Scotland's Digital Future: A Strategy for Scotland

3 Growing a Digital Economy

We want Scotland to be at the forefront of the digital economy

Digital technologies are widely recognised as an enabler of productivity and a driver of innovation and international trade, helping to boost jobs and export income. They will underpin growth and help all of Scotland's industries to transform and prosper, while enabling greater engagement from remote communities.

Our "Low Carbon Economic Strategy" (published in November 2010) ⁴ , sets out how Scotland can secure the transition to a low carbon economy. Digital technologies will be an integral part of that transition by, for example:

• replacing goods and services with virtual equivalents
• allowing more efficient use of energy
• offering virtual technologies that allow online shopping, teleworking and access to online public services

Digital technologies will be an integral part of our transition to a low carbon economy

The European Union recognises the importance of a flourishing digital future, and its commitment to supporting member states and local authorities with its roll-out is welcomed. The Digital Agenda ⁵ is one of the flagship initiatives of the EU 2020 Strategy. Its overall aim is, by 2020, to deliver sustainable economic and social benefits from a digital single market, based on next generation broadband networks and fully integrated ICT (information and communications technologies).

The UK Government recently published its broadband strategy "Britain's Superfast Broadband Future" ⁶ which outlines the positive impact of UK-wide next generation broadband on gross value added to employment and the overall economy. We are working closely with the UK Government to ensure that Scotland achieves the best outcomes from this strategy.

Action 3.1: We will continue to ensure that action taken in Scotland builds on, and adds value, to that carried out at a UK and European level

Maximising future economic opportunities for Scotland

Scotland's enterprise agencies, Scottish Enterprise ( SE) and Highlands and Islands Enterprise ( HIE) will play a critical role in helping us to deliver a world leading digital economy.

Current and future digital opportunities for businesses in Scotland must be fully understood and realised. We are gathering views from a wide range of sources, for example, through the Industry Advisory Groups, consultation with key players and workshops with businesses. SE and HIE have recently undertaken a series of workshops with senior business leaders from across Scotland. These workshops are helping to identify strengths and opportunities, future job prospects and potential skills needs.

In October 2010, the Technology Strategy Board ( TSB) published a Digital Strategic Update ⁷ . This outlined how the TSB will help business unlock economic potential by addressing digital challenges and helping to bridge the gap between people, processes and technology. We are keen to see greater buy-in to TSB opportunities and encourage more Scottish partners to get involved. To achieve this, Scotland hosted a visit of the TSB's Digital team in November 2010 and a number of priority actions have been identified.

Scotland's enterprise agencies will play a critical role in helping us to deliver a world leading digital economy

Role of Scotland's Colleges and Universities

Scotland's colleges and universities have a vital role in stimulating and supporting the digital economy. Through the Scottish Funding Council ( SFC), we support colleges and universities by:

• ensuring Scotland has the right skills needed by industry, and by inputting courses to the curriculum. This includes programmes such as Digital Media and ICT Vendor Alliance ( DIVA), and the E-Skills Placement Programme where we will place 750 students from universities and colleges across Scotland in IT companies
• the exchange of research, development and knowledge with business and industry through, for example, the Digital Design Studio at Glasgow School of Art. Joint ventures include the "Scottish Ten" an ambitious 5 year project in partnership with Historic Scotland to create digital models of heritage sites.

Action 3.2: Working through Scottish Enterprise, Highlands and Islands Enterprise, and other partners, we will undertake development work to map and understand future priorities for Scotland in relation to the digital economy and develop an aligned action plan on how to take this forward, including potential opportunities from the Technology Strategy Board during 2011

CASE STUDY 3D Digital Design The Digital Design Studio ( DDS) is a postgraduate research and commercial centre at Glasgow School of Art. It focuses on the interface between science, technology and the arts to explore imaginative and novel uses of advanced 3D digital visualisation and interaction technologies. In 2007, collaboration between Glasgow City Council and the DDS produced the Glasgow Urban Model, a unique 3D online tool mapping the city centre and River Clyde corridor down to a scale of just 20 cm. A world-first when launched, the model presents a wealth of practical applications for urban planners and emergency services as well as architects and developers. For tourists and students across the world, the model provides a showcase for the city's world-famous architecture and heritage and demonstrates the city's potential to business investors. The model also offers a way of generating income, with developers and architects able to obtain licenses from the City Council to use the data.

