Guest post for EU DigitalSME Alliance
By Eoin Costello, Digital Champion for Small Businesses at DigitalHQ clg
People + technology is not a zero sum game
Picture the scene, it’s the late eighties and I have left the choice of the topic for my final year dissertation at Trinity College Dublin, Ireland to the last minute. I go to the Faculty Office and wait in line to ask what is the latest date I can submit it. Standing there I overhear a lecturer ring in sick and ask that her lectures be rescheduled. A flurry of activity with charts, folios and a giant leather bound calendar book follows as the secretariat at the Faculty Office juggle lecture hall availability and capacity, student course commitments and course codes, tutorial schedules etc to arrive at the best optimised rescheduling of the postponed lecture to a location, time and date that means the minimum number of students miss out.
I realised immediately it was the perfect topic for my dissertation. Over the following two months I coded up what I called the ‘Faculty Advisor’ in the rules based programming language Prolog. Because some of the commands in Prolog are quite obscure I created an English sentence interpreter between the keyboard and the back end system. This meant that the Faculty Advisor could be used by anyone that can type.
It worked, the exercise that had taken the team in the Faculty office almost 15 minutes to complete could now be completed by the Prolog ‘Faculty Advisor’ in 0.3 seconds on the Trinity College mainframe. Delighted, I submitted my dissertation and hastened to the Faculty Office to show them how much easier their lives could become. I booted up the ‘Faculty Advisor’ and asked them to enter any scheduling problem they wished! The person typed in ‘Reschedule prof keating political economy 3pm tuesday lecture“ and in 0.5 seconds (there was a lot of traffic on the mainframe that morning) up popped the optimal reschedule “Ed Burke Theatre, 11am Wednesday, 29th April, 0% student conflicts”.
Bursting with enthusiasm I was somewhat surprised by the angry response “Get that thing out of here, that’s Mary’s job!” and that was the end of the ‘Faculty Advisor’ beyond an academic project. The perceived threat posed by my Prolog ‘Faculty Advisor’ was an early introduction for me to the tension that can exist between people and new technology.
It is clear that we all want the benefits that technology brings, greater productivity, less tedious, mundane work. It has also been proven that digital can create better businesses with higher revenues and better productivity. However we are not always comfortable with what this change means for our livelihoods and our established way of doing things. This is what motivates me in my work as Digital Champion for Small Businesses at DigitalHQ, to help level the playing pitch for SMEs in getting the benefits of digital which big business has. I work to help overcome their mindset challenges so we can enable the largest number of SMEs to leverage technology to compete and earn a sustainable income.
The SME productivity challenge - Lower productivity = less jobs
We all know that SMEs are vital to the European economy, making up 99% of Europe’s businesses and accounting for two-thirds of total employment. So if we are looking for the best way to create local, sustainable jobs then SMEs, which are by their nature more regionally distributed, are the way to go.
However it’s only when businesses scale that they create jobs and wealth and many SMEs have poor productivity growth which is a factor in why few micro businesses scale up to become medium-sized firms.
“Not enough European companies move decisively from the startup to the ‘scaleup’ phase.” European Digital Forum
Patterns of SME digital adoption play a part in this scaling challenge. Despite market volume or business growth opportunities offered by digital, most SMEs keep lagging behind with 37% of employees missing basic digital skills leaving SMEs ill-prepared to successfully navigate the big technology changes coming their way. Until recently in many cases e-commerce was the exception rather than the rule, with less than a third (32%) of SMEs taking sales orders or processing transactions through their website. And of that relatively small percentage of SMEs that have cross-border e-commerce sales, nearly all sell within their own economy.
In Ireland 2020 saw an unprecedented mass mobilisation of digital across every part of our society and economy due to the pandemic. Businesses migrated online, many for the first time, in direct response to the COVID 19 lockdowns. New .ie domain registrations reached their highest ever figure and state agencies in Ireland put record amounts of money into increasing the footprint of digital assets of small businesses (through Online Trading Voucher scheme) and entry level knowledge (Local Enterprise Offices deliver introductory level Digital Marketing & Social Media programmes, some of which I deliver in my county). Surely all of this is a good thing?
