Category Archives: Pontification

One Pound in Three

Can we talk about this:

Big opportunities for small firms: government set to spend £1 in every £3 with small businesses

When its predecessor (of £1 in 4) was announced in 2010 many of us were sceptical, so it was fantastic news in 2014 when the National Audit Office announced that this target had not only been met, but exceeded. I don’t think anyone doubts that the new £1 in 3 target will be achieved by 2020; a real measure of confidence in the commitment to these plans.

It’s fair to say that it’s genuinely been a great move forward. It’s taken some time – as you might expect – both for this to trickle all the way down to the smaller end of the SME sector and for departments and other bodies to get their procurement processes aligned, but in the last couple of years we’ve have seen many positive and concrete changes to the way the public sector procures services.

We’ve been involved in quite a few of these SME tendering processes in the last year or so and have seen a full range of tenders from the very good through to the very bad. What’s clear is that things are continuing to improve as buyers and their procurement departments learn to navigate the new types of relationships that the public sector has with these smaller suppliers.
So a lot’s changed, but what could still improve?

Procurement workshops and briefing days

Soon after the 2010 announcement and in the midst of a fashion for “hackathons” and the open web these were all the rage; you could hardly go a week without one body or another running an event of this type.

You know the ones. Every Government department and even most local councils run them; non-government public bodies like the BBC, Channel 4 and JISC love them too. The intention is absolutely sound – you want to get us excited about working with you, outline the projects that we might be working on, help shape our proposals, and ultimately make sure we understand that you’re worth the effort of us pitching to.

There’s no doubt that these are great events to attend. But. They’re often marketed as “great opportunities” and there’s frequently a sense that we must attend to ensure that we don’t miss out. But time out of the office costs money, as does getting half way across the country because the “North” briefing is in London (I kid you not, that’s happened to me more than once). On top of that the audience and content of the talks at these events can be scarily similar regardless of location or presenting organisation. There’s nothing more disheartening than arriving at another one of these events to a feeling that only the venue and speakers have changed.

It’s obviously vitally important that you get these messages across, but please try and make sure that the events themselves don’t feel compulsory. SMEs are time poor (particularly the good ones); if it’s clear that I’m not going to miss out if I don’t attend and that all the information I need will be online then I may well choose not to come. It doesn’t mean I’m not engaged, just that new channels like this are things I often need to explore outside the usual working day.
There’s often a sense of “if we make it really explicit what we’re after at the workshop” that you’ll cut down on the number of inappropriate responses to your tenders. Sadly the opposite is often true – once someone has spent a lot of time and money in attending one of the briefing days they will pitch for absolutely everything, because they now feel invested, and they’ve met you. Sunk cost thinking affects us all.

Luckily the number of these apparently mandatory briefing days is reducing, with some organisations doing away with them entirely, replacing them with live web conferences, pre-recorded video presentations and detailed (and high quality) documentation. I’d love to see them done away with entirely, though.

Keeping contracts aligned

It’s a fair assumption that during the briefing days every single speaker will have made at least one reference to Agile. And it’s likely that Agile was the main topic of at least one talk. Because Agile is good. You get that. We get that. Agile makes absolute sense for many of the kinds of projects that the public sector is currently undertaking. Digital Transformation is certainly not easy, it’s definitely not cheap and it’s absolutely not going to be helped by a waterfall, BDUF approach.

But if you’re honestly committed to Agile please please ensure that your contracts reflect that. We’ve recently had to pull out of two tenders where we’d got down to the last round because the contract simply couldn’t accommodate a genuine Agile delivery. We know Agile contracts are hard, but if you’ve spent the entire procurement process actively encouraging people to pitch you an Agile approach you need to present an Agile contract at the end of it. Companies as old and grizzled as Isotoma may feel forced – and be willing – to back away, but for many agencies it’s a trap they unwittingly fall into which ultimately does nothing for either party.

It’s also worth remembering that it’s unlikely any SME you deal with has internal legal advice, so contract reviews are an expensive luxury. If you present a mandatory contract at the start of the tender process most of us will glance over it before ploughing ahead. We certainly aren’t going to pay for a full scale review because we know it’ll cost a fortune and the lawyer is only going to tell us it’s too risky and we shouldn’t pitch anyway. One contract we were presented with by a government department was described by our lawyer as a “witch’s curse”. We still pitched. Didn’t win it. Probably for the best.