Application of digital technologies are a significant driver of innovation in Scotland's creative industries and are also creating new markets. Scotland's creative industries have significant strengths and are one of the key sectors of the Scottish economy under the Scottish Government's Economic Strategy. They account for 3% of Scotland's employment (63,000 jobs in total) and 4% of its GDP.

Application of digital technologies are a significant driver of innovation in Scotland's creative industries and are also creating new markets

As well as being economically important in their own right, the creative industries have "spillover" effects as catalysts for growth in other areas. For example, they prompt technological innovation and new thinking in areas such as design or computer games manufacture. A strong cultural and creative sector can also help to make regions more attractive places to live for highly skilled workers in other sectors of the economy.

Virtually all sub-sectors of the creative industries are affected by technological change, and some, such as publishing, may be transformed by it. Individual companies will need to seize available opportunities. But it is equally important that the public sector offers an aligned and supportive approach to help them to do this, for example, through skills development or targeted investment.

For this reason, the Scottish Creative Industries Partnership ( SCIP) co-ordination group has been established. The group is chaired by Creative Scotland, and brings together COSLA, SE, HIE, Skills Development Scotland ( SDS) and the SFC. SCIP has also established industry-led reference groups to inform its thinking on the challenges and opportunities facing different sub-sectors within the creative industries.

Action 3.3: We will shortly publish our Creative Industries Strategy, which has been developed in collaboration with the SCIP co-ordination group. The Strategy will be consistent with the aims of this Digital Strategy, and will emphasise the importance of ensuring that the creative industries are equipped to prosper in a period of rapid technological change

The Digital Media Industry Advisory Group published its Digital Inspiration report in December 2009 ⁸ . This outlines recommended actions for the public and private sectors to develop Scotland's digital media industries, for example digital content producers, distribution platforms or networks. The report focusses on encouraging innovation, promoting the development of interactive platforms, putting in place the right physical infrastructure, supporting internationalisation and seeking to boost investment for the sector.

Since then, Scottish Enterprise has established Interactive Scotland, a new service to provide expert support for digital media companies to help turn their ideas into business opportunities. Interactive Scotland has managed or supported many events since it was founded, on themes such as music business innovation and social media.

A recent Interactive Scotland ⁹ event explored how social networking such as Twitter, Facebook and LinkedIn could be used to help businesses give an edge over competitors and build a powerful online presence to communicate directly with clients, potential clients and end users.

Business use of broadband

The Scottish Government's new research ¹⁰ on the use of broadband by Scottish businesses is being published alongside this strategy. This work includes a survey of 1,000 SMEs (small to medium-sized enterprises) and micro-businesses (businesses with 0-9 employees).

A striking statistic is that around 25% of those businesses surveyed do not use the internet at all, with most of this 25% showing no intention of doing so in the next three years, believing the internet to have little relevance to their business. One reason given by survey respondents for non-use relates to lack of adequate IT skills. Cost was not cited as the main barrier.

Of the 75% who do use the internet, it tends to be mainly for email and web searching. And whilst the report indicates that more advanced use of the internet is taking place, these users are in the minority. Examples of more advanced use include social media, access to remote file systems and cloud computing.

This apparent under-use of the internet could be seen as a missed opportunity in driving innovation, increasing productivity and, ultimately, contributing to sustainable economic growth in Scotland. We acknowledge that some businesses may not need to use the internet. However, we firmly believe that better use of the internet and the opportunities it presents can improve business productivity and profitability.

Around 25% of SMEs do not use the internet at all, with many of these believing it to have little relevance to their business

Under-use of the internet is a missed opportunity in driving innovation and, ultimately, contributing to sustainable economic growth

The survey also highlights that businesses with stronger growth ambitions are more likely to view reliable high speed broadband as very important, indicating that digital technologies could help boost global exports through online marketing and trading.

