Two reports delivered earlier this year to Digital Central by Pembridge paint the most detailed picture yet of digital business in the West Midlands of England – what it is now and what it needs to succeed. The strongest firms in the region have everything to play for, writes the reports’ author, Hugh Mason.
It may not feel like it to the owners of small digital businesses in the West Midlands, but the hopes of many people are riding on their success. Where once the region was proud to project itself as the ‘Workshop of the World’, now it’s rapidly developing a reputation as a centre for digital business. So it was a privilege to be invited by Digital Central’s steering group to work with a large number of businesses in the region to map out where they are now, where they want to be, and how Digital Central can help them get there.
It was a special privilege for me as I was born and grew up in the region, near Coventry, though I moved away to study and build my career in first television then media finance. Coming back to the region now I see a totally changed landscape. Gone are the blackened bridges with grotty advertisements for ‘Ferodo’ disc brakes. Today, the centre of Birmingham feels as cosmopolitan and modern as Singapore or any of the European cities where I and my partners help Creative Companies to grow by providing finance and advice. You get the same positive vibe when you visit fast-growing digital companies right across the West Midlands.
So what are they doing, these ‘digital’ companies? How many of them and how can Digital Central help them to succeed? What will it take to make the West Midlands a real hub of the Digital Economy – the networked 21st century equivalent of the ‘Workshop of the World’?
In not so many words, those were the questions posed by Digital Central’s steering group. My colleagues and I set about answering them by identifying as many possible ‘digital’ businesses as we could. We took a commonsense approach, not getting hung up on the thorny question of what exactly defines a company as ‘digital’ and instead focussing on what businesses actually DO and what makes them tick. We contacted as many business owners and managers as we could and asked them to share their accounts and their thoughts about where their business was with us in a short phone interview. The results are compiled in the two reports published by Digital Central: Key Sector Data and, drawing on that, a Mandate for Action.
The picture we revealed will undoubtedly be useful to the folk at Advantage West Midlands and beyond who set the policy for all kinds of business support in the region. For individual businesses, I guess the most interesting thing our project shows is where you might stand in the broader landscape of business. It’s a lonely old business running a small company, and it’s never easy to see the wood for the trees when you’re in the thick of a forest. This research gives a clear helicopter view for the first time of just how many ‘digital’ businesses there are in the West Midlands so you can see for yourself where you fit in.
Summarising the findings, we reckon there are about 620 ‘digital’ businesses in the region, taking a commonsense definition of ‘a business’ as being something a bit more substantial than an individual freelancer working from home. The biggest three groups amongst them describe their activities as ‘Design’, ‘Software development’ or ‘New Media’. Intriguingly, Music, Film, TV and Games companies make up a smaller part of the sector than you might imagine given their high profile and the large amount of public support they receive, though clearly they are still important. The most well-established businesses we came across were engaged in developing, publisher and distributing handheld and mobile games, providing creative marketing communications services, or developing software for applications like logistics support.
If there were such a thing as an average digital business, it would be six years old, turn over about £160,000 (growing at 28% annually) and employ three people. But those numbers hide a huge range: we contacted firms that ranged from 1 to 150+ employees and with turnover up to £13m. If there’s one thing you can say about them, it’s hard to pick one fact that’s true of them all! Maybe that’s not surprising – after all ‘digital’ is really a state of mind when it comes to business – it’s not a well-defined business sector like being a retailer or a wholesaler.
What does emerge clearly is a sense that the top 25% of businesses, on any measure we looked at, are doing very well compared with your average small business. They have excellent growth prospects and every opportunity to become world leaders in their fields. Some are more than doubling in size every year.
At the other extreme, the bottom 25% are struggling – but then digital is all about innovation and trying new ideas – not all of which can succeed. So maybe if there weren’t some ‘lemons’ as well as ‘plums’ in the pie (these are technical terms used by investors, by the way), you could say that entrepreneurs in the region weren’t trying hard enough. Small business is all about taking risks if you want to grow.
So what do all these businesses need to succeed? What’s the spice that will bring out the sugar in the plums? Here, intriguingly, a much more consistent picture emerges. Lots of businesses want help with business strategy – they know how to do what they do and now they want to point themselves in the right direction to achieve their long-term goals. Others want help coming up with new ideas to generate cash – how can they build on the customer relationships they already have to make more money? And there’s a big demand for know-how around marketing: not just the promotional side of how you plug a service or product, but how you shape your business up to fit what the market actually wants.
The good news is that all the questions the businesses we contacted are asking themselves have already been addressed by entrepreneurs before. There’s no rocket science required: just some sharing of knowledge, some mentoring and encouragement to have the confidence and make the leap for growth. The next step is for Digital Central to talk with providers of business support and tee up the workshops, information and funding these businesses have said loud and clear to us that they need to succeed. Put that in place and the West Midlands is set to make a firm mark on the emerging digital map of the world.
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