Over the past couple of years I have been fortunate enough to have worked on projects related to the Government's Digital By Default initiative - see HERE - and also witnessed the effects of Broadband Delivery UK's (BDUK) £100m Connection Voucher Scheme (CVS) - See HERE. Putting these experiences together with those I have as an Internet entrepreneur results in this "Policy Pentagon – The Five Forces That Create a Successful ‘Tech City’". As denoted in the centre of the pentagon, the target of UK digital policy should be to: promote jobs, enterprise growth and economic prosperity. Successfully harnessing the forces operating in these five areas will deliver these things. Here is a brief outline of my presentation notes and my assessed scores out of 10 for how well the UK is doing right now in national policy terms:
Force No 1: Digital is a 'Hygiene' Factor
This event is called the ‘Tech City Summit 2014’. But all too often high profile policies on ‘Tech Cities’ substitute for UK Digital Policy. It’s almost as if the sexy bits of digital, i.e. the (very few) young people who make their millions from digital start-ups, are proffered as a sign post for the UK’s digital success. In fact, practically all aspects of the UK economy will be impacted by digital technologies. Over the next decade hi-speed broadband connections will be as essential for business success in all sectors of our economy as having a safe place to work. Two mega trends are the reason for this: The Internet of Things – where more and more inanimate objects are reporting back to the Cloud on how well they are performing the task that humans have set for them; and, the ‘sharing’ or ‘collaborative’ economy, where digital connections make it easy to share the value of human and physical assets. Money Week Editor, Merryn Somerset Webb, writing in the FT (26/4/14) estimates the value of the ‘sharing economy’ to UK consumers in 2013 at £4.6B through the use of such sites as Parkatmyhouse, mondaytofriday, zopa, Uber and Airbnb (the latest fundraising rounds for the last two valued the web properties at $18.5B and $10B respectively).
Score 7/10: Digital By Default is the government’s transformation of public facing transactional systems. The Coalition has rightly recognised hi-speed Internet as an economic priority for Britain. But the structure of the broadband market with a powerful BT at its Open Reach centre is bad for Britain and is slowing the roll out of fast internet to business.
Force No 2: VC Money Backs People and Propositions
In the digital space, venture capital money backs people and propositions (rather than mere technology) who ride the latest digital themes. Right now these are: mobile, location, social, health and productivity. In many cases technological advantages are short term and ephemeral. Whereas the combination of a good proposition and competent people can pivot towards success as they roll out their business and face the reality of market forces where rubber hits the road.
Score 8/10: The UK is blessed with great financing options for all types and sizes of business from traditional bank support (yes it's still out there), VC and crowd funding to an AIM listing and City restructuring. Several government schemes are also good for start-ups. But the Technology Strategy Board still backs technology-led bids with its millions in government funding. This is sub-optimal and must change.
Force No 3: Policy Accentuates Scale and Managing on the Margin
One of the most important lessons of business management is that success is a result of making good marginal decisions. (see also: “It’s the NUMBER of decisions Stupid!” HERE). These are the everyday judgement decisions that from an analytical point of view are not clear cut – they could go either way. Often they deal with boosting relationships and cash flow. Together with a business’ ability to scale getting more of these decisions right is a recipe for great success. A national digital policy that helps support its business people with coaching, mentoring and training in these areas will reap big rewards.
Score 5/10: This is an under-appreciated aspect of UK national digital policy and the government has it only half right. Too much emphasis is placed on finance and 'hard' factors like office space rather than the softer but critical support aspects of growing a business. Some of the major tech firms in world started in their founder's garages. At the critical time when they were formulating their initial propositions they didn't need an 'office' - they needed any space where they could think and collaborate. The number of companies newly registered at Companies House may well be at record levels but the percentage of these that register for VAT is lamentably small which indicates turnovers don't meet the VAT threshold and are either dormant or one person operations. To reach an enterprise growth tipping point, UK start-ups must scale.
Force No 4: Avoids Form over Substance
By its very nature crafting a UK digital policy is a political process. Vested interests have to be assuaged and coalitions formed. Yet this should not mean that form triumphs over substance. Neither, because the digital universe tends to be governed by short form communication (140 characters the norm?), does good public relations act as a substitute for well thoughtout policy. The Labour Party's decision to support London Black cabs against the sharing economy Uber App is a case in point. Suppose this world changing Internet start-up was started in Britain as a result of UK digital policy. Would the Labour Party still feel the same way? One of the best ways that digital policy can help start-ups scale is to offer them operational gateways to resources that can achieve this. Linking up with low cost 'coding locations' in other countries (Hyderabad? Belarus?) can help UK start-ups follow well-trodden paths to turn their intentions into reality.
[NB: At present, England's schools lag in the teaching of maths thought to be an essential basis for good coding but rank highly for international 'problem solving'. The Indian state of Andhra Pradesh (now with Telegana) produces 250,000 engineers coder graduates a year! Has the UK lost its international competitive advantage in this area? The UK often leads the way in coming up with creative solutions and ideas which other countries capitalise on commercially. UK Digital Policy should not allow our Internet entrepreneurs to fall into the same trap.]
Score 5/10: Current digital policy for start ups is focused too much on the ‘Tech City’ concept in east London. The whole of Britain needs to be included in national policy if we are not to perpetuate the north-south divide.
Force No 5: Localism is the Political Currency
Even if any future government is to extend the Tech City concept nationally, geography matters since global capital follows local policy. The number of multinational companies returning to UK shores as a result of corporate tax changes evidences this. In formulating national digital policy ‘localism’, taking political decisions at the level closest to the communities affected, matters. In the UK, most digital policy decisions are best made at unitary local authority level. One important aspect missing from current central government initiatives is getting local councillors involved in creating the relationships with towns and cities in foreign jurisdictions that can help UK businesses scale. Traditional ‘twinning’ schemes between UK and overseas local authorities may have had a bad rap. But similar arrangements that help build markets and structures that encourage UK entrepreneurs to build profitable relationships should be part of national policy. In fact local twinning schemes and active participation from knowledgeable local politicians can help build the operational infrastructures and markets that local entrepreneurs can capitalise on.
Score 4/10: Far too much of the UK’s current digital policy is run from central government departments or through quangos (quasi non-government organisations). Local councillors in many parts of the country have their finger of the pulse of local business (many are in business themselves) and should play a bigger role in developing their local economies. The Prime Minister should take local councillor delegations and entrepreneurs with him to India when he visits newly elected Prime Minister Mohdi.
Download a PDF copy of the Policy Pentagon here