The big story about Tech Nation that wasn’t revealed in the media coverage

Screen Shot 2015-02-06 at 15.02.34Tech Nation, launched yesterday (5.2.15) by Prime Minister Cameron and Chancellor Osborne, was a seriously ambitious idea and was formidably difficult to bring to life.

Nothing of this complexity – naming and locating the UK’s digital companies, identifying clusters of digital expertise and drawing conclusions about the overall contribution of the UK’s digital companies – has been tried before. There have been good efforts to map sections of the digital economy and to estimate the economic significance of digital businesses, but Tech Nation is in a different league.

Having been closely involved in Tech Nation’s creation, I’d encourage people to dig beneath the headlines because this absorbing study reveals some new, subtle and important insights into Britain’s economy.

Probably the most challenging question in the whole project was the most fundamental one: what is a digital company?

Some companies are obviously “digital”: the UK divisions of Facebook, Google and Twitter were always going to make the cut, along with app developers, crowdfunding platforms and music streaming services.

You’d think that online retailers – Sofa.com, Amazon, NotOnTheHighStreet – would be shoo-ins, too, but this was where the tricky questions started: is it a “digital” company if most of its effort goes into shifting physical stuff like books; what if, as well as using digital channels to take orders, a company manufactures products and has physical outlets? Might it at some point stop being a digital company?

Similar questions could be asked in the opposite direction. Long-standing, pre-digital companies such as John Lewis have awesome digital architecture, but when do they stop being an offline company and become an online one? Is there a proportion of revenue, or costs, that must be attributed to digital stuff that qualifies a company to be digital? One of the oldest companies in Tech Nation, NCR Limited, started life in Dayton, Ohio, in 1895 as National Cash Register. Clearly it wasn’t a digital company back then, but evolved over time into a software corporate.

There were many hard questions: when does a valve-maker that uses digital-based technology to design its products stop being a sweaty manufacturer and start becoming a sleek digital pioneer? The HQ of McLaren in Woking is a temple of clean lines and data science (Cupertino in Commuter belt), but when does it tip from engineering into something different?

What’s so impressive about the data science behind Tech Nation is that it a) recognises companies that self-identify as “digital” through the Standard Industry Classification (SIC) system and b) has the sensitivity to detect companies as they evolve into a fuller digital infrastructure – digital-in-progress companies, if you like. In years to come, I suspect we’ll see supermarkets, banks and engineering companies starting to be absorbed into the “digital” economy and fall under the aegis of Tech Nation.

This of course is the big story behind Tech Nation. For “digital” isn’t really an industry sector at all; it’s a recoding of the way we do everything, particularly the way we do business.

Tech Nation brilliantly spotlights the 47,802 companies that already get what being digital means – the opportunity for hyper-flexible supply chains and employment models; digital channels as an instant route to a global customer base; pervasive automation and reductions in fixed costs – but these are just the trailblazers. In years to come, we’ll see millions more companies counted within Tech Nation and, as we do, a leaner, more competitive Britain will emerge.

And the most painful thing about rapid business growth is…?

largeIn my experience, after interviewing hundreds of business owners, the answer would be something along the lines of: retaining the company’s positive, creative energy amid a blizzard of horrific irritations, conflicting options and rank dumb questions.

On the evening of Monday February 23, at the British Library, we’ll be putting this question – and many others – to:

Here are the full details of the next Business & IP Centre Inspiring Entrepreneurs event, as well as videos from previous events; you can follow all the action and tweet your questions on Twitter via #BLGROW

The engine room of the economy: the UK mid-market

Which are the most important UK companies? Is there one segment that contributes proportionately more than any other? Why are we so obsessed with the FTSE 100 and startups?

In 2014, as editor-in-chief at DueDil and working with Investec and The Times, I helped to launch the first Investec Mid-Market programme, which:

  1. Identified and ranked the fastest-growing UK mid-sized companies, the Investec Mid-Market 100.
  2. Created the first ever index of the ongoing health and performance of the UK mid-market, the Investec Mid-Market Index.
  3. Held the first ever Investec Mid-market Summit (which I also chaired), featuring Dunnhumby co-founder Edwina Dunn, serial entrepreneur Sherry Coutu and victorious Ryder Cup captain Paul Macginley.

