Renewing Scotland's full potential in a digital world: consultation

7. A Digital and Data Economy

The pandemic has underlined the importance of digital capacity and capability in ensuring a robust, inclusive, wellbeing economy with the resilience to deal with such cataclysmic disruptions. The economic vision set for green and education led recovery set out in the Advisory Group on Economic Recovery (AGER) report described the pivotal role of digital technology in this process.

Scotland’s commitment to enabling access to superfast broadband for all, closing gaps in mobile provision and supporting the networks that underpin the Internet of Things provide the foundations for just a recovery. However, we can do more to ensure the quality and resilience of the networks on which businesses rely. We can encourage further investment in international connectivity to reduce our dependence on the London-Amsterdam corridor, ensure resilience throughout our networks and develop our data centre capacity in ways that create economic opportunities, enhance performance and take advantage of our natural resources to minimise the environmental impact of the power consumption they require.

Businesses across Scotland have stepped up to respond to the challenges presented by the pandemic with many adopting new digital technologies at unprecedented pace, transforming in a matter of weeks and months when it would previously have taken years. The businesses that have coped best are those who have been able to innovate: pivoting quickly to homeworking, adopting cloud computing for speed and collaborative working, using new digital platforms to access customers and to repurpose or diversify products and services.

A report (Finding Our Feet) by the Federation of Small Businesses in June 2020 reported that a fifth of Small to Medium Enterprises (SMEs) in Scotland had adopted new digital technologies during the pandemic. However, whilst we acknowledge the progress that has been made, there is still much work to do to ensure that every business realises the benefits of digital technologies. Failure to take advantage of existing technologies comes at a significant economic cost

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 the mass of SMEs 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.

Sluggish productivity means limited economic growth, poor wage growth, depressed tax revenues and increasing income inequalities, including on a regional basis (since frontier firms are concentrated in cities). Crucially, without intervention, this polarisation of the economy is projected to get worse. If SMEs cannot adopt existing technologies, it constrains the prospect of them having the capital, strategic capacity or skills necessary to invest in far more powerful and sophisticated technologies such as Artificial Intelligence (AI), data analytics and 5G. In contrast, frontier firms concentrated in major cities will continue to invest, train staff and grow faster and more productive.

This polarisation in the ability to embrace and successfully implement digital change is highly likely to also be reflected in the challenge of supporting businesses to embrace decarbonisation. This relationship between digitalisation and a transition to a Green Economy is central Scotland’s net-zero ambitions.

Potential Actions to sustain a successful, inclusive digital and data economy

• Expert support for SMEs: We will double our original 2020/21 investment in the DigitalBoost programme (delivered by Business Gateway. This addition investment will be used to provide expert advice, capacity building and coaching tailored to the specific needs of businesses in particular sectors and localities and deliver pro-active sectoral and place-based interventions to target low productivity sectors and places. As part of this scheme, we will also establish a capital fund to incentivise and support SMEs to invest in the necessary software, hardware and skills.
• 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.
• Increase the digital skills talent pool: We need to ensure we have a skilled workforce available to meet the needs of a growing digital economy. We will leverage the National Transition Training Fund wherever possible to encourage more people to take advantage of the digital skills training opportunities that we have in Scotland, in addition to continuing to support entry into digital roles through the £1m Digital Start Fund offering digital training to those who are unemployed or on a low income.
• Increase diversity in digital roles: This requires working with industry to tackle both short and long term skills shortages across the public sector, increasing the number of and diversity of suitable candidates, for example women and those from minority ethnic backgrounds, and increasing 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.
• Enabling Infrastructure: We will work with the private sector to improve international data connections for Scotland and stimulate investment in strong connections between cities to support the growth of a green and resilient digital economy.
• Use Scotland’s data capabilities to address climate change targets: For example by extending our Earth Observation programme to monitor peatland restoration and waste monitoring, and building on the work of our AI for Good Climate Change programme.
• Workplace Transformation: We will work with bodies including CivTech, CENSIS and Scottish Futures Trust to demonstrate and deliver the operational and environmental benefits of safe and secure home working, and working from remote and alternative locations. This will include work 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.

Case Study: Data Lab – Realising The Economic Potential Of Data

Over the last 5 years, Scotland’s Innovation Centre for Data Science and AI, the Data Lab, has been working with its network of over 2,000 companies, public sector organisations and universities, to make Scotland the global leader in data innovation. With a mission to help Scotland maximise value from data and lead the world to a data powered future, the Data Lab has built a range of services around Collaborative Innovation, Skills and Talent and Community.

The Data Lab has supported over 400 projects across many industries from Energy to Fintech and Transport to Tourism for businesses, public sector and the third sector. Companies The Data Lab have helped are predicting an increase in revenue of over £200m and of 750 new jobs. The Data Lab Masters programme has supported over 500 newly qualified Data Engineers, Data Scientists and AI Developers as well as supporting over 25 Industrial Doctorates helping industries in research and development and teaching over 1500 business leaders in driving value from data.

Case Study: Helping All Business To Become Digital Businesses

Heal Physiotherapy provides physiotherapy, podiatry and private GP services in Dundee and St Andrews.

As the effects of the coronavirus lockdown impacted on their business, the owners used the digital skills they developed by attending DigitalBoost – Scottish Government’s leading digital support programme, delivered by Business Gateway – to create engaging on-line content to reach customers during the pandemic.

The skills they developed allowed them to accelerate digital development plans that were already in progress by delivering an estimated six months of work via online channels in shortened timescales. This included planning online virtual consultations; developing new systems, policies and procedures; changing administrative systems to take payments online; and engaging more on social media in attempt to attract new clients.

As a result they have completely adapted the way they do business by using video consultation in a profession where human contact was previously deemed essential. It has enabled them to keep in contact with customers and ensured that some services can take place in a virtual form.

The support and advice from Business Gateway and DigitalBoost (including digital consultancy, online training one-to-one business advice, strategic HR support and marketing to customers) has been vital for their survival, and given them a new way of looking at the services they offer.

In addition, to support wider efforts to tackle coronavirus, they are now working with local web developers to adapt the NHS screening app to make it suitable for their own use. This will help to reassure patients that when it is safe to do so, they will be able to resume face-to-face appointments.