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PA IN THE MEDIA

Why Wales needs to think like a McDonald's to get the best out of Brexit

This article was first published in Wales Online

Brexit is just the latest of many sources of disruption facing Welsh businesses.

Increased automation, the rise of artificial intelligence, an ageing population, urban migration are all bringing uncertainty.

The best way to manage this uncertainty is to embrace the disruption it brings. To do that requires a combination of strategic and tactical responses, inspirational leadership, advanced skills and more agile ways of working.

For Wales to meet this challenge it should think like a business.

It has a working population of around 1.4 million which is comparable with global corporates such as:

Foxconn Technology 1.3m.

McDonald's 1.6m.

Walmart 2.3m.

And some of the strategic thinking that these businesses do could provide a model for meeting the challenges of the post 2019 reality.

If Wales were a business, it would be thinking about the best tactics to manage the upcoming stresses and disruption to their operating environment like:

  • Investors withdrawing from projects.
  • Automation driving changes in markets.
  • New products wiping out long-held competitive positions.

Countries like India, China and South Korea, have also managed uncertainty to leapfrog their way into a significantly improved world economic ranking by looking at themselves as businesses.

Business leaders typically respond to crises by considering their cost base, and taking hard decisions about efficiency and productivity.

They then look at where value is created – where the right markets are, and where the trends offer future growth – and how to capture additional value through innovation, taking more risk, and being more agile.

Economy Secretary Ken Skates’ flagship strategy, Prosperity for All, outlines a similar approach, with its focus on managing welfare costs, reducing the number of national sectors, developing future skills early in schools and funding infrastructure projects like the M4 relief road.

However, to shift Wales from a past of stubborn economic under performance and over-dependence on aid will require new thinking, across key sectors.

That starts with shifting the cost base by focusing on managing productivity upwards, managing cost downwards and investing in areas that provide the most productive return. High volumes of low-paid work are not going to move the economy into the future.

That is not just about cutting public service budgets, especially if that is to the detriment of investing in enabling technology, skills advancement and accountable leadership. It is about creating a culture of cost-consciousness and accountability.

Lord Maude of Horsham shared a telling anecdote on a visit to PA. He outlined how a clinical organisation, newly spun-out from the NHS, put a label with the unit cost of items on the surgical store room shelves.

That almost halved the frequency of stock replenishment and level of waste from theatre trolleys. Simply by showing staff the cost of items they started to take only what they needed instead of multiple handfuls of everything.

It is those kind of simple measures, underpinned by a culture of cost consciousness that can make a real difference.

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Creating value

The next critical step is to focus on fewer national sectors. That will require difficult dialogue between Ministers and business leaders, but should underline that not being a “priority sector” does not mean no investment.

It simply means that other sectors need priority status because of their emerging economic importance.

The priority sectors should be those that make best use of the current workforce and create demand for future skills such as FinTech, creative media and life science companies. These are currently largely delivered through agile yet fragile Welsh SMEs and start-ups.

Business support for emergent areas should be focused on developing and deploying new product lines, like the wound management solutions developed by the Welsh Wound Innovation Centre in Pontyclun, or supporting innovation in established lines of business, such as the Buildings as Power Stations collaboration between industry and Swansea University's SPECIFIC initiative.

It should favour agility and investment in areas where 'Wales as a business' is confident in a future return.

It should also balance the economic return from investing in a single businesses to support a local upturn in one sector with what could be achieved from investing in complementary businesses to create a wider ecosystem that can stimulate collaboration and benefits at a sub-regional level.

There is also a need to support SME growth rather than sustaining legacy product lines.

The exception should be if they are innovating and developing technology-enabled large-scale production facilities across sectors and embracing robotics. While this kind of thinking is compatible with Prosperity for All, it will require focused effort to drive home the importance of segmentation and prioritisation.

Consider value capture

Wales as a business then needs to look at how to use innovation to add value. Casually observing the raft of innovation in Wales raises the question of why so much activity is piloted but never quickly and consistently moved into the mainstream.

There seems to be a cultural reluctance to focus on driving the practical application of new technology across the economy.

Yet innovation is critical, the phrase “innovate or die" first coined in the 1980s, happens to be true. The way an organisation embraces innovation, paces evolution against revolution and invests speculatively can make the difference between survival, market domination or catastrophic failure in times of economic disruption.

The level of innovation across Wales is not in doubt: academia and industry are combining to develop world changing solutions across bio-tech, renewable energy and future industries.

These range from the Rutherford Clinic, semiconductor catapult and Industry 4.0 investment in the automotive and aerospace industries and the tantalisingly close opportunity of the Swansea Bay tidal lagoon.

What is needed is a willingness to scale up that innovation.

Agriculture

One of the sectors that will be most affected by disruption from Brexit is agriculture, but it is also one where innovation can transform the industry for the better.

There are a number of technologies available that could make a real difference if they became mainstream.

Use of GPS technologies to track growth in crops could be applied to measuring the maturity of lambs and avoid the body-mass wastage of bringing them to barn for weighing.

Another technology with real potential is an objective meat grading scanner, which could reduce the subjectivity of inspectors and improve the accuracy of pound per kilo pricing of meat quality into market.

Investing in bio-sciences to harvest crops that deliver health preventative benefits or enable waste materials to be recycled into sustainable solid fuels or cattle food are also on the horizon but are struggling to gain traction.

While there are issues around connectivity, these technologies offer real opportunities and the industry needs to show serious and widespread commitment to embracing them.

Across all sectors, managing the disruption of Brexit will require Wales to harness its entrepreneurial spirit, galvanise the economic appetite and be prepared to take risks across sectors and in those areas where it can make greatest impact.

The BeTheSpark initiative to support innovation and entrepreneurship is an encouraging sign, though it is too early to judge whether it will have the desired impact.

Seeing Wales as a business will not provide the full answer to navigating Brexit but looking at it from that perspective will provide a clearer view of what is important and how to identify new opportunities.

That will help the nation embrace the disruption ahead, plan effectively for 2019 and beyond, and drive the transformation of its economy.

Karen Cherrett is an economic development and local public services specialist at PA Consulting Group

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