Timelines

They say it’s the hope that kills you.

Small businesses are, by definition, small. The kind of procurements I’m talking about here are for services, not products, which means that people – our people, our limited number of people – are going to be required for the delivery. If the timeline on the procurement says “award contract on 17th February 2017, go live by end June 2017” we’re going to start trying to plan for what winning might look like. This might well involve subtly changing the shape of other projects that we’ve got in flight. If we’re really confident it might even mean turning away other work.

When we get to the 17th February and there’s no news from you what are we supposed to do? Do we hold the people we’d pencilled in for this work back and live with the fact that they’re unbilled?. And then when 24th February comes and there’s another round of clarification questions, but you commit to giving us an answer by the following week what do we do then? And so on. And so on.

The larger the business you’re dealing with the easier they find absorbing these kind of changes to timelines, but that’s one of the reasons they’re more expensive. SMEs are small, they’re nimble, but they also rely on keeping their utilisation high and their pipeline flowing. Unrealistic procurement timelines combined with fixed delivery dates can make pitching for large tenders very uncomfortable indeed.

To summarise

As I said at the start things have made huge leaps forward over the past couple of years. The commitment to pay 80% of all undisputed invoices within 5 days is a great example of how the public sector is starting to really understand the needs of SMEs, as is removing the PQQ process for smaller contracts, the commitment to dividing contracts into lots and explicitly supporting consortia and subcontracting.

In 2016 we’ve been to sadly uninformative developer days for an organisation that has offered wonderfully equitable Agile contracts and extremely clear and accurate timelines. We’ve pitched for work that was beautifully explained online with no developer day, but that presented a bear trap of a contract, and we’ve pitched for work that was perfect except for the wildly optimistic timelines and that finally awarded the contract 3 months after the date in the tender.

Things are definitely getting better, but a few more little tweaks could make them perfect.
Here’s to £1 in 3, and the continuing good work that everyone is doing across the sector.

The economics of innovation

One of the services we provide is innovation support. We help companies of all sizes when they need help with the concrete parts of developing new digital products or services for their business, or making significant changes to their existing products.

A few weeks ago the Royal Swedish Academy of Sciences awarded the Nobel Prize for Economics to Oliver Hart and Bengt Holmström for their work in contract theory. This prompted me to look at some of his previous work (for my sins I find economics fascinating), and I came across his 1998 paper Agency Costs and Innovation. This is so relevant to some of my recent experiences I wanted to share it.

Imagine you have a firm or a business unit and you have decided that you need to innovate.

This is a pretty common situation – you know strategically that your existing product is starting to lose traction. Maybe you can see commoditisation approaching in your sector. Or perhaps, as is often the case, you can see the Internet juggernaut bearing down on your traditional business and you know you need to change things up to survive.

What do you do about it?  If you’ve been in this situation the following will probably resonate:

agency2

This describes the principal-agent problem, which is a classic in economics. This describes how a principal (who wants something) can incentivise an agent to do what they want. The agent and “contracting” being discussed here could be any kind of contracting including full time staff.

A good example of the principal-agent problem is how you pay a surgeon. You want to reward their work, but you can’t observe everything they do. The outcome of surgery depends on team effort, not just an individual. They have other things they need to do other than just surgery – developing standards, mentoring junior staff and so forth. Finally the activity itself is very high risk inherently – which means surgeons will make mistakes, no matter how competent. This means their salary would be at risk, which means you need to pay huge bonuses to encourage them to undertake the work at all.

In fact commonly firms will try and innovate using their existing teams, who are delivering the existing product. These teams understand their market. They know the capabilities and constraints of existing systems. They have domain expertise and would seem to be the ideal place to go.

However, these teams have a whole range of tasks available to them (just as with our surgeon above), and choices in how they allocate their time. This is the “multitasking effect”. This is particularly problematic for innovative tasks.

