It’s the “exportable technology”, stupid

After the lazy nineties and noughties when we believed that services and the public sector could fuel a sustainable economy, then came the reckoning. The most concise redefinition of Britain’s economic strategy came from Sir James Dyson in the FT last weekend. It’s really quite simple, said the engineering genius and founder of Dyson: “Our total focus must be on developing the best products and technologies of our own – to sell to the world.”

Without a primary economy, there’s no sustainable engine room; doing each other’s laundry doesn’t work as a strategy when the confidence runs out. “Exportable technology” is everything, says Sir James. We should focus on nothing else.

The death of jobs

ASK a business owner 20 years ago how big their company was and, like the pharaohs, he or she would soon tell you how many people they employed. Full-time staff numbers denoted personal achievement and the business’s (and owner’s) social value.

Today, precisely the opposite is true. In volatile markets and desperate to avoid fixed costs, the twenty-first century entrepreneur strives for the minimum number of full-time, permanent employees to get the job done. I can’t recall the last time I heard a boss striving to deliver a job target. They’ll talk profit margins, turnover, even output per worker, but the last thing most want is large numbers of full-time heads. And it goes further. This micro trend spells dramatic change for the world of work, and for how the UK measures economic wellbeing.

Take Blur Group, an Aim-listed operator of online platforms for trading business services; its shares have doubled in value since listing in October 2012. Chief executive Philip Letts is at the cutting edge of this new thinking. “Employee numbers are not the metric I care about,” he says. His critical metric is the business’s reach and “how good we are at managing resources– whether internally or externally”.

According to Letts, we’re seeing the realignment of the worker’s contract, moving towards the networked organisation. At Blur, they call it “managing from the middle”. A mere 50 full-time people co-ordinate a network of 24,000 designers, marketers and innovators. For Letts, the optimal permanent-to-flexible ratio is one to ten – for every ten “resources” you have working on your business, only one should be a full-time employee.

In similar vein, Will King proudly explains how his firm King of Shaves sells a shaving product every three seconds, yet only employs 14 full-time staff. Celebrating its twentieth anniversary in 2013, King of Shaves runs on a “virtually integrated” model, with vital intellectual property and innovation (“the Coca-Cola formula”) retained in-house, connecting out to a sprawling global supply chain of manufacturing, distribution and marketing.

Workforce data supports the idea of a shift away from old-style employment. Full-time permanent employment peaked at 19m in June 2008, falling to 18.5m in the latest figures. Today, under half of people “employed” (46 per cent) are in full-time, permanent employment. The number of part time workers, on the other hand, has risen by 300,000 over the same period, and recent Office for National Statistics figures showed that 200,000 UK workers are on “zero hour contracts” (on the company’s books, but with no guaranteed of any actual work or pay). If these trends continue, Britain may experience the paradox of job-creating recession and a job-destroying recovery.

Emotions rise when such numbers enter polite society. London deputy mayor Kit Malthouse says that “the weight of regulation means employees are as much a risk to your business as a benefit.” Kevin Green, chief executive of the Recruitment and Employment Confederation, cites research that 60 per cent of part-time workers are happy with their lot. But Duncan Weldon of the Trade Union Congress talks of an “hour-glass economy”, with vanishing middle-level jobs and 10 per cent of the workforce eager to work more hours.

No-one, however, believes we’re going back to the days of settled, long-term, permanent employment with a nice fat pension at the end of it. These are long-term transformations in the market.

For us workers, the outcome will be an inexorable and positive move towards self-reliance, multiple job engagements and micro-entrepreneurialism. As for the country, we must develop new tools for monitoring economic health. “The measure of the number of people in jobs shouldn’t be, and never was, the measure of economic prosperity,” says Roger Philby, chief executive of management consultancy The Chemistry Group. Better data is needed, and fast.

For those of you still pining for job security, however, I advise a trip to the offices of DCS Europe in leafy Stratford-upon-Avon. There, local entrepreneur Denys Shortt is an unrepentant employer. “To be honest,” he says, “I do judge success by the number of jobs you create. We are up to 280 and proud of it. I’d rather have employees who can feed their families and help me deliver a great service than be rushed off my feet counting money.”

This article was first published in City AM in April 2013.

The rapid rise of the magnesium economy

BRITAIN is enduring an economic enema. Bloated and unhealthy, blockages – to consumers, to finance, to starting businesses – are being slooshed away by the disintermediating power of the internet and social media. It doesn’t feel pleasant now, but a refreshed, if mildly emaciated, economy should result. Like a triathlete, the Britain of the future may look gaunt, but it will be more competitive.

This transition from an offline to online economy heralds a new age of short-termism: the jobs market is already hurtling to a project or contractor basis, as organisations shed operating costs (aka full-time employees) in their quest for flexible balance sheets. Stockmarket rallies and slumps last mere minutes, as new information arrives at light speed. Industry lifecycles are shortening to a matter of years.

