10 principles for a 21st Century UK government

It’s no surprise that the 2017 UK General Election is dominated by Brexit and the associated debate. But the danger is that too much of the rhetoric is based on 20th Century thinking; on a country with an established place in the world and the recent history that defined it. Intolerance in all forms is increasing within society, and this also acts as a catalyst to use existing or outdated modes of thinking. It is exactly at a time like this when political leaders need to consider the future more holistically and cast aside some of their old fashioned assumptions about how the country should be governed. Accordingly now is a good time to lay down some core principles for a new government, for a government that is resetting the agenda for the 21st Century and not living by 20th Century rules.

My top 10 principles for future UK governments are as follows:

  1. Free trade. Now that the UK’s relationship with Europe is changing, it must look to establish comprehensive free trade principles across all parts of the world. The UK cannot afford to be half in and half out of Europe; to be neither fish nor fowl. If it is leaving then it needs to set out a new trade philosophy for the world and stick to it. Whatever the result, the UK should be fighting for minimal trade barriers and pushing to reduce the subsidies that artificially inflate prices for consumers.
  2. Freedom of civil rights. It is easy to forget that over the last few centuries many people gave up their lives to win civil liberties for future generations. This was hard fought. We must remain vigilant at keeping these. Although terrorist threats are real and frightening, we should not sacrifice these freedoms in the face of terrorist threats. After all we have faced worse before, without giving in. This means that we should not give away online civil liberties too easily just because we can.
  3. Technology leadership. Technology is at the heart of every aspect of society. We now need to be the masters of own technology destiny. We need to invest in every aspect of technology across industries and in educating all our citizens. We should aim to be at the forefront of technology innovation and see it as a source of future wealth and prosperity rather than as a threat.
  4. Personal responsibility. There is a growing tension between those people who believe that the state should guarantee ever more benefits to its people, without expecting them to take on more personal responsibility, and those who think that society cannot extend its arms ever further. We need to enable and expect people to take on more individual responsibility and be happy to support the minority that cannot, but that minority cannot become the majority. We need to push personal responsibility onto people, as part of our evolving society.
  5. Reinvention. We should be prepared to challenge existing assumptions around every aspect of government. The pace of change continues to increase and societies cannot survive unless they evolve with that change. We must be prepared to reinvent aspects of society and government more frequently. This includes challenging assumptions around healthcare, education, finance, housing and defence. For example  why should the richest members of society have endless access to free healthcare, when the system is struggling to provide free care for the poorest?
  6. Cradle to grave entrepreneurship. We need to help people at every age to work and be self-employed, and not be dependent on an ever smaller group of large employers and the state. This should not be just focused on teaching the youth to code. It is important to help people create new enterprises though into old age – in other words cradle to grave entrepreneurship.
  7. Lifetime education. The most enlightened and richest employers are encouraging their employees to live in an endless cycle of re-education. Given the pace of change, we need to ensure that all society can live in this way. We need to ensure that there is educational capacity to do this across people’s entire lives.
  8. Financial planning. We need to think much more creatively about how we can afford all the aspects of our society. This includes thinking about how we pay for education for children and care for the elderly. We need to facilitate different ways for people’s work to pay for the choices that they want in their life, whether homes, or pensions or care.
  9. Global integration. Whether everyone likes it or not, our world is getting ever more interconnected. We need to debate and define a system that will work for the next 100 years and not just for today. We need to ensure that we engage with other countries and with the most skilled workers that we need, whilst being able to protect our own citizens. At the moment every government of the last 10 years has failed to debate, define or implement anything sustainable. The people do not believe anything that any government tells them about migration.
  10. Sovereign Fund. We need to build our own sovereign fund to enable the country to take a more long-term strategic view on investments.

These principles need to be woven into any future government’s plans. It is likely that this 2017 Election will be unusually short of policy commitments outside of Brexit, but we cannot allow our governments to just focus on the here and now, and not to take key strategic decisions for our future.

Why are all the innovative “ageing” companies about mitigating pain, rather than delivering pleasure?

Ageing is exciting!