My personal experience of this is that, when people have choices between R&D type work and “normal work”, they will choose to do the normal work (all the while complaining that their work isn’t interesting enough, of course):

variance

This leads large firms to have separate R&D divisions – this allows R&D investment decisions to take place between options that have some homogeneity of risk, which means incentives are more balanced.

However, large firms have a problem with bureaucratisation. This is a particular problem when you wish to innovate:

monitoring

Together this leads to a problem we’ve come across a number of times, where large firms have strong market incentives to spend on innovation – but find their own internal incentive systems make this extremely challenging.

If you are experiencing these sorts of problems please do give us a call and see how we can help.

I am indebted to Kevin Bryan’s excellent A Fine Theorem blog for introducing me to Holmström’s work.

 

4 Times That The Misery Of Creative Agencies Made Me Happy

Clickbait titles are fun, but bear with me, good people. I’m trying the make a point.

This report was wafted under my nose the other day. It makes for depressing, but not terribly surprising reading. The first paragraph pretty much nails it:

Anyone who’s spoken to me in a professional capacity for the last 3 months will probably recognise that Smith & Beta’s report is quantitative confirmation of what I’ve been going on about for ages. Each one of these makes me sad – but also, because I am a shallow, vapid person, I still get to feel happy that I’m right.

1) Good quality creative requires good quality technical implementation

Agencies lead with creative vision and lean on technical skills (internal & external) to deliver this vision. No one ever won a pitch by saying that the creative will be a strong C+ but it’s going to be implemented really well. Sadly, the opposite is almost always true. The industry is generally OK with taking an amazing creative idea and delivering it late, over-budget and on top of a pile of bodies of fallen colleagues.

2) This technical resource – where it exists within an agency – is often siloed and over-committed

Because of the way the creative industry works, creative resource is always going to be an expense the agency is happy to invest in. Investing in technical resource however; is a more expensive, slower, trickier business.

Similarly, investing in older, more skilled resource is always going to be a harder sell when there are countless thousands of young and exploitable juniors clamouring for your attention.

An agency trying to walk the line between capability and capacity in order to really call themselves “Full Service” will end up with a safe but middle of the road offer. Conversely, an agency who shoots for the moon and invests in highly specialised and/or highly senior team may find that they’ve painted themselves into a very expensive corner.

3) It’s hard to hire your way out of this problem

I mean, duh, obviously. It’s hard to hire your way out of any problem. Recruitment, training and increasing retention are sloooooow processes. And the problems that this report outlines are problems of the now.

(Side-note: In my role here at Isotoma, I often end up talking to agencies about projects that we can collaborate on. I’m usually talking about projects that might be coming up in, say, 6 months, but people actually want help RIGHT NOW.)

4) These problems when considered together, reduce the satisfaction of the customer and shorten the lifetime of the account

As abusive as the client/agency model can be, there’s a satisfyingly stark bottom line to it: “Do good work; get more work.” Note that this is distinct from “Pitch good creative; get more work.”

As I said above, no one ever won a pitch for outlining a competent implementation plan, but once the project is over and the smoke settles, the customer doesn’t just remember the pitch.

(If you’re really unlucky, the people who were in the pitch don’t even work for the customer anymore…)

The knife edge that a marcomms agency has to walk is being able to deliver creative vision *and* technical competence in a way that doesn’t fundamentally alter what the company is. Go too far in one direction and you’re unable to deliver anything profitably, go too far in the other and you’ve magically become a company that you don’t want to be.

So this is one of the reasons that Isotoma do what we do. We’re already a technical agency. We’re already geared up to help you estimate, deliver and, crucially, support a creative campaign. We’re good partners. And the better we get at ploughing this particular furrow, the better we’re able to help and complement agencies who’ve chosen to plough another.

And that makes me happy.

(See? I was being cynically provocative to attract clicks. And the pug at the top? The cherry on the cake, my friend. Truly I am a monster.)

 

Will the industry heed the Digital Powerhouse Report?

Last month The Digital Powerhouse Report, commissioned by Tech North and published by the RSA was released. It looks at the Northern Powerhouse, the digital industry, the region’s digital economy and future. The report outlined how the northern tech sector could improve its business performance and reach full potential.