Well let’s dig a bit deeper, how are SMEs leveraging these new digital assets in their day to day business? According to a framework created by Ireland’s .IE the digital competences of SMEs span three areas, Communicating (the ability to connect with customers through a website, social media platform, or messaging software), Transacting (the ability to facilitate e-commerce and manage other business transactions online) and Boosting (the ability to use software and digital skills to improve business productivity, analyse customer data, and promote an online presence). Their research finds that 75% of SMEs are E or F grade in Boosting or, what we at DigitalHQ might term, digital growth.
Figure 1 - Ireland’s .IE Digital Health Assessment 2019 for SMEs.
So yes, Irish SMEs have more digital assets than ever before, 87% have at least one digital asset but they do not seem to be reaping the rewards of digital? What’s happening here? Well let’s consider a simple example from online marketing. The cost of having a presence on a global social platform, the Communicating element of an SMEs digital health, is usually done on the “free to use” model. Little or no effort is required of the SME as the starter presence is designed to be extremely user friendly and does not require particular skills to be operated. Job done says the owner/manager to themselves as they click submit and wait for the customers to start contacting them.
However the customers don’t start contacting them and the owner manager becomes disillusioned, “I did what they asked and it’s giving me nothing” is a comment I often hear.
To unlock the potential of online platforms for SMEs the OECD says a mindset change is needed. In the example of social media if the company really wants to gain from its presence on the platform, it needs to increase traffic, reactions, network, impressions– which is as the OECD identifies “a non-trivial task that requires knowledge of the functioning of the sorting algorithm on the platform and the set-up of a media strategy. This can be achieved through internal training or by hiring specialised professionals.” In essence the same amount of time and resources that the business owner puts into managing the traditional aspects of their business, staff, suppliers, operations needs to be invested in gaining the advantages of digital.
The pandemic has accelerated two digital trends - digital adoption and transfer of value
While the rate of investment in digital assets has leapt up so too has the increasing concentration of reach in cloud based providers of business services of all types, from cloud computing to ride hailing, from food delivery to online ordering from Amazon. These all take a bite of varying sizes out of the income of local SMEs in sectors as diverse as restaurants, retailers, IT solutions providers etc. The basics of stock exchange fueled growth demand that value identified in one segment of the value chain be absorbed not just vertically but also horizontally into adjoining market sectors.
For example in the final quarter of 2020 Microsoft’s quarterly revenue surpassed $40bn for the first time as demand for cloud services continues to grow as a result of its direct to market sales of the company’s Azure cloud services, its Office 365 products and Teams. Why use your local IT company when you can do it online with big business?
This acceleration of the ‘Direct to Consumer’ plans of big business is creating a transition from selling through B2B channels to selling directly to consumers in a wide range of products and services from brand name suits to contact lenses, from electrical equipment to IT products and services. This removes a source of income and product variety from the traditional retail and distribution channels of local suppliers thereby reducing their critical mass little by little . And don’t forget the unrelenting assault of Netflix on our local cinema audiences!
Both these trends, removing the local provider and increasing concentration of value in cloud platforms, are only going to accelerate with big businesses like Microsoft’s plans for clouds for industry thus potentially removing the need for local enterprise software companies. Put at its simplest the net effect of these accelerating trends is to transfer value from our local communities to Silicon Valley and the NASDAQ.
If big business is aiming for ‘winner take all’ surely the benefit of being small is that you can innovate faster than them to stay ahead?
We know companies that invest in innovation of all types gain 30% in sales consistently, last longer and are less dependent on sales of aging/obsolete products/services. However as I found when I co-led Ireland’s SME Info2Innovate national programme, on behalf of EEN Ireland for DG Enterprise, our national series of workshops and forums with small business owners established that for many SMEs the innovation equation equals time + money + risk with no guarantee of success = Fear. As a result over 90% of Europe’s SMEs feel they are lagging behind in digital innovation. Given the technology market transitions already underway supported by IoT, mobility, cloud computing, big data analytics and social collaboration this failure to invest in innovation activities by small businesses means that the innovation experiments that will create next year’s income are not happening.
Figure 2 - Growth Aligned Pipeline - If small businesses are not testing ideas and concepts today where will next year’s growth come from?
