Scottish technology ecosystem: review

Introduction, Purpose of this Paper

This document forms part of a review of Scotland’s technology ecosystem, requested by the Scottish Government. The review’s recommendations are primarily concerned with stimulating and accelerating the maturity of Scotland’s “Technology Ecosystem”. By this we mean the system, in its widest sense, that supports and nurtures technology businesses in Scotland, from the early start-up phase through to fully scaled maturity.

The output of this ecosystem should be a stream of start-ups that reach sustained profitability, including a significant proportion that do so at scale. The review’s recommendations are intended to significantly improve upon current outcomes against this goal; that is to say, all of our recommendations should act to increase the rate of profitable, scaled tech businesses and/or reduce the average time taken for viable individual start-ups to reach scale.

Scope

The review is not a direct response to the COVID-19 crisis; the majority of recommendations made here were equally applicable prior to the emergence of the present situation and are generally “strategic” in nature rather than “tactical”. However, the recommendations do take into account the anticipated environment in which the tech industry in Scotland will be operating into the future as a result of the pandemic. In other words, if the timeline can be segmented into three stages – (1) Immediate Crisis Management, (2) Convalescence and Recovery, and (3) Future Growth, then this review focusses primarily on (3) with some consideration given to (2).

The review does not cover the wider topic of digital literacy in Scotland, which is the subject of other policy reviews.

Relationship to Report of the Advisory Group on Economic Recovery

The Advisory Group on Economic Recovery (which was established by the Scottish Government in April 2020 to provide advice on supporting the different regions and sectors of Scotland’s economy in their recovery from the impacts of COVID-19) published its report on the 22 June 2020. That report covers a broad scope, with recommendations directed at both the Scottish Government and other actors across the whole of Scotland’s economy. The report identifies digital innovation as an important growth area of Scotland’s future economy but doesn’t put forward detailed recommendations as to how to stimulate this sector.

The present report is complementary to the Advisory Group’s report and aims to provide those detailed recommendations as they relate to the Scottish tech sector.

Structure of the Response

The recommendations put forward in this document are provided in the following context: a model for Scotland’s Technology Ecosystem is first developed. The purpose of this model is to ensure a common definition for the ecosystem, a common understanding of how it works and, consequently, a common framework for assessing problems and interventions within it. For example, what do we mean by Tech Ecosystem? What do we mean by Tech? And what does it mean to improve the tech ecosystem? What are its outputs? How can those outcomes be improved? These and other key questions are addressed by this model definition.

In the context of that model, an analysis of deficiencies in the Scottish tech ecosystem is then conducted. This analysis examines, in turn, each part of the ecosystem, in each case identifying deficiencies and areas for improvement, as they impact on the ecosystem’s performance. Each of the issues identified constrains the ecosystem’s output in some way. For each of these areas, a brief summary of the recommended strategic approach to address the identified deficiencies is provided. These frameworks form the basis of the recommendations section of the report.

A consolidated set of recommendations for improving and accelerating outcomes is then presented, distilling the analysis of the various parts of the ecosystem model into one cohesive set of recommendations. Recommendations are made in five main focal areas, which are derived from the above analysis.

Finally, an implementation model is proposed, which is intended to support the implementation of the recommendations, with the required level of coordination and momentum.

Tone and Focus of the Analysis

Before commencing our analysis, let us state here that there are many commendable aspects to Scotland’s tech ecosystem. Scotland hosts multiple accelerators, innovation centres, industry networks, one of Europe’s largest incubators, one of Europe’s largest tech conferences, novel public initiatives such as CivTech and other innovative publicly financed support mechanisms (for example, SIB and Techstart), and effective investment syndicate networks and VC firms. Many highly committed individuals have contributed their time and energy to bringing the ecosystem to this point, and they continue to do so. We commend these initiatives and the people who champion them, and we don’t propose to tamper with their work in this review.

However, Scotland cannot not yet boast a world-class tech ecosystem. Though we have laid some of the foundations, we do not produce enough scaled, sustainable tech businesses from our ecosystem. Why not? What can we do about that?

The aim of this review is to address these questions. Correspondingly, whilst acknowledging the above virtuous aspects, our review will focus on what’s wrong with our ecosystem today; what we aren’t doing that we should be, what we are doing that we need to do more of, and what we’re doing that we shouldn’t be. The intent is not to set a negative tone, but rather one of impetus to action. Building on our earlier foundations, it is within our collective gift to dramatically improve the outputs from our ecosystem.

Importance of Establishing a Common Model of the Ecosystem

We have chosen to place the review’s findings in the context of a comprehensive model of the Scottish tech ecosystem, for the following reasons:

It is highly desirable that all of the stakeholders in Scotland’s technology sector coalesce around the same model of how the ecosystem works and how it can be improved. The existence of a widely understood, circumscribed target model for our tech ecosystem conveys several important benefits. Firstly, it is more likely that interventions will be identified that improve the performance of the ecosystem as a whole and that they will be understood in context. For example, it enables the specific desired outputs of our ecosystem to be clearly defined. Secondly, it increases the likelihood that initiatives from different stakeholders can amplify others’ beneficial effects towards those outcomes. Thirdly, a shared model enables all interventions to be assessed and justified in a consistent way, across all stakeholder groups. Finally, it enables collaboration and cross-amplification of impact without requiring intensive coordination.

Without a common model, multiple problems arise. For example, we increase the risk that different stakeholders make conflicting interventions. It is also more likely that stakeholders default to optimising for locally important organisational goals and Key Performance Indicators (KPIs). Some of these interventions may well benefit the wider ecosystem but their effectiveness is reduced because they are made without consideration to the ecosystem’s wider context. Others may be blindly detrimental or inertial to the ecosystem as a whole. Conversely, there exist interventions that may be difficult or unpalatable to implement for certain ecosystem participants (and hence would normally not be implemented for that reason) but that nevertheless could increase the ecosystem’s performance overall. Visualising a common model of the ecosystem helps considerably in navigating these “local versus global optimisation” considerations.

Accordingly, we next define this model for Scotland’s technology ecosystem. After that, we conduct an analysis of the ecosystem using the model as a guide. We then present our recommendations for improving its performance resulting from that analysis.