Its just as exciting as adolescence

I know that sounds bloody weird. After all, adolescence sounds like sex, drugs and rock n’roll, whereas for most people, ageing conjures up loneliness, loss of health, loss of friends and often loss of wealth.

Getting old is seen as being a complete turn off.

But actually the business of ageing is very exciting for a number of reasons:

  1. Firstly an older workforce is good for the world.
    1. It boosts national wealth: A UK government study released in 2011 found that increasing time in the workforce by just one year per person would boost the level of real GDP by approximately 1.9%
    2. Productivity rises with age. This has been confirmed by multiple studies from companies including Mercedes Benz, McDonalds and JD Weatherspoon
  2. Secondly older people have more money and spend more and that’s good for everyone – At £320bn a year, the over-50s now account for around 47% of all UK consumer spending, up from 41% in 2003, according to research from Saga and the Centre for Economic and Business Research
  3. Thirdly a huge number of businesses are now investing in making old age more bearable, in areas like in home care, volunteer care, medical devices, healthcare technology platforms, health supplements, DNA sequencing, cloud based medication and behavioural tracking, personalised medicine for chronic conditions and financial services to aid spending controls

I mean look at these amazing companies. What’s not to like? Here’s my list of top 10 innovative healthcare companies who are working to make a difference to people later in life

  1. https://www.counsyl.com DNA screening for the most important moments in your life – helping people understand and navigate their inherited diseases
  2. http://www.babylonhealth.com/ your personal health service
  3. http://www.elysiumhealth.com/ a cellular health support mechanism in the form of a daily pill
  4. https://www.liftware.com/ – Liftware is designed to help people with hand tremor eat more easily
  5. https://www.neurotrack.com/ Developing cognitive health assessment tools to enable early detection of cognitive diseases like Alzheimer’s
  6. http://www.ibm.com/smarterplanet/us/en/ibmwatson/watson-oncology.html IBM Watson uses natural language processing and machine learning to interpete large amounts of data. For example Watson Oncology analyzes a patient’s medical information against a vast array of data and expertise to provide evidence-based treatment options.
  7. http://www.proteus.com/ Proteus Discover helps patients with long-term chronic conditions who are having challenges managing their medications. It enables patients to take their medication with an ingestible sensor which communicates with a patch and so enables physicians to provide data driven advice.
  8. https://www.caresolver.com/ making the world of carers simple and better
  9. http://www.oxfordpm.com/ a manufacturer of medical devices, which is producing 3D printed orthopedic and neurological implants.
  10. http://www.medtronic.com/ which strives to alleviate pain, restore health, and extend life for example with an Insertable Cardiac Monitoring System to detect abnormal heart rhythms.

And this is just scratching the surface! And doesn’t cover the other big guys like Apple, Philips, Samsung, Intel, Microsoft and Google with its new Calico Labs

So why is the ageing industry expanding so rapidly?

Well obviously its because we are all getting so much older. For example in Japan, more than 30 percent of the population is already aged 60 or over. And by 2050 India’s population of 1.6 billion will have superseded China’s, with an associated increase from 100 million aged 60+ to over 323 million

So obviously the costs of keeping us all healthy and alive are increasing exponentially.

But actually its also because the top 5 needs of old people are all about losses, whether of physical agility or mental competence or not having enough money. They are not about having more fun.

The Nielsen Global Survey About Aging conducted in 2013, which polled more than 30,000 consumers in 60 countries found that the top 5 biggest worries for the ageing population were:

  1. not having the self-reliance it takes to care for their basic needs in old age (58%)
  2. losing their physical agility (57%)
  3. losing their mental competence (51%)
  4. being a burden on family member or friends (49%)
  5. having enough money to live comfortably (44%)

In the study the social desires were much less important, for example enjoying active social lives and staying connected with family and friends.

But I am excited as an entepreneur and innovator, because i believe that in future people will take having better health for granted and will expect to continue to have fun, even if in different ways to when they were 20,30 or even 40 years old. I think less imagination has been applied to leisure. Noone is dreaming up Moshi Monsters and Kidzania for people over 60. And of course older people don’t want to be treated like old people, which is why so few brands have successfully targeted them with specific leisure services.

I don’t know what the answer is yet, but i am interested in working one out..

