Facing fears: six steps towards a commercial model

All those involved in public services are only too aware of the political, legislative and financial uncertainty that lies ahead on the road to Brexit. Again, local authorities which have already had to face major change and financial constraint, are likely to be impacted. Since the referendum result, ratings agency Moody’s has downgraded the credit rating of several authorities.

This development comes at a pivotal time when authorities are expected to be financially self-sufficient by 2020. Many have been trying different things to achieve this, from sharing services and reducing headcount to re-shaping service delivery. However, one of the most revolutionary of these is the adoption of commercial strategies to grow alternative income streams. According to recent independent research in Civica’s The Commercial Imperative report, local authority leaders are opening up to the role of commercialisation as a way to close funding gaps and become self-sufficient.

But the same research across council leaders and CFOs shows that positive progress is being held back by concerns about the risks involved and discomfort about trying new models (56%), as well as a restrictive organisational culture (40%). This is, of course, completely understandable, taking “private” sector risks with public money is a big responsibility. But much like even the most polished public speakers feel nervous before going out on stage, public sector leaders must move out of their comfort zone to reap rewards. As such, I’ve listed six ways for local authority leaders to feel the commercial fear and do it anyway:

  1. Education, education, education – Our market research shows that 36% of council leaders and finance heads admit they lack an understanding of what ‘the market’ needs. It is impossible to embrace new ways of working, no matter how positive they might be, without the understanding to do so confidently. Take the time to get to know your market environment. Delve deeper into your citizens, their behaviour, their pain points and where the specialist insight and expertise in your organisation might be able to fill a need not currently met, and which could be monetised. Invest in business management training to ensure you’re able to understand, implement and manage business cases, financial management and marketing – all essentials to any commercial endeavour.
  1. Make use of your internal and external network – Our research reveals that there is, perhaps naturally, a lack of commercial experience amongst senior leadership in local authorities. Just 4% said they had significant commercial experience. Local authority leaders should make use of knowledge and expertise that can be garnered from colleagues, professional networks and partners who do have experience in the commercial sector. Build a taskforce of experts who can help you shape your commercial strategy, a commercial board if you will. We work with many local authorities on this basis, helping to advise and implement new commercial projects.
  1. Embrace calculated risks – Risk is a part of daily life. In business, creating a new product or service or entering a new market always includes an element of the unknown. But this is what allows an organisation to stand out from competitors and to reap the rewards. This is often at odds with the culture that the public sector is used to, according to those I have spoken to. As our Reinvigorating The Public Sector Revolution report highlighted, council leaders and execs believe that progress is being constrained by a restrictive culture (36%), as well as an abundance of red tape and regulations (57%). And there is no quicker way to suffocate original thinking or ideas, by punishing them. Instead council leaders must continue to empower themselves and their employees to be bold and to make decisions which involve a higher acceptance of risk. With the right business modelling and risk measurement processes in place, there is no reason why failures can’t be minimised and innovation succeed. That is part of the commercial process and often the learnings that come from failures help to shape a project’s future success.
  1. Drive digital – Pursuing a digital strategy has helped many local authorities to respond to the digital agenda, but also to achieve significant cost savings by shifting services online. Digital platforms and business intelligence can also be used to access new revenue streams. Take the General Register Office of Northern Ireland for example. Its new digital ancestry service, which was created as part of its wider digital transformation programme, allows it to connect to a global audience. They’ve generated over 15,000 per month and 100 orders per hour from searches to over 9 million records, boosting revenues by over £5m.
  1. Balance the big with the small – Commercial endeavours come in all shapes and sizes. Take a look at the bigger picture and address the financial situation with multiple initiatives, both big and small. By taking a broader approach, councils can hedge their investments, reaping the rewards of successful programmes and minimising the downside risk of smaller projects that fail.  Smaller projects, when added up, can also make a tremendous difference.
  1. Monitor, measure and adjust – Successful, sustainable commercial endeavours – much like any other long-term transformation project – will change as they evolve. What works now may not work forever, particularly as community demands fluctuate. As any commercial operation knows, customers can be a fickle bunch. Prepare to move in-time with these changes and trends by constantly and consistently measuring your progress against pre-agreed targets and the overarching business case.

Using commercialisation to aid self-sufficiency is going to be one of the most important priorities for local authorities over the next decade. And the current period of “business as usual”, while decisions about what Brexit will actually look like are made, is the perfect time to begin testing out new models. While taking a more proactively commercial mind-set may feel uncomfortable at first, doing so while keeping the aforementioned six steps in mind will make the transformation significantly easier.

While not every attempt will make money, organisations such as the General Register Office of Northern Ireland show us the impressive gains that can be achieved when things do go right.

Gary Bell is executive director at Civica

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