It’s Time to Be More Magpie on the UK’s approach to innovation

This blog is called Be More Magpie because it refers to the CBI’s campaign to encourage businesses to adopt tried-and-tested technologies and management practices that other businesses are already using.

But policymakers can Be More Magpie too. As I mentioned last week, the international example tells us that there is lots the UK can learn from other countries on how to raise the level of innovation. One area where the government has already signalled it would like to do this, is in the creation of a US-style ARPA agency.

It’s great to see the idea of a UK ARPA model being explored. The CBI called for this back in 2006 to help position the UK as a destination for innovation and to support the development of radical new ideas. Fast forward to 2020 and there are three key things our members tell us will help UK ARPA work well:

Number one is a long-term funding model:

One of the strongest levers government has at its disposal when it comes to spurring private sector innovation isn’t the money (though that does matter) it’s the signals it creates with where it choses to invest and how long it choses to invest for. The US model exemplifies this, DARPA has existed for 60 years and receives over $3bn per year in funding.

Despite its potential benefits, high-risk research is costly, and the patchy funding can serve as a deterrent to businesses wanting to undertake this research. The £800 million proposed over five years by the government to fund the new agency represents a good starting point. If the first five years are successful, this funding would need to be put on a sustained footing. Former Universities Minister David Willetts recently suggested that funding would need to be around £200 million a year.

Second, set ARPA up to take risks:

The key benefit of the US ARPA model is its ability to encourage high risk research, which wouldn’t happen if it was left to the market alone. The US ARPA model achieves this through two things: independence and a customer relationship.

• On independence, the US agency operates outside of the traditional oversight structures of departments. This independence should be mirrored in the UK as it allows the agency to pursue high-risk innovation the market wouldn’t otherwise do, and supports its delivery by removing institutional restraints. One model could be that the Cabinet Office sponsors the agency, and contracts out the operation of ARPA to the public sector.

• On the customer relationship, ultimately the reason companies develop new products and services is because they expect a market for them, and government can create markets through its procurement approach. Much of the success of the ARPA programs in the US can be attributed to the implementation of an “extended pipeline” model, where government departments – particularly the department of defence – act as lead customers. In the UK, government departments could play a similar customer role.

• Businesses can also be customers for new ideas coming out of an innovation agency. As new technologies are being created and developed by UK ARPA businesses should be offered the chance to invest in them. This investment could take the form of financial, technical or marketing support. Establishing a dedicated commercialisation team could support with this.

Finally, design ARPA with the business community in mind:

This means creating a business-focused brand; having a good framework for IP agreements and designing funding that helps businesses make the case to invest.

• A business-focused brand: The agency’s brand will need to be bold if it is to compete internationally and attract the brightest and best. To do this government must be ambitious with its marketing of UK ARPA, starting with identifying a new name and mission statement which inspires and encompasses its purpose and vision.
• Design funding in a way that works for business: The US ARPA model can give funding in ten-year increments (with three year “gates” where a project needs to demonstrate its delivering). This longevity of funding pots can help businesses make the internal case to invest in risky R&D.
• Get IP right: Intellectual property agreements can sometimes be a barrier to private sector investment and collaboration. The agency will need to develop a model that gives businesses and researchers the confidence to share ideas while maintaining critical IP.

For more information and detail on the CBI’s policy thinking please read:

ARPA position paper: the business community’s views on what a model for UK ARPA could look like.

CBI members who would like to get involved in shaping our innovation and digital policy work can find out more through MyCBI:

This week, we’re collecting innovation and digital priorities for the new government.