As I See It

Scotland must accept its role in a global world

Terry smiling headSome of those who gathered at last week’s ‘tech fest’ EIE event in Edinburgh will be re-grouping at Gleneagles this week with two of the sector’s leading lights sure to be the centre of attention.

Gareth Williams, who built and led the travel search engine Skyscanner into a billion-dollar company, is a principal speaker at Entrepreneurial Scotland’s annual conference on Thursday, while Lesley Eccles, co-founder of FanDuel, will be chairing a session. Admirers will never tire of hearing them re-tell their stories.

More than that, they will want to hear more about Skyscanner’s tie-up with Chinese owner Ctrip which bought the Edinburgh company in 2016. Mrs Eccles told Daily Business last week that she is planning a new venture and delegates will be keen to hear if she has more to tell us.

It is extraordinary to think that in less than two years these companies have undergone such profound change, and that change should act as a cautionary tale and a check to some of the hype and expectation that surrounds Scotland’s prospects as a world-beating economy. There is nothing wrong with ambition, and the progress in turning the country into a ‘tech nation’ has been truly magnificent. But there is a need to remain pragmatic and accept what is achievable.

Skyscanner’s sale denied Scotland an anticipated IPO that would have capped one of the most exhilarating business growth stories of modern times. FanDuel’s growth was no less impressive, but it is no longer run by any of the five individuals who set it up in Edinburgh just a decade ago and it is now based in New York. Seeing the headquarters of two independent Scottish companies snatched away was a sucker punch that ‘robbed’ the country in its moment of corporate glory.

Hard as it has been to take, it is not all bad, and the practical realities of these outcomes is not the old “take the money and head for the golf course” story, or a fear of over-achievement. The circumstances that led to both companies surrendering to external forces are rooted in a modern economy that may just be too big for Scotland to take on.

The message so far from Skyscanner, as I predicted at the time, is that the company has benefited from the Ctrip deal, not least in the recent application of Chinese technology to extend its offering to rail services. Quite simply, even becoming a unicorn in a field full of ponies is not necessarily enough to be a world beater.

SkyscannerIt is understandable to want homegrown companies to grow, or ‘scale up’ as we must now call it, and retain control on home soil. When decision makers are based locally they not only feel more protective towards local operations, they also feed the wider eco-system, or supply base. This is true of all sectors, whether it is shipbuilding, banking – or technology.

In days past, the giant industrial concerns spilled work into hundreds of small companies, providing a source of contracts and of ready-made trained labour. Those big employers – Singer, the National Coal Board, the numerous Clyde shipbuilders, Timex – no longer exist. Their replacements  – the computer and semi-conductor plants that arrived in the 70s and 80s – have also largely disappeared.

The new economy has spurned a host of small firms, often employing only a handful of people, but still needing someone to buy their products or finance their growth.

And here’s the challenge: while companies have become smaller – more micro – their markets have become much wider – in most cases global, in terms of competition and seeking out customers.

This puts pressures on the modern SME that didn’t so much trouble the smaller firms of old who could rely on a steady flow of orders from the pits, steelworks, engineering plants and shipyards no further away than the other side of town.

These days, young firms have to look abroad, to Europe, the US and China, and they have to do so quickly.

This adds cost, and requires a sophisticated workforce and particular negotiating skills. It shortens the time available between making the breakthrough and surviving the onslaught of international rivalries. Companies need to be extraordinarily well-resourced if they are to survive the global battle, and in a world made faster by the internet it requires them to be fleet of foot.

The same principle applies further up the food chain where even being ‘big’ may not necessarily be big enough.  It may be regrettable that Skyscanner sold up (as opposed to  ‘sold out’) but it is by no means alone in facing the reality of building a corporate champion in Scotland.

Just look at the whisky, oil and renewables industries, populated by excellent mid-sized Scottish firms, but operating in sectors still dominated and dependent on overseas-controlled multinationals.

Some are making a good fist of it: Wood Group’s acquisition of Amec Foster Wheeler, and BrewDog’s astonishing rise from Ellon brewhouse to sit just outside Britain’s top 100 most valuable brands.

But there are those who expect even the new Standard Life Aberdeen, with £670bn of assets under management, to eventually meet its match and be taken over.

Entrepreneurial Scotland’s plan to turn the country into the most entrepreneurial in the world will not be easy to measure and we may never know if or when we have achieved it. While it remains a worthy ideal it is also the case that however many Skyscanners we produce, there will always be someone bigger, and better armed, ready to pick them off.

It would be nice to think Scotland could build a tech society to rival Silicon Valley, but the reality is that it will probably always be a feeder club to the Premier League.

Instead of letting that bother us we should enjoy doing what we are good at – creating ideas and processes – even if it means having to share them with others.

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