SBA

A Digital Skills Gap?

I quite like the research done by the the UK Federation of Small Businesses (FSB) - because it is highly relevant to the Isle of Man. In the UK a “Small Enterprise” is one with fewer than fifty employees, and a “Medium Enterprise” is 50 - 250 employees. In the UK these SMEs between them make up 99.9 of all businesses, and employ around 60% of the private sector workforce. Clearly in the Isle of Man most of our businesses are “small” by UK standards and the lessons provided by UK FSB research are directly relevant to the huge majority of our employers.

Anyway, the FSB has just published a report titled “Learning The Ropes - Skills And Training In Small Businesses” (it’s available online, download and read it (if you can)). It is informative and perhaps a little depressing - it reports that approximately:

• One quarter of English small business owners lack confidence in their own  “basic digital skills”
• A fifth of SMEs seem to think that lack of employee digital skills restricts their ability to do more digital business
• A fifth of SMEs are inhibited from doing more digital business by concerns over cyber security
• Nearly half of SMEs believe that some or all of their staff are not “fully proficient” at their jobs

The FSB report also refers to the Lloyds Bank UK Digital Business Index 2017 report (it’s available online, download and read it (if you can)) - and claims that for UK Small Businesses: 

• 41% do not have adequate basic digital skills
• organisations using digital are saving almost 20% of their working week in time efficiencies
• highly digitally capable businesses are 50% more likely to say growth is important to their strategy
• the most digital businesses are two and a half times more likely to report increasing turnovers
• the most digital businesses are eleven times more likely to trade overseas than the least

So there seems to be a consistency - many small businesses do not have adequate digital business skills and believe this to be holding back their growth, and those small businesses which do have adequate digital skills are much more likely to succeed in international trade and grow.

Yay. Not exactly rocket science, maybe even stating the bleeding obvious, but because we are a nation of small businesses it matters, it’s worth stating again and again. Most of our Financial Services, Corporate / Trust Services and e-Business sectors are largely dependent on overseas trade, and a substantial proportion of our consumer spending goes to overseas suppliers with better digital skills instead of to our local shopkeepers and service providers. Amazon alone is responsible for container-loads of goods being shipped to the island bypassing Manx retailers - but have you tried shopping online using island-based suppliers? It’s a frustrating experience despite the old DED ShopIOM initiative.

Does it really matter though? According to the OECD / G20 Base Erosion Profit Shifting project “Because the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes.“ - which is probably why Action 1 in the OECD 2015 BEPS strategy is “Addressing The Tax Challenges Of The Digital Economy” and a major focus of Action 1 is mitigating the impacts of transferring Consumption / Value Added taxes. 

The Isle of Man of course has an agreement with the UK for the apportionment of VAT, so if that agreement is fair our Government should not lose out on its share,  but nevertheless many of our small businesses - retailers, corporate service providers, niche financial companies etc., are losing out everyday by being less than expert, efficient and competitive in the Digital Economy due to their lack of basic digital skills. 

So what are these magical “Digital Skills” which small businesses are said to lack? The Lloyds Bank research used a framework from thinktank Doteveryone, covering five basic aspects of digital competency:

• Managing information: Find, manage and store digital information and content 
• Communicating: Communicate, interact, collaborate, share and connect with others 
• Transacting: Purchase and sell goods and services; organise your finances; register for and use digital government services 
• Problem solving: Increase independence and confidence by solving problems using digital tools and finding solutions 
• Creating: Engage with communities and create basic digital content

I don’t know about you but I find the claim, which is backed up by valid research so I can’t dispute it, that small businesses are lacking these utterly basic skills to a degree which impairs their business success, deeply depressing and quite frightening. Some readers, I know, will share my incredulity, but others apparently will be struggling to read the FSB and Lloyds Bank reports because despite running small businesses and employing staff they are not even competent to search online and download them. 

Enough of me whinging on. There are, obviously, solutions. Around fifteen years ago, as a director of a high-growth business in the UK, I was frustrated by both the lack of digital skills in my workforce, and the burden my digitally disadvantaged employees put onto the IT helpdesk - so I and my IT managers put over a third of the workforce through the European Computer Driving Licence training syllabus. Each participating employee received two hours in-house classroom training each week, for about half a year, and alongside the inevitable improvement in workforce productivity we also dramatically reduced the IT helpdesk burden. The upskilled employees not only performed better themselves, they also became “super-users” who helped their work colleagues by solving their everyday IT frustrations. I can personally vouch that most employees’ digital skills can be improved by training, and that doing so is a worthwhile investment.

Two hours a week. Actually it cost our business one hour per employee-week because the participating employees, all volunteers, gave up an hour of their own time each week for the benefit of improving their skills. It’s not a big investment really, the primary barrier is arranging the training - sourcing the syllabus, materials and trainers - and whilst this may be a bit of a pain my honest opinion is that any small-business owner who can’t find a way of arranging digital skills training for their staff doesn’t deserve to be in business. 

Overall the message for Isle of Man businesses is simple:

Regulatory Compliance

Businesses holding any customer data electronically will struggle to comply with the new General Data Protection Regulation which comes into force  mid-2018 unless they have adequate digital skills.

Competitive Advantage

Businesses without adequate digital skills will lose out to either or both of on-island or off-island competitors who use superior digital skills to both improve their business efficiency and attract digital savvy customers.

Protecting Our Economy

Improving small-business digital skills on the island is crucial to improving local value creation and preventing erosion of our local economy in the face of the combined impacts of the sustained international attack on the island by tax campaigners and the steadily increasing trend for island residents to buy goods from off-island via the Internet.

Simple Fix

There are a multiplicity of training suppliers on the island to whom local businesses can turn for help; some of them are even reputed to provide training in basic IT and Digital skills, Online Marketing. e-Commerce, etc.  

New Year Resolution

If you have the slightest doubt about your business’ digital skills capability then your New Year Resolutions should include an action plan to close your digital skills gap. It’s another unwelcome hassle, one that most small business owners can do without, but in the words of the OECD “the digital economy is increasingly becoming the economy itself”. 

Wishing you all a Merry Christmas and Prosperous New Year.