As Marketing Manager of a northern technology company, a copy of this report naturally found its way to my desk. I was interested in what the report recommended; it is after all the north’s first major guideline to becoming a ‘Powerhouse’. Anything that aims to improve business infrastructure in the region should be welcomed and, more importantly, acted upon.

What does this report bring to the table?

What’s so striking about the report are the key recommendations for the north to grow. Suggestions such as establishing a digital powerhouse contract portal were – in our eyes – unexpected. Many northern tender portals are in existence already, such as YorTender, Due North and YPO. I believe that instead of reinventing the wheel, we should start turning the wheel that exists already. Yes, these portals haven’t been set up specifically to cater for the digital industry but they do exist and they do work.

Problem-based commissioning, data on KPIs and procurement results are brilliant recommendations and we’d like to see activity of this type in the region. The report also encourages the use of open source software, which is something we have been passionate about since we first opened our doors back in 2004.

There are some solid recommendations within the report which, if undertaken correctly, will certainly bring the north’s tech businesses closer together.

Retaining graduate talent in the north is key

I believe one of the stickiest problems facing the north are the demographic differences we’re seeing between the north and south of the UK. We need to retain our talent and encourage graduates to seek employment within the region.

This is something we at Isotoma are passionate about, investing a lot of resources into our junior onboarding and training work, ensuring that we give graduates the tools they need to thrive in a working environment. This is a long-term investment on our behalf as current apprentice schemes do not apply to individuals with degrees.

When it comes to higher education, the north is well catered for – the region contains 23 universities, 6 of which rank in the top 20 for research excellence on a national scale. However we don’t seem to be utilising the facilities on our doorstep, The Guardian’s Northern Powerhouse article states that “Only three cities in the north – York, Warrington and Leeds – feature in the UK’s top 20 when it comes to the number of workers educated to degree level.“

So it would appear that less people are attending Universities in the north, and can we blame them? We’ve all seen the media coverage about the rise in tuition fees, can students afford the financial setback that getting a degree now brings?

London is growing, is the North shrinking?

According to the official government projections, an explosion of growth in London’s East End boroughs will bring London’s population to nearly 10 million within eight years. Compare that to the shrinking population of the northern boroughs such as Blackpool, Richmondshire and Cumbria predicting the biggest fall in population in England, declining by 4.3% by 2024.

The Guardian newspaper wrote an article 2 days after the Northern Powerhouse report was released with some worrying projections about the north-south working-age and retired population; “Barrow-in-Furness is predicted to lose 4.3% of its population by 2024, while Tower Hamlets in London is expected to grow by 25%“.

So, do we need better transport links?

Commuting from Leeds to Manchester alone is a nightmare, the M62 is one of the worst motorways I’ve had to commute on. The northern rail links are awful. More often than not there’s no chance of working from the train as the mobile signal is non existent most of the time, especially when going over the Pennines. The Government has announced many elaborate plans to improve the transport links in the north, such as the HS3 rail link between Leeds & Manchester, however no deadlines have yet been announced.

What else does the report recommend?

The report has 14 overarching recommendations, most of which we wholeheartedly agree with and are more than happy to pioneer. One such recommendation is to champion the tech cooperative model. This idea has legs, but tech cooperative models are very expensive to form contractually. Model contracts and assistance in making this work would be needed.

Another recommendation from the report is to kickstart new corporate-backed accelerators. I agree, and this is already happening, but the businesses seem to naturally migrate to London and not stay in the north, so is this really going to help?

In summary…

You can find evidence to back up any argument you want to make on the topic of the Northern Powerhouse, but will it be such a hot topic after the next general elections..? I hope so.

Identifying the problems that exist in the north for business is half the battle won. We live in such an exciting era of emerging technology in an ever changing landscape of tech invention… meaning we need to keep our graduates. The onus is on employers to incentivise graduates with great jobs, exciting technology and amazing career opportunities!

Transport links need to improve from city to city, as well as inner city links. York has an excellent brand new Park and Ride scheme which uses electric busses, free Wi-Fi and parking to attract commuters, in comparison the northern rail network between the major cities needs substantial improvement and investment.

Most importantly the recommendations in the Northern Powerhouse report need to be owned, actioned and supported by all of us, those northern tech businesses the report is aiming to help.