What did I learn about SME scaling from my Novara Technology journey starting from our spare bedroom to successful sale
After parting ways with my father and the family business as a result of taking opposite sides on the role of digital in our SME (more on this later) I was looking for opportunities. Despite the fact that this was 2000 and the .com internet era was booming, my gut instinct was telling me that the web was not ready for an online jewellery store.
As part of my horizon scanning for what to do next I cast my mind back to what I learnt working as an investment manager on the London Stock Exchange. Fads and frenzies (what Gartner would term the peak of inflated expectations) can pass so rather than get sucked into investing my money in an online store I remember the truism that during a similar mass hysteria, the San Francisco gold rush, very few of the people caught up in the frenzy of chasing the gold prospector’s dream made the money but the much more down to earth businesses that were selling the picks, shovels and gold pans did very well.
Attributes of a scalable business opportunity
For the internet the equivalent of picks and shovels were domain registrations, hosting accounts and data centre services, the infrastructure behind the boom. What attracted me to the business of web hosting as an opportunity was it has recurring revenue, revenue diversity (not overly dependent on a couple of bug customers but income comes from many customers that generate small amounts of revenue), repeat customers (as it is an annual subscription business you knew what next year’s turnover was going to be within a relatively predictable range), has a low attrition rate and is based on repeatable standard offerings to customers (not requiring individual customisation). It was a sector that lent itself perfectly to my love of systems and digital intelligence. However this passion for over engineering was to get me into trouble in the early years of Novara Technology but more on that later.
Figure 3 - Starting out in the spare bedroom of my house to the sale to Digiweb
At the time of sale to one of Ireland’s largest broadband companies for a seven figure sum, Novara Technology had grown to Ireland’s second largest hosting company (overtaking Ireland’s largest telecoms company in the process), had twenty staff, was highly profitable with zero debt and had one of the best staff to sales ratios in the industry thanks to our considerable investment in in-house developed automation software. We were the first in Ireland to implement the 3D Secure standard for payment processing, had excellent staff retention rates and in excess of 10,000 clients (including national and international organisations such as hotel chains, Government departments and some London Stock Exchange listed companies) with our regular surveys yielded high levels of customer satisfaction.
“Novara has continuously been recognised as a market leader for developing innovative applications and top customer service to maintain its position among the top hosting companies in Ireland.” Irish Web Hosting Review
Because we operated in a highly competitive market the capability to successfully innovate was essential to our survival and growth. However our company’s journey was not in a straight line, there were plenty of ups and downs, many of which in the early years were caused by my own mindset. On average the seven year mark denotes the start of a high growth period for firms and getting to that point saw Novara go through three distinct phases, survival, transition and take off.
For much of the first three years we were in crisis driven mode and seemed to lurch from one incident to another. Shortly after year one my business partner left to set up in competition with Novara, then our data centre closed down with 1 month’s notice necessitating a forced migration. We did far too much bespoke work both for our inhouse systems and for clients, which led to a cash flow crisis in year 3 when I had to remortgage the house to keep the show on the road. This critical incident was the catalyst for me to seek outside input and the role of this external mentor was to be the biggest turning point in my mindset as CEO. She helped me to confront the brutal facts - working with her it became clear to me that up until then I had behaved as if the business was a hobby and secondly that hope is not a strategy!
Figure 4 - Novara’s journey through three stages of evolution with the critical intervention of an external mentor in year 3.
Hope is not a strategy - The 3 questions that changed my mindset
The three questions my new mentor put to me were deceptively simple. When she pushed the sheet of paper with her three questions across the desk to me her final words were always to think of value from the point of view of the customer, not myself. The questions were -
In 5 words write down why do people buy from your business and how do your day to day decisions about your business strengthen those factors? - What differentiated us and made us the first choice of our customers was not something I had considered much at that point. I was bogged down in fighting fires and too much non-value add work to know the answer to this.
What is the best way to do what your business does - Have you stood back and assessed if you are putting time and resources into non-value add projects? What is your business doing today that should be kept in-house and what should be contracted out, automated or ceased altogether? - When it came to productivity until then when it came to knowing how best to deliver our company’s services I’d felt ‘I know best’. I’d ‘fallen in love’ with some of our internal projects resulting in bad decisions. Equally I’d felt it was more ‘virile’ for a business to grow absolute headcount, if we didn’t have the skills inhouse we waited until we could afford a full time person or would take out a working capital loan to make the recruitment.