For us workers (and governments), one of the sternest tests in this new “magnesium economy” will be the emergence of an utterly different kind of organisation; one that has no intention of lasting, indeed is designed for the briefest of lives.

Over 60 years, the lifespan of companies has gradually shrunk. According to an Innosight study, in 1958, corporations on the S&P 500 lasted in the index for an average of 61 years. By 1980, that had fallen to 25; today it’s just 18 years.

Small company trends are even more vivid (though, interestingly, the statistics are harder to find). Office for National Statistics data shows that, of the startup firms born in 2006, 96.5 per cent survived beyond one year; of those born in 2010, however, only 86.7 per cent made it to their first birthday. Nesta (the National Endowment for Science, Technology and the Arts) reckons only 5 per cent of all UK startups have more than five employees ten years later.

Business has been too slow for too long, says Damian Kimmelman, founder of the disruptive data business Duedil. With the internet barely 20 years old, there’s much more anarchy to come. He talks of challenger businesses moving into markets quickly, “like fast-expanding suns”.

But what does this mean for our economy and working lives? First, such productive churn isn’t necessarily a bad thing. “Yes, it can be disruptive for jobs in the short term, but in the long run it’s good for the efficiency of the economy”, says Hiba Sameen, an economist at the Big Innovation Centre (part of the Work Foundation). Think Myspace, Netscape, Friends Reunited, the tech industry cherishes its stories of creative destruction on speed.

As it becomes cheaper and easier to start a business, the likelihood of quick failure (or success) rises. Instagram is the poster boy for this new economy, careering from independent college startup to $1bn Facebook acquisition in just 18 months. Entrepreneurs spot short-term market gaps or inefficiencies, create solutions, make money (or don’t) and move on.

Some see this as business moving to a music industry model, in which the primary motivation is to create “hits” rather than lasting success. Philip Letts, chief executive of Aim-quoted Blur Group, reckons that the entrepreneurs of the future may start and sell 25 businesses over a lifetime, managing a procession of commercial hits like a rock band.

In such a volatile environment, risks increase. Failure, particularly rapid, iridescent failure, doesn’t sit comfortably with economic or personal career planning, but we will just have to get used to it. Silicon Valley investors actively favour entrepreneurs with a turkey or two on their CV. London-based serial online entrepreneur George Karibian says simply: “we don’t celebrate failure enough in this country”.

That may be a step too far for many Brits, but we’ve already come a long way. Howard Leigh, founder of corporate finance house Cavendish (itself celebrating a venerable 25th anniversary), recalls that “25 years ago, the concept that you could start and sell a business within three years would have been laughable; indeed, would have been frowned upon. Now the stigma is gone, and it’s accepted”.

Surprisingly, it’s the digital pioneers who are advising caution and advocating a return to long-termism. Phil Libin, chief executive of the ubiquitous note-taking software firm Evernote, sparked debate recently when he talked of wanting to create a “100 year-old startup”. Britain’s digital rock stars, like Songkick co-founder Ian Hogarth and Wonga chief executive Errol Damelin, talk openly of long-term projects. Damelin speaks in grand tones of building “a sustainable enterprise that re-imagines and re-conceives what’s possible in one of the world’s largest and most critical industries”. In a seething cosmos, at least some planets are settling.

This article was first published in City AM in July 2013.

The 11 qualities of all entrepreneurs

Having analysed the entrepreneurial characteristics of hundreds of successful business leaders and entrepreneurs, I reckon I have a good idea about the magic behind their success.

From bullish salespeople to technical wizards, they are a diverse breed. However, beneath the surface, a few vital characteristics emerge, which they share in common.

Lord Karan Bilimoria, founder of Cobra Beer and himself no mean entrepreneur, calls this “by far the best and most accurate list of characteristics I have ever seen. A great deal resonated with me personally!”

So if you’re exploring your own entrepreneurial potential, be honest and evaluate how many of the following you possess:

  • Implacable self-belief
  • A single core technical skill or ability (it could be marketing, selling, or a specialist scientific capability)
  • High resources of personal energy that enable you to work often brutal hours
  • You will be unafraid, indeed relish, talking about money. You are definitely not diffident and English about this
  • You won’t sit on problems or difficult situations, you’d rather deal with them and get them out of the way
  • At the right moment, you love to party. Sol Kerzner, the iconic hotelier and founder of Sun City, is one of the world’s great hosts.
  • You will have something about you – call it charisma – that inspires loyalty in others
  • You are fired by powerful competitive instincts, even anger, that drives you to win over your competitors.
  • Personal resilience. Entrepreneurs will have setbacks. The true winners will absorb them, learn from them and rebound.
  • They love what they do, at times at the expense of your family and friends
  • And you really will believe that your business, product, service, is better than what’s come before or is offered in their market now (even when it patently isn’t!).

This article is taken from my inaugural “Big Picture” lecture delivered at Greenwich University in February 2012. You can read the full lecture text at Real Business.