Commercialisation: Minimising the risks and maximising the returns

July 26, 2017   By Jessica Studdert, Deputy Director, NLGN

Every now and then a zeitgeist-y term comes along that everyone in local government tasked with planning for the future either knows about, or knows they should know about. ‘Commercialisation’ is one of those buzzwords du jour. In the context of not just funding cuts, but increasingly also outright obfuscation from central government, councils are increasingly looking to find ways to improve their self-sufficiency. Adopting more entrepreneurial approaches to generating income, which can then be reinvested in the sustainability of local services, is an emerging area of interest.

Commercialisation covers a broad range of activity- from investing in and developing property, to charging for non-statutory services. One option is establishing a local authority trading company, which is separate to but wholly owned by, the council, that can provide services commercially to a wider market in the public sector and beyond. This is a growing area of activity due to more permissive legislation earlier this decade.

To support the increasing appetite to understand commercial models in practice, we chose the theme for the first of our new Innovation Briefings, which launch today for our members. This sets out practical considerations and learning from best practice, for councils considering spinning out an existing service into a trading company.

There are advantages to pursuing this particular route for an existing area of in-house activity – for example legal services or environmental health. A new business model could create more flexibility and staff autonomy, flatten internal hierarchies and speed up decision-making structures. This could create more responsiveness to the financial, technological and regulatory operating context, and potentially generate long-term revenue returns for the council.

But the move to trading services is not without risk or complexity – new costs will be incurred, the change can potentially be disruptive to staff and there is an array of governance, legal and technical considerations to navigate.

When putting together a commercialisation strategy, councils may well calculate that the risks of doing nothing are also steep, within a national policy framework fraught with unknowns, new cost burdens and no funding certainty beyond 2020. It is important then that local government shares between itself ideas and lessons to improve capability and minimise risks in the adoption of new models. Our Innovation Briefing is designed to do just that by exploring key themes and considerations in more detail, and using active case studies and learning points gleaned with hindsight from those pioneering new trading services.

The theme of commercialisation is one we will return to at NLGN, through our research and our ongoing programme of peer learning for our innovative member councils. As local government adapts and responds to the challenges and opportunities of our times, it is important we shine a light on the practice at the cutting edge, and explore the potential trade-offs and risks that exist.

If you have an interest in this area, or are developing particular activity, I’d love to hear from you on jstuddert@newlocal.org.uk

  • The first of NLGN’s new programme of Innovation Briefings is launched today and available exclusively for our members.
  • Commercialisation will be the theme of our next member-only Innovation Exchange on 8th September, focussed on the practicalities of developing an effective commercialisation strategy.

For more information about the range of benefits of joining our community of innovative councils, please contact Richard Nelmes, Head of Network, on rnelmes@newlocal.org.uk.

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