Where do you want to be in 5 years time, both personally and for the business? Where are you now and how will you get to where you need to be? Measuring if we were going in the right direction or not wasn’t something I had considered as I didn’t have many targets beyond making payroll for my staff at the end of the month. I was largely operating on instincts without a clear roadmap. This question helped me create a disciplined framework for knowing if we were going in the right direction.
How the 3 Questions can help level the playing pitch between SMEs and big business
“At the aggregate level, the SME digital gap contributes to increased inequalities among people, places and firms.” 2021 OECD Studies on SMEs and Entrepreneurship - The Digital Transformation of SMEs
Big business has figured out the answers to my mentor’s 3 questions long ago, that by leveraging digital tools, intelligence and distributed work forces it is possible not only to break the lock step between sales and costs but to grow rapidly nationally and internationally. A case in point is Whatsapp which, when it was bought by Facebook in 2014 for approximately USD 16 billion with 450 million monthly users, it only a headcount of 55 employees.
However many of these same tools and practices are equally available to SMEs, witness the great work of my friend Clayton Mooney below in his aeroponic farm in Ames, America (Figure 5).
So how can we try to level the playing pitch between small local businesses and big business, how can we make the awareness of the principles of the exponential organisation the norm amongst SMEs rather than the exception? A failure by SMEs to leverage digital assets will not be sustainable in a post COVID 19 world where there has been a permanent move to a ‘digital first’ approach to buying and engaging with products and services by the majority of consumers and businesses.
In this rapidly changing landscape there will be winners and losers so if SMEs are not just to survive, but to thrive, they need to get smart and agile. And this gets to the root of what we term the Digital Growth Mindset.
Wrap your digital exoskeleton around your business and become Harder - Faster - Stronger - Better
When existing processes are simply moved from an Excel sheet or manual process to a digital service all that happens is that technology is applied without changing the business model or the growth potential of the business. Digital Growth requires becoming an innovative digital first business. The key mindset change is not so much ‘training’ owners how to use the functions of certain online tools but creating a mindset of how can I best achieve the outcome I need, what tool in combination with practices, other tools and team members (both direct staff and remote workers) can achieve faster and more valuable outcomes for my business?
When mentoring small business owners on the opportunity the Digital Growth Mindset offers I use the analogy of thinking of the power loader exoskeleton we saw in the movie Aliens. In the movie we see Ripley's training session with the power loader illustrating how the exoskeleton is a technological complement to human capability and agility, not a replacement. In one short scene it demonstrates how human and technology can combine to maximise the strengths of both for a combined outcome that was greater than the sum of the parts, this is called synergy.
Figure 5 - My friend Clayton Mooney has created a local, sustainable vertical farm with a very small team.
When synergy between your business and digital is achieved you can power up and achieve results that are, as Daft Punk would put it, Harder, Better, Faster, Stronger! If we continue this analogy and consider the CRM system, website or accounts package most SMEs have purchased as their digital exoskeleton then in many cases the small business owner hasn’t wrapped this digital exoskeleton around their business and given it mission critical work to do. If we think of it like the power loader exoskeleton in the movie, the exoskeleton is often still lying untouched in the packaging or is being used minimally to make tea and coffee for the owner and staff. Synergy is clearly not achieved.
Figure 6 - Many SMEs don’t set about achieving synergy with their digital assets to become Harder, Better, Faster, Stronger!
However I understand how many small business owners are wary of the powerful technology they have at their fingertips. As I mentioned earlier I gained first hand experience when I was working for my family’s jewellery business of the challenges for small business owners in changing to a digital first mindset. As I outline in my TEDx talk I joined my father to help grow the family business to three locations with a small wholesale business. From my Trinity experience I was full of ambitious ideas about making digital central to our business model, from my time on the London Stock Exchange I had exposure to the principles of scaling rapidly.