It’s not about the idea, it’s about how you scale.

Everybody’s obsessed with the idea. It’s not just Start-ups, it’s also Corporates. There is just too much noise about how easy it is to launch a new business idea, the whole notion of “lean start-up” and getting to market cheaply. There is far too little focus on whether and how an idea can scale. We live in a world where every idea has 10 competitors, where technology and innovation can come from anywhere. Today it is rarely the idea that is the defining factor in the sustainable growth of a business.

It’s a truism, but no less important for being one, that there has been a fundamental shift in the way business is done, since the turn of the 21st century. The well-established concept of 1st mover advantage may have something to do with this. “1st mover advantage” was initially critiqued in 1981 by Michael Spence and then popularised further by Stanford Business School professor, David Montgomery, and his co-author, Marvin Lieberman. It remains a business school obsession, in spite of various attempts by different people to challenge it, including The Harvard Business Review. Too many people focus on “breakthrough ideas” in the belief that this will guarantee success. The reality is much more nuanced. There are many different examples including Netscape, Overture, My Space where 1st mover advantage did not lead to category leadership. Perhaps more importantly in today’s world, many successful ideas and technologies can be replicated very fast, so the barriers to entry for competitors tend to arrive later, once a company has significant market penetration and not once its idea is in the market. This is all about scale.

In my own experience there is no rhyme or reason for why being the first mover works sometimes and sometimes it doesn’t. For example in the online market research industry, Survey Monkey, was the early player and has established a significant market share on the back of this. Other competitors have followed but none so far have made a dent on its market dominance. Whereas in consumer legal services, a number of early entrants have come into the UK market on the back of the deregulation of the industry, but none of them has established themselves successfully, including Quality Solicitors, which is heavily PE backed. In fact many companies have failed.

The other obsession both in start-ups and in Corporate innovation departments is with finding “a niche”. Obviously having a very clear view of your target market is critical to success, and a scatter gun approach normally fails. However, too often now, business managers are driven to identify micro niches or segments that are “clear market spaces”, but that will never be large enough to establish a scaled business or even get through most corporate innovation pipeline processes. It is critical today to find solutions that work across niches and therefore will scale, because otherwise the business or entrepreneur will flog their guts out and burn resource without sustainable success. After all anywhere between 50% (source RSA 2014) and 90% (CB Insights 2015) of start-ups fail depending on whose research you believe.

So today any ideator or innovator should focus early on about scale. There are 10 questions that you really need to answer convincingly, if you want to scale an idea.

  1. Have you got a product that enough people really want to pay for?

As most business people know, the sooner you put your idea down in front of people the better. Every idea needs a lot of constructive criticism to shape and improve it. But too often this means that the business focuses on the idea or product at the expense of understanding the pricing dynamics. It can be all too easy to create a product that people want to use if it’s free, but don’t want to pay for when you start charging. In other words there appears to be a market for the product but it may not be a sustainable market opportunity. You have to understand why successive customers want to use your product and continue using it, above other competitors. You also have to be sure that there are enough of them, before you can really begin to scale the idea or business. This is a triangulation of product, price and market size that can only be guaranteed once you have been in the real market for long enough.

  1. Have you got a great team that covers all the roles that you need to scale?

New ideas and new businesses rarely can afford many people. So they start with the minimum number of people to launch the minimum viable product. This is sensible and understandable. But as soon as the company starts to taste success and growth, it needs to change. This change needs to happen not just once but many times, as the idea gets used and bought by its first and subsequent customers. When we started eSubstance (later Ink Publishing) in 2000, unusually we had too many of the wrong people on the back of £10m of 3i funding (and others). After a shakeout and 3 years of losing money, we acquired Ink and got the right team and established the right product. We then began to grow at pace and scale the business, but it wasn’t for another 3 or 4 years after that, that we successfully identified the other roles that would allow us to scale properly internationally. The challenge of many young businesses is to find the key people who will really scale the business, as this may or may not be the Founders.

