Uncompetitive companies pose threat to future prosperity

uncompetitive companiesA new model of competitiveness devised by academics at Goldsmiths, University of London in partnership with Microsoft scores almost half (46 percent) of UK firms in the lowest quadrant, posing a threat to Britain’s prosperity as organisations rally from the impact of COVID-19, and prepare for Brexit as UK-EU negotiations reach their conclusion that such uncompetitive companies pose a serious threat to the country’s future prosperity .

The research claims that more than half (54 percent) of UK organisations surveyed have seen a decrease in revenue this year compared to last year, with more than one in five (22 percent) experiencing a drop greater than 15 percent. The same proportion (22 percent) had to scrap an existing business model within days of entering the UK’s first lockdown, and 45 percent of leaders surveyed expect their current business model will cease to exist in 5 years’ time – an increase of 12 percent over the past year.

However, the model also suggests minimal, rapid changes that UK organisations could make to existing business models, which would quickly yield a cumulative boost to the British economy in excess of £48 billion – more than the entire cost of the UK furlough scheme. Further, this value is just a starting point based on minimal changes and minimal investment by business leaders – it could grow considerably if organisations drive longer-term investment in competitiveness.

Forming the basis of a new report by Microsoft, Creating a Blueprint for UK Competitiveness, the model incorporates input from renowned experts on competitiveness from Harvard University, the CBI, PwC and the Tech Talent Charter, and utilises data from a survey of 1,713 UK senior decision makers and 2,470 UK employees, conducted in partnership with YouGov. The report also includes practical insights from a range of leading British businesses following sustainable growth strategies, including Admiral and Sainsbury’s.


A hollow victory

As organisations begin the rebuilding process in the wake of the COVID-19 pandemic, the research claims two distinct strategies emerging – Hollow Growth and Sustainable Growth – with alarmingly different outcomes that could impact the UK’s future prosperity.

Firms pursuing a Hollow Growth strategy typically extract as much value as possible from people to reduce costs; offer little support to employees to adapt to new conditions; focus technology investments in siloed areas of the business to solve individual challenges; and benchmark future readiness by traditional productivity measures. Organisations pursuing Sustainable Growth on the other hand, strive to maintain resilience and have a capacity to adapt; adopt leadership defined by empathy and decisiveness; nurture a culture of trust, empowerment and inclusivity; and consider the impact of technology across their organisations as part of their wider strategic approach.


48 billion reasons to change

Economists within the research team led by Dr Chris Brauer at Goldsmiths, University of London estimate that the UK would see an immediate boost to the economy in excess of £48.25 billion if every leader took even basic and low-investment steps to move towards sustainable growth practices. In the longer term, the figure could rise considerably as business leaders drive further investment towards a Sustainable Growth model.

To help put this figure into context, the cost of the government’s entire furlough scheme until mid-August was £35.4 billion. If 10 percent of the total £48 billion figure was used to fund new hires by UK business leaders, it could create as many as 128,920 full time jobs at the average annual adjusted salary rate of £37,428. Further, if those new jobs primarily went to traditionally underpaid populations – such as female and BAME workers and those working outside London – the impact on regional, race and gender pay inequality would be substantial.

Incremental changes recommended with the report relate to the Talent, Technology and Future Readiness dimensions of the new model for competitiveness for the digital age (see Notes to Editors). This includes urgently addressing the gender pay gap and state of diversity within organisations, especially increasing the number of female STEM graduates. It includes speeding up technology transition times by three months and migrating more functions to the cloud to increase agility. It also includes the creation of ‘innovation clusters’ among technically-literate staff to drive in-house R&D at low cost.


Microsoft’s commitment to skilling the UK

In light of these findings, Microsoft is announcing an ambitious commitment to help address the widening digital talent gap in UK industry. By the end of 2025, and working with organisations across industry, Microsoft will help 1.5 million people build careers in technology and help connect a further 300,000 to tech job opportunities.

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]”The nation’s collective competitiveness is being put to the test like never before.”[/perfectpullquote]

Clare Barclay, CEO, Microsoft UK, comments: “UK organisations face a unique moment. Buffeted by the headwinds of pandemic and Brexit, the nation’s collective competitiveness is being put to the test like never before. But can they thrive? Today, we are ringing the alarm bell, as our research reveals that half of organisations will struggle to adapt.

The tech intensity that was starting to gather pace before the pandemic struck has become turbocharged – to keep up, leaders must act decisively and quickly. Small changes in approach to investment, people and technology can quickly boost the UK’s competitiveness, giving our economy the best chance of success in the post-COVID and post-Brexit era.”

Roxanne Morison, Head of Digital Policy, CBI comments: “The UK has a long tail of low-productivity firms which face challenging times ahead without changing their business model to suit the digital age. If we got those companies confident in using cloud, confident in using digital marketing systems, confident in using data, the positive impact on our productivity would be significant.

“But technology cannot be viewed in isolation. As the Microsoft research shows, it must be underpinned by progressive leadership, fair and inclusive talent development and adaptability for future change, in order to build a sustainable competitive advantage.”

Image by Ranya