The digital generation gap
I have huge respect for what my father achieved in business. Where we differed was that he was more of a traditionalist. He liked to keep the main elements of running the business in his head. He liked to be onsite in each shop as much as possible, be central to many of the day to day decisions, to cultivate personal relationships with individual customers etc. On the positive side this meant that our business was highly regarded with superb customer service, on the downside, as the technology is not available yet to clone people, it meant that the business was excessively dependent on him and not scalable nationally.
After a number of years of repeatedly pressing my father to invest in a digital exoskeleton for our businesses including electronic point of sale systems, a computerised accounting package, websites for our shops etc, it came to a breaking point. We were getting squeezed by the ever increasing rents of the shopping centre owners where our stores were located and digital offered a way to maintain our profitability. We sat down for a crunch meeting where I outlined that if we didn’t start investing in digital to help run our business in a way that it could scale, I would be forced to go my own way.
He thought about it for a couple of moments, paused, and then wished me the best of luck with my new direction! We parted amicably and I cashed in my chips becoming the first business in Ireland to sell one of its physical premises to go online!
Figure 7 - Me outside our Cornelscourt branch that we sold to enable me to set up the tech business.
So what is the Digital Growth Mindset? It’s about achieving synergy between your digital exoskeleton and your business!
Lack of skills for strategic planning, the absence of measurable objectives and unclear assessment of resources needed reduces the ability of most SMEs to achieve the level of synergy with their digital assets that can yield high rates of return.
Our goal is to help SMEs achieve this synergy. At its most basic the Digital Growth Mindset is very much aligned with the 3 questions my mentor put to me at that crucial point in Novara Technology’s evolution. It’s about understanding what value customers get from your business and then delivering that as effectively as possible by embedding digital capability and agility in your business using a four step process.
Step 1 DIFFERENTIATION - Understanding from your customers point of view your basis of adding value. - This helps inform the work of keeping your business the first choice of your customers and ahead of the competition. This is the main job for you as the owner manager and your core team, that of concentrating the limited resources of your business on maximising value in your areas of greatest differentiation.
This clarity of purpose about the sustainable value proposition for your business is essential and if ‘we’re the local choice’ is the best value proposition you have I’m sorry to say it’s probably not sustainable and you may have stormy seas ahead of you.
Because value is defined by paying customers, understanding your points of differentiation is about seeing your business from the “outside-in”. The starting point for this is understanding who you serve i.e. who your sweet spot customer is (don’t worry, you can have multiple customer personas) and asking these sweet spot customers for validation of what constitutes ‘value’ in their eyes.
The way we did this at Novara was to regularly ask customers to rate in order from 1 to 10 the reasons they chose us, this yielded a customer value hierarchy. Those factors that were in the top quadrant of our customer surveys became our ‘Clinchers’ which formed the basis of our value proposition and was where we put most of our effort.
Figure 8 - The Customer Value hierarchy exercise in action for our enterprise centre in Dún Laoghaire
Those below this quadrant were ‘Threshold’ where we made sure we were at least as competitive as the industry and those in the bottom quadrant we termed “Nice to Have” which we usually eliminated over time.
Step 2 - PRODUCTIVITY - What is the best way to sustainably deliver your value proposition
As Klaus Schwab says we are entering an era where social and creative skills will be paramount and the development of novel ideas will be essential to business growth. Therefore once you have a clear understanding of the value proposition of your business from your customers’ point of view, the goal of step 2 is to figure out how to deliver this in a way that your most valuable resource, you and your core team, are in a position to put as much time and effort as possible into working on your business rather than in your business.
This means using the best choice of digital tools and resources at your disposal to remove any non-value add work from your core team. This can be achieved by maximising sales through using digital to transform processes and business models while minimising costs by empowering workforce efficiency and innovation.
Figure 9 - The goal of step two is to put your core team in a position to focus on constantly reinforcing your value proposing through design led innovation
Earlier I highlighted the negative aspects of cloud platforms (that they are potentially coming to eat your lunch) but now is the time to focus on their positive potential. Cloud apps for your vertical offers your business cost effective access online to help streamline your processes through extra processing power or storage and, in the case of sector specific apps, to learn from other people's mistakes without having to make them yourself.