Read the special Mid-Market 100 magazine, explore the Mid-Market Index and watch the Mid-Market Summit. Or enjoy The Times’ coverage.

Inspiring Entrepreneurs: the Business & IP Centre at the British Library

As the economy reorientates around entrepreneurship – more startups than ever were founded in the UK in 2014; more people than ever are self-employed – so these novice entrepreneurs require support and advice during what can be a difficult transition.

The British Library’s Business & IP Centre is probably the UK’s single most important resource for supporting growing and new businesses. Some 400,000 people have passed through the BIPC doors since it opened in 2006.

Since its formation, I’ve been an ambassador for the BIPC and chaired the BIPC’s “Inspiring Entrepreneurs” series, hosting many of the UK’s most successful entrepreneurs – including the late Dame Anita Roddick (who held one-to-one workshops at the BIPC), Lord Sugar, lastminute.com founder Martha Lane Fox, Cobra Beer founder Lord Bilimoria, many of the new generation of digital entrepreneurs and dozens of manufacturers, service specialists, engineers and designers.

The events are broadcast across the Business & IP Centre’s UK library network, as well as to New York Public Library and via live webcasts. The Inspiring Entrepreneurs series is now sponsored by Barclays.

You can watch many of the “Inspiring Entrepreneurs” series on BIPCTV.

Immigration and entrepreneurship: the evidence

Do migrants soak up resources or contribute to the economy they arrive in? Does the traumatic experience of migration foster a naturally entrepreneurialism or make migrants likely to turn to welfare? In March 2014, a collaboration between DueDil and the Centre for Entrepreneurs produced ground-breaking research into the number of companies founded by migrant entrepreneurs in the UK.

To calculate migrant entrepreneurship levels, we investigated the number of active UK companies whose first registered director (not company secretaries) list their nationality as non-British. The results were astonishing:  are behind one in seven of all UK companies. Their entrepreneurial activity is near double that of UK-born individuals. They are on average, eight years younger than the typical UK-born entrepreneur and, among a number of nationalities, a greater proportion of migrant women start companies than among the UK population. The report gained worldwide media coverage.

In my role as Editor-in-chief at DueDil, I co-authored Migrant Entrepreneurs: Building our Businesses, Creating our Jobs with Matt Smith and Scott Craig from the Centre for Entrepreneurs.

Young entrepreneurs are holding their nerve while their parents fear failure

One piece of data that can strike fear into the minds of government officials is the level of company formations. It may not sound like a stomach-turner, but a surge of new businesses could offer reassurance when politicians are rightly keen to see unemployment continue to fall. Right now, there’s cause for jumpiness.

While the UK saw a record-breaking 526,446 new businesses formed in 2013, our appetite for enterprise may be on the slide. The 2013 GEM Report, the definitive take on such things, shows “total entrepreneurship activity” lower in 2013 than in 2012. It seems that, as the recovery takes hold, fear of failure is rising and we Brits are becoming more risk-averse. Those “necessity” entrepreneurs, who started their own businesses during the recession, are taking flight back to the haven of a full-time job.

Similar trends are in play in the US, traditionally a hotbed of entrepreneurialism. Startup rates there have been declining for three decades. But since 2008, the number of new companies created each year has been outstripped by those dying. It’s pretty dispiriting when we’d assumed we were in a new era of enterprise.

But new research DueDil is releasing today with Enterprise Nation shows an entrepreneurial outperformance by one section of society: the young.

We looked at the number of company formations in 2006, just before the recession, versus 2013, and found that the number of founders who were younger than 35 rose from 145,104 to 247,049 in the period. That’s a 70 per cent rise. The male to female split for 2013 company founders was 74 to 26 per cent. Business and management consultancy, IT, architecture, restaurants, mail-order retail, and “artistic & literary creation” are the favoured sectors for this new generation of entrepreneurs. Notably, more and more young people are also launching companies on their own, rather than with partners or co-founders.

