By Tris Dyson, Founder and Managing Director, Nesta Challenges
There is a sense that new beginnings are in the air. The UK and EU are finding their feet following December’s trade agreement. The inauguration of Joe Biden and the US’s immediate re-engagement with the Paris Climate Accords ahead of COP26 is buoyed by a global awakening to the toll of climate change. And, of course, the glimmer of hope, that done right, the vaccine program in Britain will reach enough people by June to allow a return to normality – albeit a forever changed normal.
2020 may well go down as a watershed year, a date etched in public consciousness like 1945 or 1989. The transformation of the way we work, shop, communicate will leave a lasting legacy. So too will the example of governments, research academia and the private sector in delivering years of pharmaceutical innovation in a little under 9 months.
As we emerge from the Coronavirus pandemic and leave behind the years of uncertainty that Brexit negotiations imposed on the economy, we are looking to a rapid green recovery that levels opportunity across the UK while undoing the damage to jobs and growth of the year just gone.
The economic recovery, job creation, levelling up and net zero agenda will be led by government policy, but ultimately it will be delivered by enterprise. Businesses large and small, entrepreneurs and disruptors, research teams that create new companies built on ground-breaking discoveries in labs and universities. SMEs are the biggest employer in the UK, their success is all of our success, so we need policy that helps them soar.
We must not see a repeat of the almost comic (if it weren’t so embarrassingly true) journey of Oxford PV in trying to establish its manufacturing base in Britain. Having developed a novel technology making solar panels twice as efficient, the British company sought to open a factory in the UK.
Approaching regional development agencies across the country, it heard nothing back for months. At a loss, it approached the development agency in Germany a week before Christmas; two days after Christmas they offered up five potential sites. Instead of a manufacturing base in Blackburn or Barnsley, it is set to open its factory in Brandenburg an der Havel. The founder says, “British agencies just didn’t take us seriously enough… they thought we were too small”.
This is a real problem, and no doubt one many small businesses and start-ups will be familiar with. Being small, being untested or unknown, poses a risk for government investment – that money may be lost if the business fails or its product or technology does not achieve what it set out to do. The Oxford PV story is an example that the greater risk comes from not putting in place mechanisms that embrace small start-ups and new market entrants and supporting them to prosper.
These mechanisms do exist, and they have been proven to be effective in achieving just that, unfortunately their use has been ad hoc and small scale until now. Challenge prizes, as they are known, offer a large (often multi-million pound) reward to innovations that first or best overcome a problem.
The incentive of high reward helps crowd in new ideas and solutions, often from specialist businesses and skilled entrepreneurs, around a problem. The most promising innovations are supported with seed funding, expert support and access to data and sandboxes to iterate and advance their ideas. The innovation that first or best solves the problem wins the prize. The funder (be it central government or a regional development agency) has confidence that its funding is going to a viable product or business and the winner is supported to grow and contribute to the economy.
That’s not the endpoint though. Since challenge prizes help advance a variety of ideas in pursuit of the big financial reward, simply through participation, new business success stories emerge. We saw this with the Open Up challenges in 2018 and 2020, challenge prizes to promote fintech innovation for small business banking and then consumer banking.
The entrants, particularly to the 2018 prize, were relative unknowns with great ideas, now they are well-known brands you may well use yourself (including Fluidly, Coconut and Swoop). Their success has helped make London a world-leading hub for financial technology second only to San Francisco. Their participation in a high-profile prize added to their credibility, and their wider viability for investment. From tiny start-ups they are now scaling businesses, employing hundreds.
Look at how much the world has changed in a year. 2021 can, if we choose, be the fresh start where we seize the opportunity to transform the economy and unlock the huge potential of its SMEs, start-ups and entrepreneurs. It can be a year where bold government policy pioneers new approaches to driving innovation that delivers wider societal goals of a green recovery, with well-paid and secure jobs, that benefits the whole of the UK, not only the South East.
If the present approach means we are missing out on the success of companies like Oxford PV, new policy needs new mechanisms that turn innovation funding on its head and empowers government and its agencies to make better investments in our national economic success. Challenge prizes have proven their mettle in the last decade, they need to be part of the mix as we embrace this new chapter.