Press coverage of the recent SE Report described e-commerce as the ‘biggest thing in business today’, supporting 200,000 jobs and contributing £31 billion in sales to the Scottish economy. One expert stated that ‘e-commerce employs roughly double the number of people employed in the oil and gas industry’ (see References).
Based on this evidence, it would appear that e-commerce is ‘mission critical’ to the future success of the Scottish economy – or is it? How accurate are the Report’s findings? Are they robust enough to form the basis of future policy-making in this area? SE have already stated that the Report will have a major impact on future digital policy, with a much greater focus on ‘international e-commerce awareness, advice and support’. Did we not do this back in the late 90’s and early noughties?
Given the claim that e-commerce is critical to the Scottish economy, it is somewhat surprising that no online forum has been set up to encourage industry feedback and comment on what has been described as a ‘landmark, no-nonsense report that gets right to the heart of the issue’. Before committing public resource behind the main recommendations of the Report, should we not be crowdsourcing the collective knowledge and experience of the whole digital supply industry in Scotland? Early soundings, using Twitter, would suggest that there is considerable unease with a number of aspects of the recent Report which need addressed. In response to a tweet enquiry, @scotent replied that the ‘next step is to hear views on encouraging ecommerce, with networking/community events this year’. But what if the actual focus on e-commerce is wrong?
Decisions concerning public sector digital support will have a major impact on the future competitiveness of the Scottish economy. We need to get it right. In our view, the Report’s narrow focus on e-commerce will lead to a concentration of public sector support in the wrong area. There are many other aspects of ‘digital’ that are of equal if not more importance than e-commerce.
We would have preferred to have posted our thoughts on a dedicated industry forum specifically set up for this purpose rather than on our own blog. These issues are far too important to be associated with a particular brand. We welcome open debate, comments and feedback on any issue discussed below or any other aspect of the Report; either using the comments section below or an industry forum of your own choice.
Due to the very wide ranging nature of the SE e-Commerce Report, we will restrict our comments to just three areas:
- Report methodology and headline findings
- Why the focus on e-commerce?
- Recommendations and the Digital Policy Agenda
Report Methodology and Headline Findings
The overall aim of the Report was to evaluate Scotland’s competitive position in relation to the adoption of e-commerce by Scottish based businesses; identify the value and potential impact on the Scottish economy of current activity; to consider if businesses are using e-commerce to maximise their efficiency and performance; and to consider ways in which public sector support for e-commerce could be improved.
Given the dearth of available statistics on Scottish e-commerce, the Report authors (SQW) have done an excellent job at bringing together disparate information from a wide range of sources, using different methodologies and often with different definitions of e-commerce. This is a strength, but also a weakness of the Report.
The Report represents the first serious attempt at pulling together disparate information sources to present a detailed snapshot of e-commerce in Scotland. It does a very good job in this respect. A large number of very interesting and useful graphs, tables and statistics are presented. Whether the evidence presented is robust enough to support the main recommendations of the Report and future policy-making in this area is another question. By SQW’s own admission there are a large number of caveats and assumptions underlying the key findings and recommendations.
It is our opinion that the evidence presented is simply not strong enough to support the case for e-commerce being the focal point of future digital policy in Scotland. For example, taking the headline figure of 200,000 direct jobs and £31 billion in e-commerce sales per annum, SQW state that:
‘these numbers are indicative estimates, to give an idea of the scale of activity. They are based on UK-level data, adjusted for Scotland’s share of UK employees in each sector, as there is no definitive source for such data at the Scotland-level at present’.
We would dispute whether the quoted headline data even gives an indicative estimate. It covers all e-transactions, including EDI. The estimated value of e-commerce sales over web sites is just £8 billion or 26% of the total.
It is the value of web site e-commerce sales that most people will read into the Report, not EDI. By our calculation, the number of jobs supported by web site e-commerce is closer to 51,600 rather than 200,000 – still important but not ‘double the number working in the oil and gas industry’ as claimed by a leading e-commerce expert.
We would stress that the comments above should not in any way be seen as a criticism of SQW. The authors are very open and honest throughout the Report on the methodology weaknesses due to the lack of available statistical evidence on Scottish e-commerce. They have done a very good job at pulling together and analysing what is available.
Our main concern is with the headline data quoted in the press and the exaggerated comments made by some expert observers. In our view, these headline figures and exaggerated claims have negated what otherwise was a very useful Report. It is worth noting that the Report also received mixed press coverage with headlines ranging from ‘E-commerce performance slammed by Scottish Enterprise’ to ‘SE unveils 200,000 jobs in Scotland through e-commerce’. One headline states that ‘Scotland lags behind rest of the UK in e-Commerce’ yet the report states very clearly that in most areas we do not lag behind (see References).
Before committing public resource to support e-commerce, surely we should agree its relative importance to the Scottish economy and whether we are world leaders or laggards? Please let us have an open debate about this; one that is not led by vested self-interest.
One aspect of the Report’s methodology and findings that we do take issue with is the recommendation that ‘it would be worth assessing the feasibility of a Scottish university offering an MSc in e-commerce, in liaison with HEI partners’. As far as we can see, nobody from the Higher Education sector was consulted as part of this research. Why not?
It is worth pointing out, at this stage, that SE’s narrow focus on transaction based e-commerce is in mark contrast to the much wider approach being adopted by other countries. For example, in September of this year, Dublin City University Business School will be launching three new MSc programmes in Cloud Computing, Digital Marketing and Strategy ‘to help equip graduates with skills in high-growth areas and to help tackle Ireland’s ICT skills gap’.