Youth enterprise isn’t just a London trend. The areas that saw the biggest percentage rise in young founders were: North Ayrshire, with a 169 per cent increase between 2006 and 2013; Blaenau Gwent at 161 per cent; the Western Isles, 150 per cent; West Dunbartonshire, 144 per cent; Midlothian, 117 per cent; Merthyr Tydfil, 113 per cent; and Greater London with a 110 per cent rise. By contrast, the Northern Ireland counties of Fermanagh, Down and Armagh have seen a decline in the number of young founders through the recession.

Enterprise Nation’s Emma Jones argues that “young people are turning their interests into a way of making a living and benefiting from the freedom and flexibility that comes with being your own boss.” But might young people also turn away from entrepreneurship as the economy picks up? We may have passed a tipping point. According to UnLtd, more than 55 per cent of young people aged 16 to 25 now want to set up their own firm. Santander estimates that 80,000 UK university students run a business, and a quarter of these plan to turn it into a career when they graduate.

Will they hold their nerve? This is data worth watching.

This article was first published in City AM on September 29, 2014.

The entrepreneurial economy is taking off but we’re yet to realise its potential

At the launch of Global Entrepreneurship Week 2013, Vince Cable announced that “10 per cent of the UK workforce is engaged in entrepreneurship activity.” Then he ploughed on with his speech, leaving the audience wondering precisely what this was supposed to mean.

After decades of being politely sidelined, entrepreneurship is political and economic orthodoxy. Few question that enterprising people, of all ages, should be encouraged to start and grow their own companies; that running your own business is a sensible alternative to full-time employment; and that long-term national prosperity depends on the performance of small and mid-sized companies, not just FTSE behemoths.

But how are we performing as a nation? Is 10 per cent “entrepreneurship activity” a Manuel Pelligrini-like performance, or David Moyes? And are we matching the US’s dynamism, let alone the pent-up aspirations of the emerging economies?

The short answer is that we’re on a long-term upward curve, but driven significantly by the “necessity entrepreneurship” of the crisis years, when thousands were forced out of employment and into fending for themselves. But whether we have fully-adjusted to a new world in which economic activity is driven by individual high-performance entrepreneurs and companies, the evidence isn’t yet conclusive.

Cable’s “10 per cent entrepreneurship activity” figure was based on research into “total entrepreneurship activity” (TEA) from the 2011 UK Global Entrepreneurship Monitor (GEM) report, which identifies the proportion of working age adults who are either setting up or have been running a business for less than 42 months. In the latest numbers, released last week, the UK’s TEA slipped to 7.1 per cent. This is still, however, above the long-term 6 per cent trend.

And the true figure could be much higher. Professor Jonathan Levie of the Hunter Centre for Entrepreneurship at Strathclyde University says that the proportion of the UK working-age population who are intending to start their own business within the next three years, actively trying to start one, running a newish one, or running an established business topped 25 per cent for the first time in 2012. Add social entrepreneurs and “employee entrepreneurs” (people launching new products or services for their employers), and entrepreneurial levels would be higher still.

This passes the hunch test. Brits do seem to be catching the entrepreneurial bug and more than 500,000 new businesses were created in 2013. Young people increasingly want to start their own company. “It’s fashionable now to start your own business,” says Centre for Entrepreneurs chairman Luke Johnson.

There are signs that the economy is loosening, rebuilding around a more informal, entrepreneurial model. According to Nick Palmer of the Office for National Statistics, during the recession, many people turned part-time roles (such as providing gardening services) into fuller-time work. More and more of us participate, in a quasi-entrepreneurial way, in the “sharing economy”, using tools such as Airbnb, Storemates, Liftshare, and RentmyGarden to commercialise our domestic assets. The Royal Society of Arts’ Untapped Enterprise report reckons that 20 per cent of business owners started off by trading informally – a short-term headache for HMRC, but a healthy pipeline for the UK economy.

How is the UK set in a global context? Quite well. UK entrepreneurial activity outpaced Germany and France during the downturn, though we still lagged the US on the TEA measure in 2012 (12.7 per cent versus 7.1 per cent).

