A changing nation: how Scotland will thrive in a digital world

Helping All Businesses to Become Digital Businesses

All businesses operate in the digital economy and all businesses have to be aware of the opportunities and threats that this represents. However, there are differences between businesses which are still reaching digital maturity, and those which are already operating almost entirely in the digital space. This chapter concentrates on helping businesses to reach digital maturity, and the next at how we will grow our tech businesses.

The adoption of digital business models has accelerated dramatically during the pandemic. The Fraser of Allander Institute and Addleshaw Goddard [35] found that overall 73% of businesses found that the pandemic has encouraged them to adopt new technology to provide their goods and services. Businesses have been adopting new digital technologies at unprecedented pace, transforming in a matter of weeks and months when it would previously have taken years. These figures match those of research by the OECD (February 2021) who found that global business surveys are indicating up to 70% of SMEs worldwide have intensified their use of digital technologies as a result of the pandemic.

Where we are now

Small to Medium Enterprises (SMEs) are vital to Scotland’s business base accounting for roughly 41% of turnover and employing 55% of Scottish private sector employees – so interventions specifically supporting SMEs are crucial. This is why we are investing an additional £21.8 million to support business invest in digital and data technologies. This included £20m in the DigitalBoost Development Grant, £1 million with The Data Lab and £800k in Highlands and Islands Enterprise’s Digital Enablement Grant.

However, a report by the Federation of Small Businesses in June 2020 [36] reported that just a fifth of SMEs in Scotland had adopted new digital technologies during the pandemic. This contrasts with research from Addleshaw Goddard and Fraser of Allander Institute [37] who claim 81% of larger businesses have accelerated their digital plans as a result of the pandemic. This suggests a continuing ‘digital divide’ between large and small firms.

The businesses that have responded best to the challenges of the pandemic are those who have been able to innovate: pivoting quickly to homeworking, adopting cloud computing for speed and collaborative working, using new and secure digital platforms to access customers and to repurpose or diversify products and services and there is a growing body of evidence to suggest that this way of working is here to stay. With global online retail sales reaching $4.9 trillion in 2020 and growth in the area expected to continue, it is clear that E-commerce will be critical to Scotland’s ability to deliver the ambitious target set in A Trading Nation, Scotland’s export growth plan, of growing exports to 25% of GDP by 2029. [38]

Scotland has some of the best data in the world, and our methods of managing, storing, accessing and controlling that data are also amongst the best in the world. A median estimate from a number of studies by the European Data Portal have shown the current open data market share in 2019 is 1.19% of the GDP of EU countries. [39] The UK-wide Geospatial Commission (GC) was established in 2017 to improve the quality of key, publicly held data and make it easier to access and use. By doing so, it is estimated the commission will unlock up to £11 billion of extra value for the UK economy each year. [40]

The effective use of non-personal data is crucial to ensure a thriving economy, with a recent report estimating that the value of open data to the EU27+ countries is currently worth €184 billion and forecast to reach between €199.51 and €334.21 billion in 2025; with the biggest potential benefits in sectors such as science, finance, agriculture and transport. [41]

Scotland, like other countries, has had to respond rapidly to these difficult and unexpected circumstances and the need to be digitally secure has been a critical component to the coronavirus response. Cyber resilience has been a key underpinning factor to ensure Scotland is able to develop secure smart digital solutions to meet the needs of the situation in the immediate and longer-terms.

The coronavirus pandemic is not the only crisis that we are currently facing. As Scotland prepares to host the UN Climate Change Conference COP26, we are acutely aware of the growing demand from Scottish businesses to develop or adopt climate technology for economic and environmental purposes.

In March 2020 the European Commission published its SME strategy for a digital and sustainable Europe with plans to launch a green tech investment initiative designed to increase finance for SMEs and start-ups developing and adopting green tech solutions. [42]

Where we want to be

Whilst the adoption of digital technology has been a feature of the country’s response to the pandemic, there is still much work to do to ensure that every business understands what support is available to realise the benefits of digital technologies, and does so securely from the very start. The more we can realise the digital ambitions of our businesses, the greater the return on our increased investment in digital infrastructure. This sentiment formed a key part of the 2020 Advisory Group on Economic Recovery report and underpins the actions we are taking currently to develop business information and support through mygov.scot and findbusinesssupport.gov.scot. We will continue working to help Scottish businesses find the right information, advice and support at the right time to meet their needs.  

Our determination to ensure that ‘no one is left behind’ is as much an economic as it is a social commitment. The economic cost of inaction in adopting digital technologies is significant with an ever-increasing productivity divide between ‘frontier’ firms who adopt and benefit from digital technologies and those who are not benefiting from technological advances and experience sluggish productivity. The Organisation for Economic Co-operation and Development (OECD) estimate that more than half of this divide is explained by the contrasting capacity of businesses to integrate digital technologies.

