Suffolk A Good Place For Small Business

THE SUFFOLK SMALL BUSINESS PROJECT

What makes Suffolk a good place for small business?

What makes Suffolk a good place for small business? This simple question unearths a mass of interesting issues. To start with, there is a presumption that Suffolk is a good place for small business. Is it? If it is, then why is it so? If it isn’t, what could be done to make it so?

However, underlying these questions are deeper questions concerning why a location would be good for small business. What features would a good place for small business have? The answers to this question are provided by an appropriate model of small business development. It is only at this point that we can judge the performance of Suffolk as a location for small business. We shall start by considering some of the models that explain small business development before looking at how Suffolk performs against those models.

Many commentators agree that we are currently in a period of acute change. We have been so for the past twenty years, and there is every expectation that the next twenty years will see an equal degree of change in our lives. Some commentators go as far as to say that we are in the midst of a revolution in the world of work that is akin to the Industrial Revolution of the early Nineteenth Century and the Agrarian Revolution of the Seventeenth Century.

And yet, those commentators who bring these changes to our attention often miss one very important point – that profound and lasting economic change is associated with profound and lasting political and social change. The Agrarian Revolution, after the English Civil War, gave us Parliamentary Democracy and the Merchant Class. The Industrial Revolution, after the Napoleonic Wars, gave us universal suffrage along with the Working Classes and the Bourgeoisie. It is our view that any model of change that we incorporate must also be able to describe social and political change as well as economic change.

When we look around, in the world of business, what do we see? On the one hand, there is the decline of the Nation State. The old Westphalian system of international relations is in decline, with the business concomitant being the rise of the Global Corporation. We often hear that there are no longer any British car manufacturers. However, how true is it to say that there are any national car manufacturers? Nissan manufactures in the UK, but to what extent can we say that Nissan is a truly Japanese car manufacturer? The Global Corporation is supra-national in the Westphalian sense.

At the same time, we also see the loosening of the Global Corporations. The traditional rigid hierarchies are being replaced by flatter management structures. The company is increasingly focused on producing their core activities and outsourcing everything else, either locally or through “off-shoring”. In one sense, we are moving from the age of hierarchies (the “Orange World” in terms of Spiral Dynamics) to the age of networks (the “Green World” in terms of Spiral Dynamics). Never before have your business contacts been so important.

In the light of this, what models do we fond compelling? We are quite convinced by three models. The first is of the “Dream Society”, as outlined by Rolf Jensen of the Copenhagen Institute for Futures Studies. The second model, that of the “Creative Class”, is expounded by Professor Richard Florida of Carnegie Mellon University. The final model, that of the “Support Economy”, is outlined by Professor Shoshana Zuboff of Harvard Business School. We shall consider each of these models before producing a synthesis.

The most significant point raised by Rolf Jensen is that the next stage of business development is likely to be dominated by the purchase of “stories” rather than the purchase of goods and services. People are likely to buy the story that the product tells rather than the product itself. The brand outweighs the functionality. For example, I am currently writing this piece at my health club. I don’t see any paradox in the fact that I will drive 10 miles on a round trip to the health club so that I can walk and cycle 5 miles on the exercise machines because I am buying the image of me that the health club sells. If all I were buying is “health” or “fitness”, I would cycle half way to the club and back again for free. Alternatively, a quick look at the bar tells me that there are 16 brands of water available, including tap water that is free. And yet, I buy chilled Northumberland sparkling water out of all of the brands available. In both cases, brand and image outweighs functionality.

If there is to be growth in the small business community, the small business community needs to be able to leverage brand and image. It needs to be able to tell a good story. How can they do this? We feel that Professor Florida has the answer to this question. He takes the view that, in the modern economy, wealth is generated by value added. Valued added is enhanced by knowledge enhancements, and that knowledge enhancements are the product of creative activity. The people who are engaged in the creative process, both within and outside of organisations, are what Professor Florida terms the “Creative Class”.

Professor Florida marshals a great deal of evidence to support his view, which has some very interesting policy conclusions. In his view, if a body wishes to encourage small business – particularly high tech small business – it first has to ensure that there is a relatively large and vibrant creative class. If these people are there, the firms and the jobs will follow. This stands on its head the orthodox locational theory that if an authority wishes to develop a given industry, then they need to attract the firms in the expectation that the staff will follow. The theory certainly helps to explain the ineffectual nature of British Regional Policy over the last forty years.