Only in Japan is entrepreneurship encouraged more as a career choice, according to EY’s G20 report on the subject. We are even, EY reckons, ahead of India and China in our entrepreneurship culture. (Mind you, it also ranks France top for entrepreneurial education and training.)

EY’s global entrepreneurial guru Maria Pinelli says Britain has all the right ingredients: access to finance, tax and regulatory climate, supportive culture, education. Add in better access to capital markets (offering opportunities to scale) and more co-ordinated support from incubators, mentors, and UK entrepreneurs will be ready to rock.

Self-belief and fear of failure remain our biggest emotional hurdles. In 2012, 43 per cent of the working age population said fear of failure would prevent them starting a business – even though these same people actually see business opportunities. The recession, says Levie, has left a profound “aftershock”. Many still crave the security of full-time employment. But in a fast-changing world, that “job security” may not feel secure for long.

First published in City AM on January 22, 2014.

The world’s barometer: interview with Regus CEO Mark Dixon

With a presence in 100 countries, Regus is a barometer of the global economy: rising demand for the firm’s flexible workspace indicates increased economic activity; a Regus slowdown can spell wider trouble afoot.

Right now, bookings are on the up. Full-year revenues at the FTSE 250 business are expected to hit £1.5bn. Viewed through the Regus looking glass, the world economy is recovering.

More interesting still is the profile of that growth, and the data underpinning it. Regus has just opened new centres in Nepal and Cambodia; Bangladesh is imminent. Recent Regus research reveals that receptiveness to flexible working is much higher in emerging nations such as China, Mexico and Brazil than in mature economies such as the UK and Japan. Unshackled by traditional business models, these dynamic, entrepreneurial economies may be finding an edge in the post-crisis economy,

None of this surprises Regus founder and CEO Mark Dixon. “The problem with the UK, for example, is that it’s still very establishment,” he says, fittingly speaking from an airport departure lounge. “I can’t believe people still ask you where your office is.” He admires American attitudes to business, where entrepreneurs are unafraid to have a go, where everyone is tech-savvy, and where even large corporations espouse virtual working.

Dixon has led the crusade for flexible working for 25 years. Noticing how travelling businesspeople in Brussels had to work in cafes and hotels because they didn’t have access to a decent office, the young entrepreneur decided to start creating temporary workspaces to meet that growing need. In the pre-internet era, when smartphones were a distant pipedream, this required real vision.

Looking back, Dixon admits “we were probably ten years ahead of our time.” While he always believed in his vision of a hyper-flexible world, the technology “didn’t come through as quickly as we thought”. Being the pioneer in its market, Regus took some big blows, including “hitting the wall” (Dixon’s words) after the 2000 IPO and a Chapter 11 bankruptcy filing in the US in 2003.

Having interviewed Dixon on several occasions over the past 15 years, I’m struck by his equanimity: he never got too high, nor too low. In 1999, I sat with him at a grand dinner where, in front of the cream of Britain’s business community, he accepted the “Entrepreneur of the Year” title from Ernst & Young; a few months later, he had to pull the group’s much-anticipated flotation. In triumph and in tragedy, he maintained the same unpretentious nature and dogged certainty that the future was flexible. And, of course, he was right all along.

Already in Downton Abbey’s league as a global success story, Regus’s fire still burns brightly. Its “Businessworld” range, where members can drop in for as little as ten minutes, takes temporary workspace to a new level. While Regus has long appealed to small companies, which value the lower, flexible overheads, big businesses are increasingly turning to Regus as they dismantle their legacy, office-based infrastructure and liberate employees to work from wherever suits them best. Toshiba, for example, has 2,000 individual Regus subscriptions.

The latest innovation is Regus’s “Community Centres”. With more and more micro and rural businesses being established in villages and towns, Dixon reckons these centres (currently running in the Netherlands) will offer better facilities than the local pub or café, help to professionalise these early-stage firms and be a major driver of growth for Regus.

