Business 2020

Business 2020

THE SUFFOLK SMALL BUSINESS PROJECT

There is a danger, when approaching a review of a small geographical area, of neglecting the wider economy in which that area operates. Small Business in Suffolk operates in a wider national and international economy. The UK economy is quite open, with a significant percentage of GNP being derived from international trade. Suffolk is no exception to this rule, both in physical terms (with the location of the Haven Ports at the gateway to Europe), and in terms of intangibles through the development of an ICT sector within the county. The purpose of this essay is to examine those larger, global, trends that are likely to impact on Suffolk Small Business out to 2020.

In examining this question, we ought to start with what we feel have been the key drivers in the world economy for the past twenty years. There are two key drivers that merit our attention – the technological revolution and the expansion of market economies.

It is easy to see the technological revolution in terms of computing – with both the development of smaller and faster hardware combined with the development of increasingly complex and sophisticated software – and telecommunications, with the development and expansion of the Internet as a business tool. However, we feel that it is something of a mistake to rely solely upon a technological focus.

We are of the view that the area of revolution lies in the transformation of business processes that the technological advances have enabled. We can now talk of flatter and leaner management processes, “just-in-time” inventory management systems, and customer focussed CRM systems. The point is that the technology has enabled us to do things differently.

The technological revolution has given rise to five key and novel features of the modern business environment:

1. Faster and leaner production processes. This means shorter design cycles,

shorter production cycles, shorter marketing loops, and shorter pricing cycles.

2. Alliances galore and long value networks. New ways of working are being

developed in order to get things done. Partnership chains are getting longer.

Networking is the key to developing these chains.

3. More services supplied over longer distances. There has been an increase in

the variety of services offered. It is now common for services to be traded

internationally, and even between continents using the Internet as a vehicle to

provide the service.

4. Businesses can reshape themselves from the ground up. The new technologies

have allowed us to craft a detailed message, which can be delivered to

thousands of recipients, at a miniscule cost of delivery. It means that:

i. Companies can outsource their non-core areas.

ii. The supplier-producer-customer chain can become seamless.

iii. Companies can undertake service offerings tailored for each

individual customer.

5. New product and service ideas. E-commerce continues to grow in size and

scope. It means that products can now become more like services. It is now

routine to give things away as a free sample.

There are three further implications of technology lowering the costs of doing business. First, it has paved the way for the low inflationary environment that was first seen in the late 1990s, and which continues today. This is quite important as a backdrop against which business planning is undertaken. Second, it has lowered the threshold at which businesses can become global players. Relatively small businesses, armed with an effective web site, can now project themselves on the global stage. In this respect, the old adage that “size matters” is becoming less true. Thirdly, the technological revolution has paved the way for services to dominate the Western Economies. This has led to a less volatile business cycle as the service sector does not have an inventory cycle in quite the way that the manufacturing sector does.

The technological revolution still has a long way to run. Indeed, a renewed burst of innovation is predicted for the period 2006-2010, as a number of latent and converging technologies start to reach mainstream adoption. Computers are becoming faster and more powerful, they are communicating to each other, and are acting to reduce telecommunications costs. This will increase the density of communications amongst businesses. In many ways, the new world economy is a networked economy.

In a networked economy, the question of geographical location is of far lesser importance. It is at this point that the technological revolution becomes intertwined with the second key driver to economic revolution – the expansion of market economies.

The period 1980-2000 saw the retreat of central planning as a technique of resource allocation within economies. In addition to the collapse of communism, there has been an expansion of the market in many of the Western market economies. Just think about how outdated the phrase “Nationalised Industry” sounds today. That is part of the legacy of the expansion of the market in just the UK, which saw itself as a Western market economy, even when over 50% of GDP was produced in the Public Sector.

There are two processes present with the expansion of the market. First, there is the widening of the scope of those economies that have embraced the market as a means of resource allocation. This expansion would include the formerly Communist nations of Eastern Europe, as well as the protectionist economies of South America and Asia. The second process would include a deepening of those areas of the economy that have embraced the market as a means of resource allocation. This would include the privatisation of industries owned and controlled by the Government in Western Europe and North America, as well as the nations of Eastern Europe, South America, and Asia described above. Across the globe, the market is responsible for resource allocation in more nations than ever before, and in more areas of national economies than ever before.

As with technology, this revolution still has a long way to run. To be sure, there are problems with relying solely upon the market as a means of resource allocation, but it cannot be argued that this is the predominant method at present. Looking out to 2020, we can see the market bringing very tangible benefits in such nations as India and China, we can see it as the mechanism by which poverty in Africa becomes relieved, and we can see it as the mechanism by which stability is delivered to South America. With the futures of so many people associated with the expansion and development of the market, it is inconceivable that an alternative method of resource allocation will be developed in the next twenty years.

This backdrop – the development of technology and the expansion of the market – provides the environment in which Suffolk Small Business will have to operate. In many ways, this is likely to be quite a positive environment for small business. Technology is forcing down the costs of entry into markets. It is also enabling small businesses to have a global view of their operating environment, which is being enhanced by nations across the globe embracing market opportunities. The next twenty years will be a time when the proactive small business will be able to seek opportunities on the global stage.

However, that does beg the question of the extent to which small business in Suffolk is proactive. Research at the Centre for Business Research at Cambridge University indicates that, although some Suffolk small businesses may have an outward focus, they are in a minority; and that London is the area in the UK where there is the greatest outward focus amongst small businesses. This is likely to be the critical uncertainty for Suffolk small business out to 2020. The technological revolution and the expansion of the market are likely to create extensive opportunities for small businesses. However, will the small businesses have sufficient entrepreneurial spirit to avail themselves of these opportunities?

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