The Boston Consulting Group recently reported 11 that online sales for SMEs grew at a faster rate for larger companies over the period 2004-8 and those companies that are selling their goods and services online are seeing overall sales growth significantly higher than those that don't.

In the retail sector, the Scottish Government is undertaking research (publication expected in March 2011) assessing the contribution of retailing to the Scottish economy. One specific area is the importance of
e-commerce to the retail sector.

SDS will publish a report in March 2011 looking at the supply and demand for e-commerce skills in Scotland. We will be examining the report's outcomes and exploring with SDS and other partners how any skills gaps identified could be addressed. More generally, as part of our work on action 3.4, we will ensure that the value of e-commerce is fully recognised by Scottish business.

Action 3.4: We will work in partnership with Business Gateway, Scottish Enterprise and Highlands and Islands Enterprise to explore how we might best encourage the 25% of Scottish businesses currently not online, to get online, and to support the 75% already online to make better use of the broadband that is available to them

CASE STUDY britishbusiness.co.uk The Getting British Business Online ( GBBO) initiative is a collaboration between Enterprise UK, Google, BT, and e-skills UK, with support from the Department for Business, Innovation and Skills. GBBO's aim is to help SMEs create their first website and help them understand the opportunities offered by the Internet. GBBO estimates that there are at least 1.5 million businesses in the UK that don't yet have a website. Following a campaign during 2010, GBBO achieved its target of helping 100,000 UK SMEs get their first website by the end of 2010.

Scottish Business Portal Programme

The Scottish Business Portal Programme will deliver a primary portal for Scottish business, offering easier online access to relevant UK and Scottish business transactions, regulatory information and other guidance and services through the Business Gateway website. These improvements will start taking place during the course of 2011. We are developing this in partnership with our public sector partners, particularly local government, and in collaboration with business organisations to ensure that the website meets the needs of businesses of all sizes and in all sectors across Scotland. This work takes advantage of investment by the UK Government in the BusinessLink website, including the provision of online tax, VAT and Companies House transactions.

The Business Portal Programme will deliver both cost savings and productivity benefits to business and public sector efficiency savings.

Rural economic growth

We recognise that good broadband connectivity is an enabler of economic growth in rural areas. However, we are aware that parts of rural Scotland are not able to exploit or benefit fully from digital opportunities.

The combination of poor connectivity and limited ICT skills can lead to digital exclusion for many people. It can also increase the "digital divide" and lower opportunities for learning, reduce access to public services and inhibit business growth. In turn, rural areas may lose their competitive advantage and be seen as less attractive places to do business. The recent "Speak Up for Rural Scotland" consultation ¹² highlighted broadband as the key issue, recognising broadband as a vital measure to support economic growth in rural areas. The Scottish Government's response to the consultation will be published in March 2011. Action to address rural connectivity is described in more detail in Chapter 5.

During 2011, HIE is looking to provide additional support in the highlands and islands region to:

• Improve connectivity (including the Highlands and Islands next generation broadband project (described in more detail in Chapter 5)
• Provide ICT business and community support
• Develop ICT skills and digital participation
• Grow the ICT supply chain consistency

Flexible working

Broadband and ICT are crucial for flexible working practices such as home working or working remotely. These technologies can increase participation in the labour market and change various aspects of working life. These developments (coupled with changing attitudes amongst workers and employees, and requirements on employers to consider flexible working arrangements) continue to make working remotely more feasible and widespread.

A report on home businesses published by Enterprise Nation in 2007 13 showed that over 60% of all new businesses were started from home, and that out of the 4.5 million SMEs in the UK, 2.1 million were home-based. The fastest growing homeworking sectors were in the business/professional areas, online trading, personal services, food and domestic energy. The 2008 National Centre for Social Research Omnibus Survey and the National Travel Survey indicated that 3% of workers always worked from home and 7% did so at least once a week. 14

The Scottish Government has a progressive scheme on flexible working which covers all its staff, not just those with children. Many large organisations actively promote flexible or home working and we would encourage all organisations to consider it. Both SE and HIE provide advice on the use of ICT for remote and home working, as part of a wider package of advice they offer to Scottish businesses.