Despite Regus’s reassuring numbers, Dixon is cautious about the wider global economy. “Confidence is improving, but growth is fragile, jumpy,” he says. Activity is still to pick up significantly. “The view seems to be that things will get better; at least we’re not staring into the abyss.”

He believes that five years of recession has brought some benefits. “Recession has become the new normality. It’s put an end to the era of waste and extravagance,” he says.

Best of all, Britain has finally got the message about entrepreneurship. “The fear of having a go seems to have gone. More new businesses are being established than ever before,” says Dixon.  And no doubt, many will base themselves in a Regus office…

This interview was written for, and published in, LDC’s Reflections magazine in December 2013. Pretty version with pictures etc here.

 

 

 

 

 

 

 

Future 50 2013 – the first 50 nominations

I’m running a project, with Real Business and Everline, to identify the UK’s 50 most disruptive, early-stage businesses. We’ve now hit 50 nominations, so it’s time for an update on some of those putting themselves forward:

A major innovation in loyalty cards, focusing on the independent retail sector. Collaborative consumption comes to the pre-owned designer fashion market. Mobile car tyre replacement = bye bye KwikFit. Recruitment disrupter features strongly with one business turning the traditional model of recruitment on its head; and another providing a unique online marketplace to match high-quality interns with corporate employers. The pre-hospital A&E sector is also ripe for disruption, says one nominee. Another is aiming to bring technology to police whistleblower calls. And, three cheers, the estate agency model is being challenged by a well-backed start-up.

Deadline: January 6. Find out more here.

24 hours on, the Autumn Statement looks rather different

There’s a new phenomenon on Twitter, which involves people filming their own reactions to major (usually sporting) events. The 12 hours around Andy Murray’s Wimbledon victory saw 3.2 million tweets, many of which were young men’s Vine posts (short Twitter videos) of themselves leaping around their sitting room.

Had Chancellor George Osborne filmed himself post-Autumn Statement, he too would have been dancing a merry jig.

Politically, this was a big win. After a torrid three years, the Chancellor finally came to the despatch box with positive news. “Britain’s economic plan is working,” he started, continuing with one of the few un-leaked forecasts: that the Office for Budget Responsibility (OBR) actually expects a small government surplus in 2018/19. This, says BBC business editor Robert Peston, will mean the state is reduced to a size last seen in 1948.

BBC political editor Nick Robinson said that “there is no doubt this was George Osborne’s day”. More colourfully, Daily Mail columnist Simon Heffer savaged Shadow Chancellor Ed Balls’ response: “In a Commons response that veered between bombast, irrelevance and self-parody, it soon became clear that Mr Balls was, in fact, releasing the most enormous cry of anguish at having been monumentally wrong on the economy”. So far, so satisfying for the Coalition government.

One day on, the big guns are starting to weigh in. Their verdict isn’t so favourable.

One can imagine the Financial Times economics editor Chris Giles not even listening to Osborne’s statement, so dismissive is he of the political posturing. “Forget the announcements”, he says in his must-read “8 things you need to know about the Autumn Statement – in charts”. The net tax and spending measures, he says, “are tiny compared with the forecasting changes to tax receipts.” The graph that goes with his assertion makes Osborne look like a pinprick on a map of the world.

The other serious economic commentators are also gathering around a consensus. “George Osborne’s recovery is built on sand,” says Jeremy Warner in the Telegraph. He, too, quotes the OBR’s sober analysis: “We judge the positive growth surprise to have been cyclical, reducing the amount of spare capacity in the economy, rather than indicating stronger underlying growth potential.”

City AM editor Allister Heath has consistently said in recent weeks that the UK is enjoying (an awful and appropriate word) the wrong kind of growth. Even the OBR’s upward revisions to GDP growth show this, he says: “of the 2.4 per cent growth that is expected, consumer spending will account for 1.2 points, government for 0.3 points (so much for austerity) and net trade for zero, which is shocking.” He concludes, tartly, with the line of the day: “Osborne has achieved growth – but its composition is not a sustainable basis on which to rebuild the UK economy.”

Put the camera down, George.

This analysis was originally written for Citypress‘s Smart Insights newsletter.