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A creative approach to innovation

Hasan Bakhshi, director of creative economy at Nesta, makes the case for good data and randomised trials to build an evidence base for innovation.

A secure evidence base is essential for improving the way public services are delivered, and will allow commissioners to make real changes to their local areas. A new report from Nesta, ‘Creative Credits’, illustrates how giving SMEs responsibility for identifying the type of support they need, in the context of a partnership approach, can lead to sustainable long-term increases in innovation. 

PSE spoke to Nesta’s director of creative economy and report co-author Hasan Bakhshi about the importance of data, and how randomised evaluations could ethically test the benefit of new policy interventions. 

Creative credits 

Nesta launched a scheme offering businesses in Manchester ‘creative credits’ to collaborate and innovate with providers of creative services, boosting growth. As well as testing how this impacted short and long-term innovation, researchers aimed to demonstrate the effectiveness of randomised trials for evaluating new policy.

As expected, those SMEs were found to be innovating more compared to those who were not working with the creative industries, and their sales were higher. But after six months the effects appeared to be dimming. 

Qualitative interviews highlighted those businesses which were more sustainably successful approached the project as one with benefits that go beyond the core service, rather than a transactional service proposition. 

Bakhshi said: “In those cases it was structured as a one-off so they got one-off results. It was as much about getting them to think in different ways.” 

A lighter touch 

Nesta wanted “a light-touch scheme where you really don’t have any brokerage at all”, so businesses could dictate how the financial support was to be used and who they worked with. 

He said: “The argument was that businesses themselves are best-placed to know what their problem is. As long as you empower them, and nudge them, we could help them to think more creatively and be more innovative.” 

While the voucher scheme is “still worth doing” for short-term benefits, Bakhshi said: “Really the prize lies, in terms of sustainable benefits, with a more targeted form of intervention.” 

It’s “really critical” that businesses define that themselves, Bakhshi said. 

Nesta recommended that Government consider these findings and build a light-touch system of support into future schemes.

Randomisation: a fairer way? 

The evaluation method is also more effective and, arguably, more ethical than traditional forms of selection, Bakhshi said. 

“There has been a reluctance to use randomisation in support for businesses, and one reason is ethical concerns. It’s argued it is difficult to randomly assign support when the policy maker knows that some businesses are more likely to use that support, and in their view are more likely to benefit from it.” 

But he explained: “There are ethical considerations even in the status quo, selecting candidates on some sort of prescribed criteria. What assumptions are being made by the policy maker when they’re selecting one business over another?

“A study published by the European Commission last year showed randomisation was a far more fair and effective way of supporting businesses because the alternative – which they call cream-skimming, where the policy maker picks winners – they’ve got an incentive to pick a business that they think is most likely to be successful, regardless of whether its because of the support or not. 

“The state [needs to] support businesses that really need it. They’re the last people that a programme manager might select, because there’s a risk that those businesses may not, for other reasons, innovate and grow and that might look like the scheme’s failed, using traditional methods. 

“You can get this perverse thing where it’s actually less ethical to cream-skim than it is to randomise. I think there’s quite a lot in that actually.” 

Randomisation did not have to be the be-all and end-all, he added. It could be used to pilot new schemes, and test their effectiveness on a small scale before being rolled out nationally, for example. 

The value of data 

An interesting offshoot of the study demonstrated how valuable the data is in itself. Bakhshi argued that in some cases the data generated is actually the main benefit. 

“Maybe we should start thinking about the relationship between data and policy and twisting it around. We tend to think about data and evidence as something you do before you design the policy intervention. In areas like innovation where there’s so much uncertainty and difficulties for businesses, maybe what we need to do is think about producing data as being the main objective of the scheme.

“I wouldn’t want to guess how many businesses actually read evaluation reports from Government – probably none I imagine. It doesn’t have to be that way, especially when you start thinking about the whole big data phenomenon and new ways in which technologies are being used to collect bigger data sets.

“There’s no reason at all why we couldn’t move to a situation where one of the big services that government provides through their innovations and by design, is business relevant data.”