Having been closely involved at the ‘coalface’ of Internet developments in Scotland since 1996, it will come as no surprise that we do consider e-commerce to be important to the future competitiveness of the Scottish economy. However, it is NOT the ‘biggest thing in business today’; nor the most important challenge facing the Scottish economy.
Meltdown of the global financial system, Eurozone crisis and bank relationships would probably top the list of ‘Things That Keep Scottish Executives Awake at Night’. From a policy perspective, the lack of an entrepreneurial culture in Scotland, our low business start-up rate, limited SME internationalisation and a ‘lost generation’ of young people due to high youth unemployment/underemployment have been the major agenda items at recent conferences we have attended including the ‘Business in Parliament’ event and Scottish Council Development and Industry’s Annual Forum.
Even in the digital world, e-commerce is not even the biggest challenge facing Scottish companies today. We have reviewed a number of ‘Key ICT/Internet Trends Reports’ published by leading authorities such as the Gartner Group, the World Economic Forum, Economist Intelligence Unit, IBM etc (see list of references at the end of the article). These have identified a wide range of opportunities and threats including hyper-connectivity; social; mobile; apps; the Cloud; convergence; virtualisation; ‘big data’; consumerisation; superfast broadband etc. E-commerce is seldom mentioned as a key trend.
Our own view is that the single most important digital challenge facing Scottish companies today is how to do business in a world where the customer is in control. The Social Media and Mobile Revolutions have led to a massive shift of power from suppliers to customers. Old ways of doing things are declining in effectiveness. As we have argued on numerous previous occasions on this blog, radical new innovative approaches to doing business are required. The key strategic challenge for Scottish companies is how to become social. Gen C (the connected customer) is demanding that our companies become social businesses – see our previous posts on this topic here.
The rest of the world seems to have woken up to this fact – see, for example, the popularity of leading authors such as Brian Solis, ‘The End of Business as Usual’ and the excellent work of Don Tapscott, ‘Grown Up Digital’, ‘Wikinomics’ and ‘Macrowikinomics’.
Based on the above, it is a legitimate question to ask why did SE commission a Report with such a narrow focus on transaction based e-commerce? Take the Cloud as an example. Recent reports have argued that the world economy stands on the verge of a digital technology revolution built around Cloud Computing. According to various estimates, the Cloud is currently worth $74bn. This is expected to increase to $150bn by 2013. In the UK alone, it is expected that spending on the public and private Cloud could create 226,000 jobs by 2015. A legitimate area for public sector support in Scotland?
In a Social Media era, where the customer is in control, it is rather depressing that a Report commissioned by a lead economic development agency can begin with the following statement:
‘The brief for this commission defined e-commerce as follows:
E-commerce refers to the selling or trading of goods and services online (through web or other ‘digital’ channels e.g. mobile apps) and related digital marketing activities to drive traffic to the online presence e.g. Search Engine Optimisation, web advertising etc.’
As we have stated elsewhere, if we continue to treat our customers like passive sheep just waiting to be driven to our web site, there is a real danger that the sheep will tell us to ‘flock off’.
As leading-edge thinking around the world points to the need for companies to become social; as Gen C (the connected customer) demand social responses, we in Scotland publish reports on e-commerce.
Recommendations and the Digital Policy Agenda
The SE Report makes a number of strategic recommendations including: re-vitalised e-commerce awareness-raising activity; the collection and analysis of regular official statistics on Scottish e-commerce; more frequent and regular networking opportunities specific to e-commerce; strengthening the supply of e-commerce skills possibly through a new MSc in e-Commerce; enhanced support for e-commerce operations in Scotland including the potential of e-commerce site reviews for large Scottish companies, including retailers, and food and drink companies. Scottish Enterprise would, of course, lead and coordinate these initiatives.
We have no doubt that the above recommendations would receive the full support of the e-commerce supply industry in Scotland. Whether the recommendations would maximise the ROI from public sector support is another matter. Should the taxpayer really be subsidising e-commerce site reviews for large companies? What is the economic case for this? Should public money be used to subsidise the sales cycle of e-commerce suppliers?
It will come as no surprise to learn that we would be fully in favour of a coordinated public/private sector approach to raising the profile of all things digital within Scotland; especially as there is strong evidence to suggest that we are falling down the e-readiness league table compared to our main international competitors. (Note: e-Readiness is defined as the ability to use information and communication technologies (ICT) to develop one’s economy and to foster one’s welfare). Countries such as Denmark, Sweden, the Netherlands, Norway, US, Australia, Singapore, Finland and others have a higher e-readiness score than the UK, hence Scotland.
However, we would argue strongly against concentrating public support on transaction based e-commerce. This would be a major mistake and would divert limited public sector resources from other more important issues.
At the very least, a coordinated and integrated Digital Agenda for Scotland should cover the following six areas:
- Social Media/Social Business
- Connectivity and the Cloud
- Internal Process Efficiency
- Web Marketing and e-Commerce
We would be more than happy to expand on these topics at the appropriate time.
We welcome feedback and comments on this post, either using the comments box below or on a forum of your own choice (just let us know which one).
Jim and Alan
PS: Apologies for the length of this post but hopefully you will agree that it raises important issues for the future competitiveness of the Scottish economy. We welcome debate.