Getting to grips with industrial strategy

I recently attended my first meeting as a member of the Government’s Industrial Strategy Council.

It’s a challenging role. First there are several distinguished people on the board for whom – unlike me until now - industrial strategy and productivity are specialist subjects. Second, when it comes to the policy detail, I don’t have any the in-depth skill or experience which might enable someone to speak from authority; I’m not an economist, I’m not a technologist and I’m not an entrepreneur or businessperson. If I do have expertise it is in the quality and future of work, an issue on which the 2017 Industrial Strategy does place great emphasis. 

There is another, less personal, challenge. Industrial strategy is a difficult policy domain to get one’s head around. The Government’s strategy contains literally hundreds of policies in areas ranging from education to environment, from local economic development to AI. Some of these policies relate to initiatives already underway, others to long term goals. Some are very concrete and specific and within the purview of BEIS, the lead department for industry, others rely not just on wider Whitehall buy-in but commitment from business and civil society.

In trying to get handle on this complexity it is also necessary to fend off scepticism. Even if everything aligns (I will avoid the ‘B’ word in this post), given our poor national starting point, the kind of deep shifts in economic performance and productivity the industrial strategy seeks will take a generation to achieve. Yet it’s far from clear the strategy would even survive a change of Government.

I have deepened my reading and attending various discussions. This has enabled me to develop some initial perspectives.  One thought is that as the body holding the Government accountable for delivering the industrial strategy, the Council should distinguish between different types of intervention. We could think of this as three ‘i’s.

Institutions: When an intervention is primarily about creating new institutional capacity by setting up new organisations or programmes.

This is something Government is able simply to mandate so key questions to be considered are about the design of the institution/programme, the adequacy or otherwise of its funding and – once things are up and running – its effectiveness in delivering on planned outputs. One example here might be the National Retraining Scheme; a good initiative and with support from business and trade unions but one as yet still only vaguely defined and – given its ambition – so far modestly funded.

Incentives: When money is used in the form of tax breaks or funding pots with the explicit intention of changing behaviours.

Here again the lead Government agency has control over the action so key questions concern; scale, is the incentive at the right level to change behaviours; alignment, will the incentive generate the behaviour or is their scope for perverse outcomes and gaming; and, again, once the policy is implemented, impact. An example here might be the National Productivity Investment Fund.  The programme is rolling out and some money has been dispersed. Is the funding leading to activity or forms of activity which would not have happened anyway and is it targeted in the right way to help the journey from basic research to successful products and businesses at scale?  

Influence: When an intervention hopes to achieve an impact through engagement using means such as persuasion, peer pressure and collaboration.

The kinds of questions that might be asked here concern:

• relevance - is it realistic to believe that behaviour can be shifted through such techniques of persuasion?
• reach - are policy makers getting their message through to the people whose behaviour needs to change?
• clarity - are policy makers clear and are those they are seeking to persuade clear what is being advocated and why?
• persistence - persuasion is rarely a one-off process, so is the attempt being maintained long enough and strongly enough to break through?

An example here is sector deals, six of which have now been signed off, in areas ranging from AI to construction. The deals do contain concrete commitments but they also depend on the sector as whole engaging with and buying into the vision outlined in the deal.

The other idea I hope to bring to the Council discussions concerns the need for system thinking and, more specifically, for approaches which create a capacity for continuous self-improvement within sectors, places and collaborations. Too often in areas like industrial strategy, where Government interventions are only part of a complex picture it can feel like policy is pushing a piece of string – a lot of effort with not much purchase. In contrast, the most dynamic systems contain a creative tension in which different actors, incentives and expectations and the spaces between them generate and sustain momentum enabling Government to focus on orchestrating and fine tuning rather than trying to drive change from the centre.

As an industrial strategy advisor I am still on a steep learning curve. At least now I feel there are some basic tools in my rucksack. But I’m still on the lookout for more.