  1. Have you started generating long-term interest in your idea and not just immediate sales?

It’s never easy to generate demand for any new idea, product or business. Often this is because the idea or product isn’t quite right. This puts enormous pressure on the business to make one or two early sales. It’s only once the business has sales that they can start to see which elements of their product are more or less interesting to customers. The problem is that it’s all too easy for a business to get into a routine where it needs more sales to keep going and the only way it can do that, is to sell more of what it has sold already. This hamster wheel can prevent a company from being able to explore where the opportunities really lie and have the time to change the product mix to meet these.

When I took over as CEO of the well-known innovation consultancy, Edengene, which was losing money, the existing management couldn’t see that the corporate venturing market was disappearing. Instead corporates now wanted internal innovation. Just looking for sales opportunities in venturing was not the answer, the business had to reposition and create new demand in a different aspect of innovation.

If a business wants to grow, then it has to find the wider market opportunity and the resources to invest in generating long term customer demand, and not just focus on immediate sales. This is a subtle but critical difference. Every business needs to tease this demand out, but if you invest too early in demand creation then you may not have the product that the market wants and if you invest too late then you may not have the cash and energy to do it

  1. Have you identified and set up the systems and processes that you need to scale?

It’s often difficult to identify the problems that are going to come your way in advance of them happening, but this is what the best entrepreneurs and innovators do. You need not only to identify them but to define and establish the processes and systems that can overcome them so that you are not dependent on manual resolution.

Key issues that require scalable processes include customer service, quality control and financial reporting systems. When you have one or two customers, then customer service is easy to do as you are falling over yourselves to keep them happy, but as soon as you have a sizeable number to deal with, then the systems need to be scalable and automated. Manual won’t cut it any longer. The same is true of quality control. It’s not a problem when you have a handful of customers to manage, but it rapidly becomes a problem, as you seek to scale. Without a clear process to deal with the issues, the business simply cannot scale.

The same issue is true of financial systems. They always start simple, but rarely can accommodate great change in the business model. With the international expansion of Ink, the business became incredibly complicated with 1000’s of small advertisers paying money in different currencies and several different P&L’s. This meant that our financial systems which were fine with a turnover of £10m just couldn’t cope well enough or quickly enough once it was £30m. Soon it could take 6 weeks to get a decent set of management accounts together. This was just too slow and became a massive hindrance to decision making. Then we had to make a huge systemic change which took time and money. We would have done better to have recognised the issues earlier and taken smaller hits along the way to upgrade and scale the systems in line with our rapid growth.

  1. Have you got the finance ready for when you need it but not when you don’t?

Most early stage businesses lack sufficient finance to do everything they want. Hence the ever increasing pressure or encouragement from the business press to go and raise funding of some sort. Often this peer pressure is unhelpful. Raising external finance of any sort is a hugely distracting task and starting too early is generally a mistake. The critical issue is to understand the market and your business well enough to anticipate when you will need funding and focus accordingly. If you don’t have the proof that you have a scalable idea and opportunity, then getting finance will be hard. You are better to keep working at understanding where the real opportunity lies and where you can have a competitive point of difference. Once that becomes clear then raising finance can be a good idea.

I raised £750k for a business, Law in Order, as a joint venture with Kennedy Cater. Our proposition was a white label one stop shop for legal services for large organisations to sell to their customers. It was and is a good idea, but we were too early into the market and couldn’t secure a deal, so we sat on the money. Ironically having the money early, didn’t guarantee success.

Conversely as a larger growing business, you can find that the banks and many other types of investor are crying out to lend you money. Again this can be unhelpful. The question then becomes why do you need the additional investment and / or when might you need it. It is entirely possible that having some funding is a good idea, for example to allow you to acquire a complementary company, but when you have less money to play with, you think more laterally about how to overcome a problem or seize an opportunity.

The answer is to think through how you see the business scaling and when finance will become critical. When you need the finance, then you must be pre-prepared and you must dedicate resource to make it happen.

  1. Have you got a plan for how to scale geographically?

Most ambitious business owners want to grow internationally but if they haven’t done it before they often don’t recognise the difficulties involved. The obvious suggestion is get someone on board who has, but that is not enough. The clue to international scale is how easily your business model can be packaged up and replicated in another country. If the product you sell, the price you charge and the way you sell it, all needs to be very different, then expect it to fail. You have to be able to roll out a similar model to make it work

When we expanded our digital agency syzygy into Germany with limited resources, we had German revenues and customers, but we hadn’t worked out how to get a stable business unit in place. It took a lot of effort and a merger with a German agency before we were able to embed the solution properly.

