In our increasingly globalised economy, it’s impossible to exist in a vacuum. As we move towards a more connected society, with technology taking us towards remote workforces, global brands and intricate supply chains, companies will need to lean on their tech ecosystem to stay current. By tuning into all the touchpoints in the ecosystem – customers, suppliers, third-parties, employees, investors and even competitors – businesses can detect micro and macro shifts in the market, from the latest tools to the biggest industry disruptors.
In this chapter of Tech Through Adversity, we explore changing relationships within the tech ecosystem.
Economies of scale
The UK tech scene is thriving. In 2019, investment into UK tech companies hit a record-breaking £10.1 billion, fuelled by a rapidly growing digital economy. There are an estimated 270,000 businesses feeding the UK’s tech market, including 1,300 start-ups, 77 unicorns and 95 “future unicorns” – an increase of 27% between 2018 and 2019.
The UK’s scale-up scene is testament to the strength of its digital economy. Scale-ups are companies that have achieved a growth of 20% of more in either employment or turnover year on year for at least two years, with an employee headcount of at least ten. A scale-up dense marketplace suggests that the industry is in-demand and accelerating. And the UK is full of them.
The UK is Europe’s top scaling nation; and with almost 82% of investment going into high-growth, high-productivity scale-ups last year; and this doesn’t look likely to change anytime soon. Now third in the world for tech unicorns, and with a number of potential unicorns in the wings, the UK’s digital economy is both accelerating and maturing. ‘Mega rounds’ of investment over £100m are becoming more commonplace, as confidence in the ecosystem grows and even large, established companies scale at pace.
A more dynamic market is also paving the way for new enterprises. Starting a business is no longer reliant on huge amounts of capital, and today an innovative start-up can easily rival a long-established corporate. The gig economy is the epitome of this mobility – where anyone can work anywhere, at any time, on anything.
Collaboration and opportunity
This hive of activity means that there are now thousands of tech businesses jostling for position in the digital economy. But this doesn’t mean that large, established businesses are getting the thin end of the wedge when it comes to innovation and disruption. This cluster of fast-growing digital businesses may seemingly slice the pie thinner when it comes to customers, investment or talent, but it’s also generative (see Proactivity, Agility and Paradoxical Thinking). Because the world is increasingly technology-driven, innovation and adaptation must happen on an almost daily basis. And more companies investing in tech means that these findings are speeding up, with discovery building on discovery.
This means that the market is both more competitive and more collaborative. Competitive, due to a lower barrier to entry; but more collaborative because more businesses recognise that being one step ahead often means working together.
This is giving rise to a rich, diverse, collaborative community of tech specialists. There are over 58,000 tech meet-ups globally, orientated around active tech communities. In the UK, some of the cities with the highest density of meet-ups per population include Manchester (14%), Cambridge (14%), London (13%) and Belfast (8%). Collaboration hubs, incubators and accelerators are all feeding this trend towards closer tech communities.
As these tech clusters have grown, greater awareness and collective goals have thawed iciness between competitors. Open source software and data platforms are enabling people from all walks of life to contribute to building better products or solving real-life challenges – like the recent coronavirus pandemic. Meanwhile, consortiums enable rival or interdisciplinary businesses to pool resources and share insight for research and development in ground-breaking or emerging tech.
Companies are also increasingly turning to their supply chain and networks to feed innovation and identify new directions of travel in the market. Big businesses are setting up their own seed funds, innovation hubs and challengers to diversify their portfolio and grow the overall tech ecosystem.
In practice, this means that the tech sector is becoming increasingly connected. As decentralised workforces become more normalised (see Flexible Workforces), we may also see individual players contributing to tech ecosystems, and not just corporations.
But, of course, there’s always another side to the story. And that’s the rise of super corporations.
The rise of tech nation states
As the tech ecosystem comes together to join the dots and scale the digital economy, there is a risk that contributions could be sucked into a black hole of big tech business.
When we look to some of the largest tech companies in the world, we see how their magnitude could easily eclipse smaller brands, especially if these brands are feeding into the giant’s ecosystem. With some of the biggest tech businesses in the world already growing at an alarming rate, it is not inconceivable for the innovations of smaller challengers to be swallowed up.
And the ramifications for that are significant. Tech giants Facebook, Apple, Microsoft, Amazon and Alphabet (Google’s parent company) generate $900 billion in combined revenue – greater than the GDP of four of the G20 nations. As a country, it would be the 18th largest by GDP, sitting between Saudi Arabia and the Netherlands. This makes big tech a serious player on the global map.
Technology sits in a crosshair between internationalism and nationalism. Because it is so central to advanced society, it is in global demand. The rise of international businesses, decentralised workforces, and ecosystems are all reliant on technology.
But technology is also a source of national interest and a geopolitical battleground. Cybersecurity is a matter of national interest, while interconnected supply chains can forge new allegiances, or be easily exploited. The UK’s dilemma over China’s role in its much-needed 5G rollout, and the US-China tech cold war are examples of how the need for tech can compromise politics. Tech companies are also increasingly flexing their political muscles – such as Twitter’s recent run in with US President Trump. Tech businesses have the power to transcend borders and unite countries – or set them back.
Covid-19 has heightened the role of tech giants, making them vital in industries like security and healthcare. As more people have turned to tech throughout lockdown, tech businesses have been able to continue at the same pace of investment and acquisitions as the previous year – even as the economy was sent into freefall. Acquisitions are also enabling tech companies to spread their wings in new places. Financial services, for example, has long been concerned about tech giants moving in – especially when Facebook announced its own cryptocurrency last year.
From Silicon Valley start-ups to global superpowers, tech is calling for a seat at the world’s decision table. As the world becomes more reliant on tech – and as tech giants begin to expand into new markets and to capitalise on ecosystems, the power of nation states to say no is waning.
Tech: for better or for worse
Whichever way you look at it, we’re becoming more connected. Interdependencies at a community, national or international level could be what’s needed to level the playing field and move together as one. Naturally, there may be conflicts on the way, countries trying to impose regulations, restrictions or agendas on tech for example, or tech taking advantage of political and tax loopholes; competitors undercutting each other and tech ecosystems where some players are more dominant than others. But when we look to our future, it’s clear from trends in globalisation and immigration, that our future is united. Working out how to share and collectively profit from tech, as we have from our other resources, is the final frontier.
For years, business leaders have warned of the implications of living in a VUCA climate. The words we use to describe the market – high velocity, unpredictable, turbulent, disruptive – all hint at the need for regular adaptation and agility. The coronavirus pandemic is a real-life example of VUCA in action. And it won’t be the last. Change, both small and monumental, is an inevitability we must all be braced for. And technology is the trigger point for this transformation, the architect of its innovation. It is a catalyst and an accelerant.
In our Tech Through Adversity series, we explore how the world of work is changing under the pressure of a VUCA climate – and the role tech has to play. Contact us at email@example.com for more information.