So the Step 2 question then becomes which activities in your value chain should be:
Delivered by you and your core team.
Should be outsourced.
Can/should be automated or built into functionality available via your website.
Should be phased out altogether.
Step 3 - MEASURE - Energy flows where attention goes
One day in Novara Technology no orders had been processed on our website by 10am so I asked our web services team if anything on our end might be causing this. It was discovered that our order processing application was malfunctioning, who knows how many orders we lost! So once you have a good sense of the ideal composition of how you will run the activities of your business the next step is to identify how you will know if all the parts are working together, i.e. are you successfully creating synergy.
The outage of our ordering system was the impetus for our work on creating what we called WeatherEyes (the dictionary says this describes a state of “constant and shrewd watchfulness and alertness”). I got a book from the library called "The Visual Display of Quantitative Information” by Edward R.Tufte and set about designing screens that we put up in our main work areas displaying the KPIs that told us all at a glance in real time if the business was having a good or bad day.
These weather eyes made the elements of value visible to our team (both our core onsite team and our consultants). This visibility created synergy between our team and our digital workforce such as our website, ticketing system and our ecommerce ordering process.
Figure 10 - Energy flows where attention goes - One of Novara’s weather eye screens which displayed on overhead screens and were key to coordinating effort and monitoring the quality of our services.
Step 4 - AGILITY - The only constant in business is change.
Once you have worked through steps 1,2, and 3 that’s not the end of it, this is a live system that needs constant alertness and fine tuning. Andy Grove reputedly said you can’t suddenly start experimenting when you realise you are in trouble unless you have been experimenting all along.
SME businesses need to achieve a sensible balance between business as usual and innovation/change. Too much change at once and Novara could have gone back to the crisis driven culture. Under step 4 you as the owner manager will be constantly monitoring the dynamic tension between where you are now and where you need to get to.
The inputs you will need for this constant fine tuning include input from what your customers surveys are telling you, what direction your industry is going in, the results coming in from your innovation funnel etc.
As part of our move from the survival phase to transition I put in place a number of simple mechanisms to help us see constant controlled change as part of our culture. We had a weekly Interesting Facts sheet printed and circulated internally in which staff could input snippets about industry trends, customer feedback (both positive and negative), information about competitors, upcoming technical upgrades, new processes or procedures etc. The best Interesting Fact as voted by everyone received a prize at our next Monthly Information Sharing Forum.
This monthly meeting was created to monitor our main KPIs and facilitated an open discussion on anything that needed to be changed. The final element of our move to an innovation culture was our Biannual Strategic Review Day which was a team building offsite day with the title “Pursuing our Strategic Objectives”. A core part of the day was when each of our operational teams pitched ideas and proposed projects that could advance one of the three strategic objectives for Novara Technology, namely profitability, quality and “future proofing”, with a prize for the best in each area.
Figure 11 - The Digital Growth Mindset’s four steps of Digital Growth
CHANGING BEHAVIOURS - What’s out of sight stays out of mind!
If you ask a small business owner what they monitor each day in their business they talk about checking in with their staff, keeping in touch with their main customers, watching their cash flow. All important things to monitor of course however they rarely mention checking in on how their digital assets are performing.
To help small business owners change this mindset we encourage you to think of the investment you have made in digital as employing an ‘invisible workforce’ for your business. If the thought of your expensive digital assets being asleep on the job doesn’t get you motivated then try another mental image. Imagine looking out your window and seeing all your competitors doing laps around your business in their digital exoskeletons! Just because you are reluctant to embrace the digital growth mindset doesn’t mean your competitors won’t!
FIGURE 12 - When I ran Novara Technology I had two images on my desk as forcing mechanisms motivating and reminding me to check in on our invisible digital workforce!
A side note to the EU - Why the future needs to be local and distributed
“Rural areas are the fabric of our society and the heartbeat of our economy. They are part of our identity and our economic potential. We will cherish our potential of our rural areas and invest in the future” Ursula van der Leyen President of European Commission
At DigitalHQ we believe that in the next decade small businesses will no longer want to go to work in business parks, industrial estates or city centres because their staff don’t want to be there. They will instead locate in the dense ecosystem of supports and resources that towns can provide. As part of helping make this new future happen our mission is to convert empty space in listed buildings into vibrant remote working hubs that attract digital businesses to the heart of town centres.
