063. Local authorities must have a commercial mindset when thinking about their assets and set clear and achievable goals in advance and measure results against them
Working with the private sector to make the most out of assets requires a commercial mindset from local authorities. While many local authorities have experience in commercial services and feel comfortable with the risks associated with this, for those that do not, are moving into a new market or scaling up significantly, having a clear commercial mindset that is shared and understood at all levels of the local authority, is vital. There must be a clear focus on the gap in the market that they are looking to fill, who competitors will be, and the potential for and scale of risk.
Setting out early on what the benefits should be and then measuring them is important to ensuring that projects stay on track and are able to provide the commercial or public service returns that they were originally set up to deliver. Key performance indicators (KPIs) help to make sure everyone involved in a project understands whether it is a success against clearly defined criteria. They give the councils and partners the time to step in and make changes if results are not going to plan. Another benefit of a clear long-term plan and KPIs is that they will also help to overcome ‘best value’ issues that can arise for councils when involved in long-term partnerships.
Case study 3: Resetting a Bristol City Council joint venture to achieve its initial goals
Bristol Is Open (BIO) is a joint venture between the University of Bristol and Bristol City Council to provide services and knowledge that capitalise on a unique publicly-owned asset belonging to the city – a broadband cable ducting network – and the strengths of its university. But due to a lack of business focus, lack of investment and insufficient organisational structure, the asset and the partnership was failing to meet its objectives. BIO required recurring investment from shareholders, was being run on goodwill and was not meeting its KPIs.
BIO was set up with a £5.3 million capital grant from central government but could not be funded every year. From the outset it was clear that the joint-venture had to make enough money to build up reserves and reinvest. The partnership aimed to use the city’s ducting network to develop an open programmable city by putting in place a platform to develop and prove ‘Smart Cities’ technology.
The collaboration was meant to allow the city to use this asset to lever in expertise and investment into the city from the technology, media and telecommunications industries, universities, local communities, and local and national government. This fitted into the broader vision of Bristol’s economic development, as well as the then Mayor of Bristol’s goal of becoming a more sustainable and equal city using the ‘smart’ approach. It would attract firms and academics to the city to use the platform and help to train engineers for the future. The partnership would eventually supply state-of-the-art services to the shareholders and other potential customers on a competitive, commercial basis.
This vision for the asset to help support the city’s economic development meant that action was taken to put the joint venture on track. An outside body was brought on board with experience of how to operate in this market and make the most of the network and skills of the university. It added to the assets and skills of the city and University and set out to:
- Develop a new business plan
- Renew focus to offer only the services of highest market value
- Design and implement a new organisational structure
- Introduce new funding arrangements
As shown in section 4 below, having the right resources to run the project was also a key part in improving the governance arrangements that made the organisation more commercially minded. A new, independent chair with extensive knowledge of the industry was brought in to provide outside, expert guidance to the board.
Previously the board was equally split with two representatives from each organisation, meaning that BIO was still heavily beholden to the shareholders’ separate interests. The independent chair helped ensure the focus was on the long-run success of the joint venture – to the benefit of both partners– rather than on the understandable short-term interests of the board members’ parent organisations.
With a change in political leadership in Bristol in 2016, there were some shifts in the vision for the city’s economy from the new mayor. BIO was flexible enough to refocus its work so that the asset was used to more clearly support these new aims as part of the original plans for the programme.
Today the joint venture is on a stable financial footing, performing according to the original aspirations, and Bristol’s unique public asset is being used to help shape the city’s economic development in tune with the new mayor’s ambitions for the city. BIO has helped Bristol to be named a leading UK Smart City.