Why the old economy is the key to the new [begins] “The eurozone crisis is the biggest challenge that we all face. It is the thing we have to fix, to sort out, to help restore growth right across the world economy,” declared David Cameron this past week. “Speed is of the essence!”
The British public, sick of being trapped in the longest economic downturn for a century and dizzy from the constant Euro bickering, is waiting for the prime minister or some European leaders in Brussels to swoop in, Superman-style, and “fix” the problems. Consider how many times you hear someone say during the course of the week: "What should the government do?"
Sorry folks, it’s not going to happen. Waiting for our politicians to kickstart growth, to create jobs, to stem the euro rupture is like waiting for Greece to announce it has paid off its debt. The game is up. Government has been found wanting in the role of leadership of our financial assets and of civic society.
Trust the people instead of looking to government.
Youth unemployment? Eminently solvable: With 4.8 million small and medium size businesses in the country, and 1 million young people out of work, that's only 20% of the SME's that need to hire one of them to fix that "problem". Can we not come up with an incentive of lower tax or local award or benefit to encourage 20% of the most durable firms in the country to take on a young person? People in their twenties have a natural advantage in business due to their approach to the web: they are digital natives. They instinctively understand the future because of how they engage with the world through their smartphones, social networks and digital games.
But those small and medium size businesses subsidise big business today. yes, you read that correctly: SME's fund the big boys. SME's are forced to pay on time. Routinely big business will give its suppliers 90 to 120 day payment terms. In addition, it was reported earlier this year that Vodafone and Goldman Sachs did "special deals" with HMRC to reduce their tax - presumably due to the leverage they would have to take business off-shore if they didn't. No SME has that ability. They pay tax where they operate; they can't "arrange" their affairs to lower tax or channel it through another jurisdiction.
Why aren’t UK plcs – who are currently sitting on £64bn of excess working capital according to Deloitte – being incentivised to invest in the country’s SMEs? Why aren’t we seeing more innovative partnerships, such as British Gas and AlertMe, VISA and Monitise, or Yell and Trusted Places? If “Goliaths” don't embrace the “Davids”, they will be run over by them and then slowly drift into insignificance. Just look at what happened to Polaroid, a pioneer of photography, or Kodak, inventor of the hand-held camera. The 133-year-old firm, Kodak, struggled to keep up with competitors who were quicker to adapt to the digital era: it filed for bankruptcy protection earlier this year. Polaroid had two near death experiences over the past decade because it failed to embrace digital. How different things could have been if either firm had beaten Facebook to the punch and invited Instagram, a social photo-sharing application with huge momentum, to hop on its back. Instagram was smack dab in the markets in which Kodak and Polaroid operate, and yet there wasn't any dialogue much less a partnership. One of the chief assets that large businesses have is their distribution, and yet many don't leverage that asset for the young digital businesses coming through that need precisely that: reach and scale.
As I argue in my new book, Welcome to Entrepreneur Country: David and Goliath must dance. The establishment and the challengers need each other to drive the deployment of the new technologies and their disruptive economics into the heart of existing industry. That is how high-growth business will re-emerge which will drive the economic engine: by leveraging the digital infrastructure which exists now into the mainstream strategies of the FTSE 250.
Society is undergoing a structural change akin to the shift from horses to cars. Entrepreneurs are building the cars, but they need the corporate highways to gain speed. Those who get to the other side first are the winners. Throughout history, those who embrace change reap the benefits.
Welcome to Entrepreneur Country is available at: https://www.amazon.co.uk