Local authorities should improve their digital offering in order to create new revenue streams – but many lack the confidence and expertise needed to push commercialisation, a report has said.

Generating new income streams has become crucial for cash-strapped councils – Photo credit: Flickr, Howard Lake

The Commercial Imperative, published by Civica and the Chartered Institute of Public Finance and Accountancy on 14 July, said that, with ever-increasing financial pressures, council leaders are starting to embrace the potential of commercial activity to bring in cash.

However, a survey of 45 council chief executives and chief financial officers carried out for the report suggests that there is a lack of knowledge and confidence, with just 4% saying they have significant commercial expertise and 56% saying that concerns about risk were holding back progress.

Other areas of concern identified by the survey were discomfort about new business models, a lack of understanding about what the market needs and restrictive cultures.

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The Commercial Imperative

The report, which is part of a series looking at how councils will need to change over the next decade, sets out a six steps to creating a sustainable commercial model in local government, such as developing a clear idea of what your commercial offering is, training staff and setting clear outcomes and evaluation processes.

Commenting on the findings, Warrington Borough Council’s deputy chief executive Katherine Fairclough said she was “not surprised”, as they reflect conversations she had had elsewhere in the country.

“There remains a clear perception that commercialisation brings with it risks, and that, in turn, brings fear,” she said. “However, the recommendations outlined are achievable and there are some really strong, positive steps we can take, as local authorities, to make commercialisation work.”

Using digital for commercial gain

As well as making broader recommendations, the report looked at a number of ways that local authorities can make the shift to being more commercial, including pursuing a digital strategy, which the report said should be part of a “much wider strategy” than just moving services online.

“A future proofed local authority can leverage their digital platforms and business intelligence to obtain further efficiencies…and also to access new revenue streams,” it said.

For instance, it noted the example of the General Register Office of Northern Ireland, whose programme to move services online not only saved money but also allowed it to connect with a global audience that brought in more orders from across the world.

“This created substantial revenue streams that stretched beyond the small geographic boundaries or Northern Ireland,” the report stated.

The council chiefs that were surveyed said there were a number of digital areas that were essential for a successful commercial operation, such as moving systems to the cloud, automating workflows and exploiting big data, data analytics and business intelligence.

Shared services is another area in which councils can boost their commercial revenue, the report said, because they typically protect jobs and reduce costs at an individual council, but are then saleable to other local authorities.

Although the report noted that councils needed to ensure they had the sales and marketing expertise to sell services to potential partners, report contributor Paul Bradbury, group business development director at Civica, told PublicTechnology that changes were already happening.

“Compared to five, six and seven years ago, the structure [of shared services] public organisations are using is much more sophisticated,” he said. “Now they’re setting up joint ventures and training organisations that are very private sector in their look and feel.”

Culture change is crucial

However, Bradbury stressed that the most important hurdle for councils in meeting their commercial potential was about attitudes and leadership.

“There’s no one answer for everybody – you have to do big things and small things,” he said. “But it can’t be done in isolation; there needs to be a culture change in the organisation about trying to think more commercially.”

Fairclough agreed, saying: “At the heart of everything we do, there needs to be strong political leadership to help us overcome the barriers. We also need strong management and effective support from officers to ensure we manage risks well.”

She added that councils should think about the challenges of commercialisation as being similar to the challenges they face from other aspects of change within local government.

“Ultimately, it’s about embracing the opportunities,” she said. “With effective strategies in place and a shared ambition which runs throughout the organisation, we can move into the commercial world with confidence.”