With Ink, we tried twice to penetrate the Chinese market profitably, the first time without a Chinese partner and the second time with one, but in both cases, we struggled to establish the business, because the model wasn’t close enough to what we did in other parts of the world.

Expanding to your second market requires the diligence of a start-up. You need to know how and where the second market differs from what has worked in the home market and pinpoint every aspect of your model that is different. Only then can you be sure you have a decent chance of addressing the differences and making it work

  1. Are you clear on what your next revenue stream will be?

Some businesses are lucky and can scale past £100m in revenue without having to consider more than one revenue stream, but they are still fairly rare. For the majority, scaling the company will require more than one revenue stream or certainly significant adaptations to the original one.

At Ink, once we had worked out the scalable proposition and business model, namely that we would produce the customer’s inflight magazine for free in return for taking the advertising revenues, we went a long way without needing another revenue stream. It was only when revenues got to £30m and the market got tougher with reducing margins that we really saw the need to focus on alternative revenue streams. This was very lucky because it meant that we were able to scale internationally off one core business model. It also meant that we were able to take time to explore the second revenue stream which became advertising on boarding passes and e-tickets.

Too often businesses that need more sales start looking for alternative products to generate additional revenues, when they should just be focusing on getting the core product positioned correctly for a scalable market. Whatever the business situation is there is a fine line between investing too early in the “new shiny idea” and being over dependent on the established revenue stream. The management need to find a mechanism for continually evaluating this question without destabilising the day to day business.

  1. Are you aware that you will need to review all aspects of your operational model once you start scaling?

It’s all too easy when you start growing at pace to just keep doing more of the same thing based on more revenues and more people. That can work for a while but will come under pressure sooner than you think. It’s easy to believe that if you have achieved good margins in the past, and they weaken, that you can pump them up again, as opposed to recognising that the market may have changed. Self-confidence can be a great thing, but it can also lead to complacency when it comes to changing the operating model.

Those businesses that have made a virtue out of getting rid of the bottom 10% of performers each year do not suit everyone. However, they do ensure that the lifeblood of a successful business keeps looking to outperform others. So it is with the operating model. You have to keep brutally challenging assumptions and looking to replace them with better alternatives.

You also need to cut costs on a regular basis. Every business takes on too much cost in different areas as they grow. Some of this resource becomes ineffective or inefficient. It needs to be cut back. You have to put pressure on people to rethink how tasks are executed and to instil the importance of creating repeatable processes as opposed to slow manual interventions. Once you have a business that is generating £millions of revenues, then you need to recognise that if you haven’t cut some costs in the last 12 months then you need to. You need to be in a perpetual cycle of improving how you spend your money as you grow revenues and costs.

  1. Have you thought of what areas you will need middle management in and how to keep your people productive?

The lack of middle management is a perennial scaling challenge for successful businesses. Too often senior management do not see the need to bring in people who are at least as good as them and ideally better than them, to drive the business forward. It is far too easy to nickel and dime on key staff, but if you hire the wrong people it takes twice as long to resolve the mess you create. It’s a well-known fact that successful start-ups hire great people. What is less well known is that medium sized companies often start to make hiring mistakes and bring on less and less superstars. This is often the result of letting a lack of time dictate how recruitment is done. But successful large companies still maintain rigorous and comprehensive hiring processes. These mitigate against the hiring of weaker people. This is a lesson that every scaling business should remember.

Similarly it’s easy as you grow staff numbers in the 100’s to forget that people perform best in smaller teams. So if you want to continue to have depth in great people, then make sure you rethink how they work with each other. Look to break groups of people into smaller teams. Look to simplify decision making processes that may have become extended and inefficient. Keep the small team ethos alive and make sure that individuals can see how they contribute to the growth of the whole enterprise.

