Interesting research out this week shows the importance of digital to the UK economy, and the lack of digital knowledge in the FTSE 100 and 250 organisations that generate a considerable amount of the UK’s wealth.
First let’s deal with the growing importance of digital for the UK economy. According to the National Institute for Economic and Social Research (NIESR) The Government’s method of categorising businesses is out of date.
It estimates that there are at least 270,00, and possibly as many as 471,000, companies in the digital economy, rather than the 167,000 calculated by the Government.
Using these new measurements, the digital economy would account for 11% of the UK workforce, rather than 5%, which is a pretty significant shift.
NIESR says the Government’s official Standard Industrial Classification missed out a large number of companies in business and domestic software, architecture, engineering and scientific and technical consulting.
“Why?” I hear you ask, well, it’s all down to that lovely check box many of us have to tick when defining our business: ‘Other’.
Unfortunately, many companies are forced to register as “Other” within their industries because, when the system was conceived in 1948, it was impossible to imagine what might drive growth in the future.
Typical examples of miscategorised firms include marketing companies, businesses that write specialist software and app developers.
The report also says the revenue reported by digital companies is growing 25% faster than that of traditional firms and that growth in the digital economy is not simply driven by London. Manchester, Birmingham, Brighton, Reading, Aberdeen, Milton Keynes and Basingstoke all feature highly.
So if the NIESR is to be believed, the digital economy is stronger than ever, and even stronger than we realised, so it would make sense that digital is now being recognised as an essential element at boardroom level, right? Wrong!
In fact, according to Russell Reynolds Associates, digital-transformation only three of the UK’s top 350 companies have three or more tech-savvy board members. Those three being ARM Holdings, TalkTalk and Telecity Group.
To be fair three or more tech-savvy board members is quite a high target, even though I agree it is necessary.
However, the more worrying stat is that only one in ten of the companies surveyed had “digital representation” on boards, meaning that they had at least one digital member. These include the likes of Marks & Spencer, Sainsbury, HSBC, BT, Vodafone, Betfair, William Hill and Easyjet.
This leaves 308 of the FTSE 100 and FTSE 250 companies in Britain with no digital board members at all.
To put this into context, the rate of digital non executive board appointments is on the rise, with around 4% of 2012 newly appointed directors in the FTSE 100 and FTSE 250 having digital backgrounds. However, the UK is still lagging far behind the United States, where 15% of newly appointed Fortune 100 directors in 2012 had digital backgrounds.
It makes sense that digital representation is growing at board level, but as with all business developments, it takes time to get senior representation and that can stifle growth. At a time when the UK is beginning to see small levels of recovery, it’s more important than ever to support our growth sectors.