Many UK business leaders are being lured onto the rocks by Brexit sirens. Experts and politicians are persuading them they are doing all they can in the face of Brexit uncertainty, but it’s a convenient excuse for inertia and a fool’s paradise that was illustrated a couple of weeks ago, when I attended an economic review.
The UK at the moment is in serious trouble – what with Brexit and a government that nobody can fathom – but as always, Britons do the “Keep calm and carry on” thing they are famous the world over for. Now, in principle I’m OK with positivity, I can deal with denialism, but when it turns to delusion it becomes very concerning and I’m witnessing more and more of this lately.
The siren in this case was giving everyone a sugar-coated version – over-egging the positives and not even mentioning the negatives and his audience of SMEs were lapping it up, maybe because they didn’t know better – which I guess was the point of the event in the first place – but in many cases, simply because the alternative would be to face reality! Either way, I suspect many more left the room with the delusion they were doing what was required than arrived in that frame of mind.
The difference between “optimistic” and “oblivious”
Optimism is fine, but if it manifests as failure to address the issues that will bring you to your knees, forget it! The economist here should have been giving his audience a balanced analysis, not luring them onto the rocks. If they don’t know what is happening, they can’t respond appropriately. This performance served only to make them feel better about not doing anything.
One of the guy’s key points was that unemployment, in the region of the UK he was talking about, is at an all-time low. It’s a common mistake of commentators – and this was no exception – to present this as good news. The reality of the digital economy, however, is that low unemployment is a negative rather than positive indicator.
If businesses are increasing their head-count, in anything but the most buoyant market, they are usually reducing their productivity. It’s a matter of record that UK productivity is already poor compared to our neighbours and if you look at recent trends, as unemployment has decreased so has productivity.
Digital transformation and Brexit facts
In the digital economy fewer people are required, than has been the case to date, to achieve the same outcome. The digital revolution is all about doing more with less. You may not like it, but it’s the reality and it’s not going to change. Any organisation that fails to accommodate this will be consigned to history.
If businesses are increasing their head-count it often follows that they aren’t investing in technology and if you look at today’s data you can see this is clearly the case. UK investment in technology is way below that of our neighbours and declining and that means, every day, foreign competitors are extending their advantage.
If we end up leaving Europe without an agreement, goods moving both ways will be subject to tariffs that will force up prices. Digital businesses in Europe will provide a far better and quicker solution to the needs of European customers. More importantly though, their low overhead will ensure, even after tax, their products will be at least as cheap in the UK as those of domestic firms. Consequently, they’ll not only be able to defend their own territory, but the UK will, at worst, represent a level playing field for them.
I meet UK business leaders daily who are in denial about this. For some, it’s the only way they can get through the day, because they know, deep down, their businesses are on a very slippery slope. So, let’s get a few things straight …
The need for digital transformation is real
Firstly, digital disruption is a reality. It’s impacting every business sector and legacy operators are falling like flies. Before Brexit it was estimated that a third of UK businesses we know today will be gone within two years, because they didn’t grasp the nettle and transform. Brexit uncertainly will only increase this figure.
Digital disrupters move fast
A digital disrupter is easily capable of “owning” a sector in a matter of weeks, while it takes a traditional business, on average, three years to be able to compete in the digital marketplace. This isn’t difficult maths. If you aren’t already closing on your transformation when a disrupter emerges, you are likely to be toast … and new disrupters are arriving daily.
Digital transformation takes time
Transformation takes as long as it does because it’s different to “change”. Change is the process of digitising an existing model. This improves efficiency, but most legacy business models are flawed anyway. In fact most of the products and services traditional businesses offer are compromises, based on the limitations of legacy technology. Making the processes that create these products more efficient is often accelerating in the wrong direction and that will usually hasten the organisation’s demise.
There’s no hiding place for traditional businesses
I appreciate it’s a lot to ask, given current Brexit uncertainty, but there’s no escaping reality. Traditional businesses simply can’t compete with those built on digital technology. We all have to transform and, whatever the Brexit outcome, it’s pretty certain UK businesses won’t be able to make up for lost time.
This means three things for legacy businesses.
- We can’t allow Brexit to become an excuse for further inaction.
- Once businesses get their transformation on the road they have to move a lot quicker than has been the case with transformations so far.
- We have to avoid the 70-80% failure rate of transformations to date.
Waiting for Brexit isn’t an option
In fact, UK businesses that are waiting to see which way Brexit goes, are making the most dreadful mistake. Regardless of the outcome in Europe every business will have to compete both in foreign markets and at home against foreign competitors who, we know will be in better shape. Some have argued that if we are not in Europe that digital threat is less of an issue, but that’s definitely not the case. Businesses around the world are engaged in transformation, competitors in many territories will still emanate from Europe and, anyway, disrupters are increasingly emerging from Asia, The Middle East and even Africa.
So, whoever they are competing with, in whatever territory, every business will have to be digital. UK businesses have to leave the politicians to get on with what they are doing with Brexit and concentrate on getting in the best shape to compete in whatever market they find themselves when the fog clears. That means re-engaging with full-on digital transformation and moving faster than any business has so-far done.
What this means for your organisation
Happily, the first step in any transformation will itself bring immediate benefits. These are not, in themselves, going to ensure the future of the organisation by any means. The step-change that is digital transformation is more significant, but it will set you on the right road.
Brand – the essential focus
This first step is brand development. It’s becoming generally accepted now that the reasons our transformation record to date has been so pitiful is that transformation projects have lacked focus. Brands are what give organisations focus. I’m not talking about logos here. Brands are communities of like-minded people. Recognising this and harnessing the incredible power they have to improve efficiency – which is what digital transformation is basically all about – is the key to not only to surviving the digital revolution, but executing fast and efficient transformation.
Moreover, the process of building a brand community is itself highly productive. It may not be “transformation” but the focus it provides will benefit, pretty well, every business I encounter these days. What’s more, if you turn the volume up on this a little, it’s an easy segue into the world of real transformation. It’s therefore an essential component of any business and that’s evidenced by the fact that the world’s most successful organisations are built on brands.
Tackling initial obstacles.
The first obstacle facing business leaders who now realise they need to get moving with their transformation is often knowing where to start. So, if you are in that position and want to explore a few ideas I’m happy to help. Just drop me a line and we can talk.
I urge you not to be one of those apologist executives who, when their business goes to the wall in a few months time, blame it on Brexit. Brexit won’t have been the problem. The only reason your business is likely to go broke is your inaction.
Businesses like JLR are responding as responsible organisations should. They have recognised and learned from their error in pursuing diesel as they did and have moved on with new accelerated development programmes for hyper-efficient petrol engines, superior electric and autonomous vehicles and a new production line in the UK dedicated to building them.
You can do the same.
Phil Darby
August 20, 2019