This will benefit traditional SMEs who need the footfall of innovation driven SME owners and staff in their locality for the sustainability of their businesses. Another more subtle benefit is about culture change. The pace of technological change is so rapid that some small business owners are experiencing learned helplessness and are opting out of digital growth due to a perception by the small business owner of "too much change in too short a period of time".
However having innovation driven SMEs in your locality can be an antidote to this. Having digital natives drop in to their local businesses for a casual chat and sharing insights on getting business from digital is at the heart of our “Digital First Communities” model. They mention a pilot of some new digital app that they are looking for local small businesses to test out.
Furthermore we know that for every job that software eats research has shown that 2.6 new jobs are created. Imagine if during that chat over coffee the traditional business owner mentions that they feel bad that they need to let a really enthusiastic staff member go due to their reducing headcount in the shop as a large percentage of sales is now done online. This is music to the innovation driven business owner’s ears who mentions that they are looking to take on digital apprentices to meet the growing demand of their business, she asks how soon the person might be available?
Creating a fusion between traditional businesses and innovation driven SMEs
This imagined conversation illustrates the fact that we must seek to create a fusion at the most local level possible between traditional SMEs (the dry cleaner, the bakery, the tour guide) and Innovation Driven SMEs to help future-proof traditional small businesses in their localities. We can support sustainable jobs in our communities by creating pathways locally that support the process of assimilation of those leaving traditional jobs to enter future jobs in an organic, sustainable way.
Figure 13 - Creating fusion between traditional SMEs and Digital SMEs at the local level can create long term sustainable jobs in rural communities.
To help keep value within localities we need ecosystem-based digital first communities across Europe. If we agree that remote working at scale can revitalise rural areas then the concentration of economic power in the MNCs, Silicon Valley and the NASDAQ, which continues to gather pace, we must see a strategic response from the European Union. Unless we act we may cast our minds back to1990s for a parallel of a possible future for our localities, a time when major retailers moved their premises from central locations to out of town, car centric mega parks that reduced footfall to the small town centre shops. The resulting hollowed out ‘doughnut’ towns saw a transfer of value from small businesses to national and international big retail corporations resulting in fewer quality jobs in the locality and a decline in local economic vibrancy.
The role of localities in facilitating the migration of jobs from traditional to digital sectors
We believe that the European Union needs to empower local and distributed centres of employment which will enable small communities to retain tech talent in localities and enable SMEs to better compete for that talent. When an owner/manager is choosing a base for their digital SME the perceived density of networks and supports plus the availability of suitable talent in an area are key decision factors. Equally a question that people building their careers that might work for a digital SME ask when deciding where to call home and raise their family is - ‘What if the job with Company A doesn’t work out, within a reasonable distance how many other opportunities are there for my skill set?”.
Therefore it is clear that there can’t be just one ‘token’ digital business in a locality. A key part of deciding where to build their career for digital natives/tech talent is driven by the availability of Plan B options hence an ecosystem of innovation driven enterprises needs to be fostered at the local level. Based on our work to date at our DigitalHQ digital growth living lab we see this as the job of what we call a Digital Growth Hub, an engine for local growth.
There are other benefits of innovation driven SMEs locating in regional locations. These SMEs can revitalise vacant buildings. Our digital growth living lab in Dun Laoghaire is located in vacant space in a 19th century listed building. When I was growing Novara Technology we located in what was then a run down 3 story building in a ‘past its best’ part of Dublin city centre which we helped rejuvenate.
Another is the creation of significant spillover benefits where the knowledge of digital talent permeates the local traditional businesses and which cumulatively at the macro level can reduce an economy’s dependence on a small number of mobile MNCs for economic growth.
We need to create these symbiotic relationships between the locality, the traditional small businesses and the innovation driven SMEs to maximise the best distributed use of the fabric of our countries. With support and leadership from the EU many localities, from neighbourhoods and villages to towns and cities to nations and regions can start to take an uber-local grassroots up holistic approach to creating indeigenous engines of growth at the heart of their communities as they begin to reimagine and remake their futures.