Research by the OECD suggests that offering the choice of – but not mandating – homeworking has the potential, in the longer run, to improve economic and social wellbeing, for example by contributing to improved work life balance and improving job opportunities in rural areas. [43] We want to explore this potential with employers of all sizes, working closely with local communities in order to ensure that they benefit from this opportunity.

We will continue to invest in developing our high-quality data as critical national assets and making more of this available to create social and economic value. Publishing public sector open data enables efficiency gains and cost savings, as people, businesses and developers can consume open data to create products that can be used to for decision making at a variety of levels. The new Geospatial Network Integrator should enable this, by bringing together disparate public, academic and private sector organisations to deliver a more cohesive, collaborative and organised sector that is actively engaging with the key customers and developing new business, delivering economic growth.

Cyber risk needs to be seen as a business risk for any organisation. We live in a rapidly evolving, hyper-connected, digitalised society that presents us with opportunities to flourish. However, the constantly evolving digital landscape in which our organisations and businesses find themselves in also presents new opportunities for criminal exploitation. A cyber resilient business is a competitively strong and trusted business.

As we set out in our recent trade vision, [44] trade is being transformed by advances in automation and the digital economy. We must ensure that digital technologies support the vision for Scotland to be a successful trading nation, so that our businesses are fully aware of the benefits of trading electronically, and the investments they need to make to be truly digital. This is particularly pertinent to SMEs who account for a small proportion of exports relative to their share of overall activity and employment, [45] so we must do more to support our SMEs, where the appetite exists, to trade internationally.

How we are going to get there

• Technology loans: Through an extension of the Digital Development Loan, we will enable SMEs in all sectors to adopt and optimise new digital technologies, improve their productivity, increase their reliance and grow their business. The scheme provides interest-free loans, between £5k and £100k for businesses to improve their digital capabilities. 
• Expand support for SMEs: We will continue to develop and expand DigitalBoost as our primary support programme for SMEs. We are currently reviewing the impact of our recent, additional investment of £21.8m in enabling businesses to invest in secure digital technologies and digital skills and will use the learning from that exercise to shape and strengthen our future programmes.
• Publish the Digital Economy Business Survey (DEBS) in Spring 2021. First produced in 2014 and then in 2017, DEBS is a longditudinal survey of the digital maturity of Scotand’s businesses and provides policy makers with a wide range of information to help inform policy design to support Scotland’s ambtion to be a leading digital economy. 
• Increase diversity in digital roles: We will work with industry to tackle both short and long term skills shortages across the sector; to increase the number of and diversity of suitable candidates, for example, women and those from minority ethnic backgrounds; and to expand the number of pathways into the workplace. We must account for the implications of the pandemic for the skills and learning system, labour market and youth transitions. 
• Scotland as a centre for home working: We will engage with communities in remote and rural areas to find ways in which Scotland can capitalise on changes in the world of work and position itself as a leading centre for home and remote working. To be successful, this approach must enjoy the support of local communities. We will include businesses, economic development agencies, Scottish Futures Trust and innovation centres such as CENSIS and CivTech in these discussions. As part of this effort, we will provide opportunities for entrepreneurs to develop and refine the new generation of collaborative digital tools we require to improve productivity and maintain social capital given the potential reduction of shared physical workspaces.
• Making more of our data available openly, renewing our focus on data which will improve transparency, open government and create economic opportunity. This will include working to open up more local government and other public sector data, through collaborations with organisations such as Scottish Cities Alliance and the Improvement Service; extending our LIDAR and Earth Observation (EO) programme; and integrating publishing of open data into our support for the transformation of analytical processes.
• Ensure businesses are digitally secure and resilient. Increase businesses’ understanding of cyber risks and how to manage a cyber incident. The implementation of the Private Sector Action Plan as part of the Strategic Framework for a Cyber Resilient Scotland will support this. [46]
   
  
• Make public sector data easy to find: In line with the principles of the open data strategy, it is vital that public sector data are discoverable to make this information easier to find, understand and reuse. We are working with Optimat, in conjunction with the Scottish Cities Alliance to understand more about what type of public sector data that businesses and organisations would benefit from access to if it were made available, and what existing data could be improved upon. 

Alignment to our National Performance Framework

Actions
We will; enable SMEs to adopt and optimise new and resilient digital technologies; expand expert support for SMEs; publish the Digital Economy Business Survey; increase diversity and work with industry to tackle digital skills shortages; collaborate with the tech industry to demonstrate and deliver the benefits of home working; make more of our data available openly; make public sector data easy to find.
NPF Alignment
	Fair Work & Business - We have thriving and innovative businesses, with quality jobs and fair work for everyone.
	Education - We are well-educated, skilled and able to contribute to society.
	Economy - We have a globally competitive, entrepreneurial, inclusive and sustainable economy.
	International - We are open, connected and make a positive contribution internationally.