Moving the analysis forward, Professor Florida suggests three things that an authority needs to do if they wish to develop a creative class. First, the area has to be developed as a great place to live. Lifestyle is the key to the creative class, and a location that wishes to attract them must be able to offer choice within the preferred lifestyles of the creative class. Second, the area needs a University to bootstrap creativity within the community. The University needs to be a source of technology (cutting edge innovations that can be spun out as commercial opportunities), talent (attracting the knowledge powerhouses and integrating them into the local business community with the savvy make a profit from innovation), and tolerance (the University needs to foster social tolerance, which is centrally important to the creative class). Third, the authority needs to generate a good “people climate” in the same way as it fosters a “business climate”. Decision making needs to be people centred. Each of these conditions is necessary but not sufficient. To have one or two without the others is likely to reduce significantly the chances of success.

To have a Creative Class developing brand and image in the Dream Society is still not sufficient to provide a comprehensive model for small business development. The model still needs a commercial interface, and this is provided by the ideas of Professor Zuboff as the “Support Economy”. This view has one central tenet – that technology now allows us to deal with each of our customers on an individual basis, and that is what our customers are expecting as the norm. It is by this standard that we shall be judged commercially. In many ways, this is a comforting view for small businesses, which have, for many years, been able to be nimble in their market space. The challenge to larger organisations is how they can emulate smaller organisations without the centrifugal forces released causing the whole organisation to fragment. This is likely to provide an interesting antithesis to the forces of globalisation.

To sum up, our model of small business development has the Dream Society as its backdrop. Brand and image are central to business development. They are the results of creative activity undertaken by the creative class, which, increasingly, will be central to the success of an area in fostering small business development. In turn, this development will be enhanced by the ability of the small business to offer tailor made solutions to their customers.

It is against this set of models that we can consider whether or not we would expect Suffolk to be a good pace for small business. On the whole, we feel that, at present, the picture is mixed. On the one hand, we can point to a number of factors that would encourage the view that Suffolk is a good place for small business. Very few people argue with the view that Suffolk is a great place to live. There are a number of genuinely world class cultural beacons such as the Aldeburgh Festival and the Newmarket Race Meetings. The regeneration of the Waterfront in Ipswich and the sympathetic development of rural Suffolk are both likely to enhance the built environment.

On the other hand, Suffolk does not have a University and is unlikely to develop one over the horizon that we are considering. There are some links with the University of London and MIT through the IP-City initiative, but none of these initiatives have led to the development of a sizeable student population that is integrated into the host population. There is a small Bohemian cluster in central Ipswich, but this has not reached the critical mass necessary for the development of a vibrant creative cluster. Indeed, the close proximity of London (just an hour or so from Ipswich by train) attracts creative talent away from Suffolk to what would appear to be, from the perspective of the Creative Class, a more attractive lifestyle.

The jury is out for the third condition laid down by Professor Florida. Does Suffolk have a good “people climate”? It is hard to answer this question at the present time. We intend to look more closely at this subject before coming to a final conclusion in the project.

On the face of it, it would appear that Suffolk will struggle to develop a vibrant small business community as it does not have all three necessary conditions for development, according to Professor Florida. It will be objected, however, that our view has two flaws. First, Professor Florida could be wrong. This may be the case, but any objection to this methodology needs to produce an alternative theory to explain societal change, along with the evidence to support that theory. We are open to persuasion on this point.

The second objection could be that the model is correct, but that our interpretation of that model, in the context of Suffolk, is wrong. We fully accept this possibility. In order to counteract the accusation of subjective bias, we added two test questions in our survey of small business. We asked small businesses: What is great about doing business in Suffolk? And: What hinders small business in Suffolk? In collating this aspect of the survey, we shall be able to compare our expected results (as described above) with the actual views of small business about Suffolk as a place in which to do business. However, this exercise was not complete at the time of the Monchers™ lunch, and will form part of a larger report on the Suffolk Small Business Community to be published later.

Stephen Aguilar-Millan

The Greenways Partnership

If you would like to pre-register your interest in the full report The Suffolk Small Business Community 2004 — An Economic Perspective, please e-mail me at stephen@greenways-partnership.com and I will put you on the distribution list when the report becomes available.

Monchers™ is a Trademark of The Greenways Partnership Limited, a company incorporated in England, Reg Number 2825001. Registered office; 6 Greenways Close, Ipswich, Suffolk IP1 3RB, United Kingdom. UK Data Protection Registration Number Z7277556.