  1. Have you identified and found your partners?

Last but by no means least, successful companies scale by engaging with the wider ecosystem around them. They look to partner with complementary companies and people who can add value to their business. Frequently the real benefit from this approach is that you attract new opinions and thinking into the business. You find new ways to operate and achieve things by learning from other industries and companies.

Partners can and should mean everything from an Advisory Board to a partner network to joint ventures to virtual staff. You may not always see who these partners should or could be, but others often will, so make it easy to collect and listen to external inputs and act on them.

Summary

Every successful business must be based on a solid idea, born out of unsatisfied customer needs and a competitive opportunity, but you don’t need to be original or a first mover to do this. You certainly don’t need a different idea to build a big business, although it can be. It’s more critical that you understand how to be better on key dimensions and then surround yourself with a great team and a well thought through plan. It sounds so obvious but often it’s very easy to forget these truisms in the white heat of innovation and entrepreneurialism!

The Commoditisation of the entrepreneur

I love the world of the entrepreneur. I am one. And I have written about them in my book, Confessions of an entrepreneur, but I do worry that the government and established media are engaged in a frenzy of activity to glamourise and hype the world of the entrepreneur.

Why should I care?

After all the British economy is now performing well, new jobs are being created, men and women are being encouraged to follow their passions, win their freedom from a boring 9-5 existence and create the business of their dreams. This is all good.

I have two problems with this hype

The first is that statistically most entrepreneurs will fail and often with considerable hardship. This is very rarely highlighted in any government or media information

The second is that creating small lifestyle businesses and millions of little start-ups is not going to revolutionise our economy.

My plea is that there is a more balanced debate about entrepreneurialism.

So let’s take these issues one at a time.

Success and failure

The media is turning entrepreneurialism into a commodity. They imply that anyone can become a successful millionaire entrepreneur.

It’s true that anyone can have an idea and become an entrepreneur. It’s easy to start a company, get a bank account, and create a website.  But that doesn’t make you a succcessful entrepreneur. If it did then there would be a lot more millionaires. The Internet has made it incredibly easy for anyone with an idea to start a business. Once upon time having a good idea was a major part of becoming a successful entrepreneur. Now anyone can have a good idea, and those ideas are competing globally and are very very rarely unique. The challenge today is not about can one have a good idea, but about how can one scale the idea into a sustainable business. This is an obvious but important distinction that is rarely mentioned in the press. Most entrepreneurs fail because they run out of cash, can’t commercialise their idea, get fed up with the pressure or fall out with their colleagues. The government and media are not providing any longterm support for the specific companies that have good ideas and are creating value but are struggling to move the business into something more sustainable.

Not all entrepreneurs are created equally

It is good that both the government and the media are encouraging people to start businesses and to give support to those who are. After all the UK needs to create business and jobs, if it is to break out of the debt nightmare that it is in and build a sustainable future for new generations.

But there is insufficient debate about which entrepreneurs should get the most support and why. After all there is a huge difference between becoming an entrepreneur with the aim of building and sustaining a business that employs a lot of people and starting a lifestyle business that allows you and one or two others to live comfortably as a self-employed business person.

The facts demonstrate that the real positive growth engines of the British economy are the fast growing mid-sized companies, who are creating lots of new jobs. From 2000-2013 the number of private sector businesses in the UK grew by 41%, however, 56% of these were in companies with no employees Source Department for Business, Innovation and Skills 2013. This means that the majority of new businesses have zero real growth potential. At the other end the companies with over 250 employees are hardly growing at all. So if we want to make entrepreneurial growth drive our overall economy, we have to be much more selective in how we incentivise the sector. This may not be a populist statement. Hence why politicians are reluctant to talk about it. But it’s true. We need to discriminate positively in favour of the best entrepreneurs who are creating jobs and building our economy.

So what would I stop doing?

For a start, I would not give out random National Insurance giveaways to all small companies, as the government recently did. I am a beneficiary of the recent £2000 NI giveaway, but actually this is too little, too widely spread.

Secondly I would look more closely at how I could deploy tax incentives to help small and medium sized businesses recruit and retain staff as they grow. For the start-ups, I would be encouraging, provide support and some fiscal stimulus, but I wouldn’t get so carried away with the hype.