I spent some time in Finland working on number of joint projects that have been developed between Turku University, where I have a visiting professorship, and the Global Academy.

During my week there, I had the opportunity to visit Helsinki and the new academic institution known as Aalto University. It was a fortuitous visit, given that Aalto University was created out of a merger, two years ago, between three specialist academic institutions, namely the University of Art and Design Helsinki (1,900 students), the Helsinki University of Technology (14,000 students) and the Helsinki School of Economics (3,200 students).

As such, it seems a relevant case study to examine the impact of university mergers that, as most of you are aware, are seen as the panacea to some of the challenges facing Welsh Higher Education. Talking to various individuals, it became clear that the first issue that was important in terms of the Aalto merger was that it had a specific vision that was linked into a national policy towards innovation and competitiveness.

Its aim, once formed, was to create an institution that would be a world-class rival to Helsinki University, which is regularly ranked amongst the top 100 universities in the world. Unfortunately, there has been a total failure to elaborate a similar national ambition within Wales for its university mergers. Instead, the emphasis on regional economies and efficiencies of scale rather than any significant educational or economic reward.

And even though the academic status of those Welsh institutions currently involved in merger discussions is somewhat different to the Aalto triumvirate, there has been little information on how educational quality could be improved as a result of organisational change, even though this should be a major part of any higher education merger. There have been arguments made, as in the case of Finnish Universities, that the diversity of programme offerings would be increased as a result of the merger. However, there is also the danger of rationalisation, rather than specialisation, especially in areas such as business studies where high levels of duplication are likely.

Another key factor in the apparent success of Aalto University is undoubtedly the funding provided by the Finnish Government to ensure that a successful new institution hits the ground running, receiving a one-off cash injection of half a billion euros on the condition that it raises another 200 million euros from the private sector.

In Wales, there seems to be no money available to support the development of further collaboration or merger between institutions, with the Welsh Government suggesting that universities have to show their worth to the public purse from an ever decreasing funding settlement. Another key ingredient in ensuring that Aalto University succeeded from its first day of operations was that the new management was able to identify and satisfy the skills needs of the key stakeholders in their region and ensure broad external support.

Again, this has not been the case in Wales, with an increasing number of organisations supporting the independence of certain institutions over any proposed merger. Indeed, the ability to come up with a compelling story so that stakeholders would buy into the concept of a merged institution has been one of the real successes of Aalto University, enabling key reforms to take place over a short period of time.

This has enabled the institution to deal directly with issues that would undoubtedly be faced by Welsh institutions. These include increased workload for staff as the merger develops, higher levels of bureaucracy, fears of redundancy, lost of academic identity for the smaller partners; disruption of teaching styles as mass lecturing takes the place of student-oriented learning and geographical distances between campuses. Of course, Aalto was designed in order that a multi-disciplinary innovation culture could be developed across all three institutions where science, arts and business could merge to create a truly innovative world-class university.

Has anyone yet made a similar case be made for any merger within the Welsh university sector? If not, then why go ahead with an expensive and time consuming exercise that could instead be enhanced through further collaboration and increased sharing of services. In fact, have those in favour of greater rationalisation created an overwhelming argument for actual organisational merger or it is largely symbolic, given the distances between various campuses?

These are serious questions that need addressing by those calling for the further merger of higher education institutions in Wales. Certainly, if they wished to strengthen their case, it would be not bad thing if they were to visit Finland to examine the challenges faced by universities not only in planning a merger but in dealing with its consequences afterwards.

Western Mail column, March 31st 2012.