Surviving the fourth industrial revolution
Large businesses are anything but early adopters of technology. This conservatism is standing in the way of productivity improvements in the UK
The McKinsey family hailed from the Scottish Hebridean islands; the Mackintoshes from Inverness. I’ve been trying to find out why 18th century Scotland became a two-speed economy with deeply contrasting standards of living between the prosperous Lowlands and my own Highlands and Islands.
The most scholarly appraisal of this matter is found in an essay on Scottish Gaeldom by Professor Sir Tom Devine. “A key difference between the two societies was that in the farming districts of the Lowlands, the population were prepared to work with the new agrarian regime,” he said.
But three centuries on, it is the McKinsey name on the latest CBI report to provide us with facts demonstrating an adoption gap between the UK’s businesses and other national economies.
Are we not prepared to work with technology and new management practices? Is our productivity performance a symptom of this conservatism? Will our standards of living slip when compared to countries quicker to take on-board a new digital regime?
From my own observations and experiences of selling technology products and new practices in the UK and around the world, the UK certainly has a problem – but I can also see a solution.
If we look at IT procurement through two lenses – B2C and B2B – no one will suggest that in our private lives we’re not quick to adopt mobile phones, cashless payments and music downloads. But I would suggest our large businesses are anything but early adopters.
Around 50 per cent of IT spend in the UK is contained within the financial services industry and in government. Both are challenged in behaviour and by budgets.
Government has adopted a broad strategy of building tools [using open source] rather than buying commercial-off-the-shelf tools. But how many of us build our own vacuum cleaners?
And our banks out-source a greater proportion of their IT work to services companies than our US and European neighbours do. These contracts remove any need to invest in better tools or practices from the decision-making process.
Is this a part explanation for particularly poor productivity performance in government and financial services?
Another consequence of reluctant adoption of technology and management practices is that the growth prospects of the UK’s IT industry are being cramped – both for product makers and service providers. If a UK IT entrepreneur was to focus entirely on the UK market, it’s probable that he or she would grow their business at a more modest rate than their peers in countries like France, Germany and the USA.
The route to high growth is often reliant on exporting – but our ambitious wannabe scale-ups will most certainly attack international markets with much less domestic trading momentum than their North American competitors.
The most extreme reaction to frustrated home market success is when UK businesses effectively become US businesses, investing in R&D and hiring more people outside the UK in order to pick the lower hanging, more IT enlightened opportunities.
That’s never better than having vibrant UK international businesses with solid revenues and profits at home.
So, what can be done? I consider the fine work commissioned by the CBI and researched by McKinsey to provide the ammunition to SMEs to promote the productive advantages for their products and services. It’s a rallying call to corporates to invest – and save. And we all need to be as creative and innovative in business as we are in our lives at home. GIVE (British) SMEs A CHANCE!
Let’s be a little less conservative, a little faster to adopt and get ready to survive the Fourth Industrial Revolution.