Industrial Policy

Aligning with or influencing government investment and policy to accelerate strategic industry growth.

"Government investment in a field." -- Simon Wardley

🚦 Industrial Policy Strategy Assessment Tool

Quickly assess how ready you are to apply the Industrial Policy strategy. Explore signals in your map and organisation that suggest a good fit, and check your readiness to execute effectively.

🤔 Explanation

What is Industrial Policy?

Industrial Policy refers to deliberate actions by governments to support strategic industries through instruments such as subsidies, tax incentives, public procurement, regulation, or infrastructure investment. For organizations, it involves aligning with or influencing these policies to de-risk investments, secure funding, and shape market conditions in their favor.

Why use Industrial Policy?

• De-risks high-capital projects with public funding or guarantees
• Accelerates R&D and innovation through targeted grants or contracts
• Creates market demand via government procurement or mandated standards
• Shapes regulatory environments to lower barriers or secure competitive advantages
• Builds strategic autonomy in critical sectors (e.g., semiconductors, green energy)

How it works

Organizations can engage in industrial policy by:

1. Mapping policy priorities and timelines
2. Building relationships with policymakers and influencers
3. Framing proposals to align corporate goals with public objectives
4. Piloting projects or proofs of concept to demonstrate value
5. Securing grants, subsidies, or favorable contracts
6. Ensuring compliance and maintaining stakeholder trust

Forms of Industrial Policy

🗺️ Real-World Examples

Historical: Aerospace industry funding – Boeing and Airbus grew rapidly on the back of government defense contracts, direct subsidies, and co-ownership arrangements, accelerating innovation and scale beyond pure private investment.

Contemporary: China’s EV sector – extensive subsidies, infrastructure development, and manufacturing incentives propelled companies like BYD and NIO to global competitiveness years ahead of market-driven timelines.

Hypothetical: A renewable energy startup partners with a national green infrastructure program, securing R&D grants and guaranteed off-take contracts for pilot wave energy projects, dramatically reducing risk and time-to-market.

🚦 When to Use / When to Avoid

🚦 Industrial Policy Strategy Self-Assessment Tool

Find out the strategic fit and organisational readiness by marking each statement as Yes/Maybe/No based on your context. Strategy Assessment Guide.

Landscape and Climate

How well does the strategy fit your context?

• Government announces initiatives or budgets for your sector (e.g., green technology, defense, semiconductors).
• High capital or regulatory barriers exist and public support can materially reduce risk or cost.
• Policy objectives (jobs, security, innovation) align with your strategic goals.
• Political environment is stable enough for multi-year programs.

Organisational Readiness (Doctrine)

How capable is your organisation to execute the strategy?

• You have resources and expertise for policy engagement or advocacy.
• You can comply with public-sector reporting, audits, and transparency requirements.
• You understand policy development processes and timelines.
• You can deliver pilot projects or prototypes that demonstrate impact.

Assessment and Recommendation

Strategic Fit: Weak. Ability to Execute: Weak.

RECOMMENDATION
Consider alternative strategies or address significant gaps before proceeding.

Use when

The long-term benefits of public funding, market guarantees, or regulatory support outweigh the potential costs of oversight and dependency.

Avoid when

Policy cycles are highly uncertain or slow, funding strings create strategic constraints, or overreliance on state support risks future agility.

🎯 Leadership

Core challenge

Balancing public objectives with private strategic goals, maintaining agility while managing government oversight and stakeholder expectations.

Key leadership skills

• Political acumen and stakeholder management
• Strategic framing and narrative building
• Compliance oversight and governance
• Coalition building across public and private sectors

Ethical considerations

Engaging in industrial policy requires a commitment to transparency and public accountability. Leaders must ensure that the pursuit of strategic advantage does not compromise ethical standards or create unfair market distortions. The process should be guided by a clear understanding of the public good and a commitment to delivering value beyond the organization itself.

📋 How to Execute

1. Scan and map relevant policy landscapes and funding programs.
2. Form cross-functional teams (policy, legal, technical, finance) for engagement.
3. Develop aligned proposals highlighting mutual benefits.
4. Engage in pilot or demonstrator projects with clear success metrics.
5. Negotiate terms for subsidies, tax breaks, or public procurement.
6. Implement governance structures for compliance and reporting.
7. Monitor policy changes and adapt strategy accordingly.
8. Plan exit or diversification to avoid overdependence.

📈 Measuring Success

• Public funding secured (amount and terms)
• Accelerated project timelines versus baseline
• Regulatory approvals or standards adoption
• Market share or volume growth enabled by policy support
• Cost-of-capital reduction
• Successful audits and stakeholder satisfaction

⚠️ Common Pitfalls and Warning Signs

• Overdependence on a single policy program or government sponsor.
• Neglecting market viability in favor of subsidy-driven activities.
• Bureaucratic delays undermining agility.
• Public backlash over perceived unfair advantages.
• Policy reversals exposing strategic gaps.

🧠 Strategic Insights

Aligning with National Champions vs. Fostering Ecosystems

Industrial policy can take the form of backing national champions (betting on a few large players) or fostering a broader ecosystem of innovation. Leadership must understand the nuances of the specific policy they are engaging with. Aligning with a "national champion" approach might offer significant scale but also carries risks if that champion falters. Ecosystem approaches might offer more resilience but require navigating a more complex set of relationships.

The Double-Edged Sword of Subsidies

While subsidies can accelerate development and market entry, they can also distort market signals and create dependencies. Strategic leaders must use subsidies to achieve specific milestones and build underlying capabilities, rather than becoming reliant on them for ongoing operations. The goal should be to use policy support to reach a point of self-sustaining competitiveness.

Navigating Policy Cycles and Political Risk

Industrial policies are subject to political winds and can change with new administrations or shifting national priorities. Companies leveraging industrial policy must build in resilience to these shifts, perhaps by diversifying their reliance across different programs or geographies, or by ensuring their core value proposition remains strong even without specific policy support.

❓ Key Questions to Ask

• Alignment: How does this specific industrial policy align with our long-term strategic goals, beyond the immediate financial incentives?
• Capabilities: Do we have the internal capabilities (e.g., for grant application, compliance, lobbying) to effectively engage with this policy?
• Risk Mitigation: What are the primary risks associated with this policy (e.g., political change, dependency, reputational risk), and how can we mitigate them?
• Exit Strategy: What is our strategy for thriving if this policy support is reduced or removed?
• Ecosystem Impact: How does our participation in this policy affect the broader ecosystem, and are there opportunities for collaboration?
• Ethical Considerations: Are there any ethical concerns or potential negative externalities associated with this policy or our involvement in it?

🔀 Related Strategies

• Lobbying - influencing policy is a core tactic within industrial policy.
• Market Enablement - government backing can create or expand markets.
• Standards Game - industrial policy often promotes standards to secure advantage.

⛅ Relevant Climatic Patterns

• Capital flows to new areas of value – influence: government investment channels funds toward targeted sectors.
• Economy has cycles – trigger: policy support often intensifies during war or wonder phases.

📚 Further Reading & References

• Wardley, S. – On Industrial Policy and Strategic Climatic Patterns.
• Case Study: The Rise of Airbus – European government consortiums and subsidies.
• InfoQ Interview: Wardley on Industrial Policy in China’s Tech Landscape.