Roundtable: Innovation and collaboration key to Tech growth
Byline: Stephen Emerson, Managing Editor.
Clusters, culture and funding are vital cogs in sector’s ecosystem
Growth in the technology sector could provide a vital spark to the South East’s economic engine – however, getting all the sector’s components to fire in unison is no easy task.
The Business Magazine, in partnership with Herrington Carmichael, held a roundtable at the law firm’s Farnborough headquarters where it was agreed that the region’s tech economy has all the parts needed for growth – they just need to be put into gear.
ROUNDTABLE PARTICIPANTS
Moderator: Stephen Emerson, Managing Editor, The Business Magazine
- Stephen Baker, Partner & Head of Dispute Resolution, Herrington Carmichael
- Darren Cheeseright, Head of Technology, Procode Technology
- Ian Cruickshank, Managing Director, Spectrum IT
- Thomas Dodd, Commercial Director, entrust IT Group
- Mark Chapman, Partner & Head of Commercial, Herrington Carmichael
- James Harcourt, Founder, Novatura
- Gemma Hood, CEO & Founder, Culturehood
- Stephen Jones, Chief for Consulting, AND Digital
- Matthew Lea, Corporate Partner, Herrington Carmichael
- Alistair McArthur, Partner & Head of Employment, Herrington Carmichael
- Michelle McClean, Sector Growth Manager, Hampshire County Council
- Raj Raghaven, Co-Founder & CEO, RootQuotient
- Martin Soltau, Co-CEO, Space Solar
- Madhur Srivastava, CEO, Doc HQ
- Stuart Weekes, Tax Partner, Crowe UK
- Tiago Veiga, CEO, Aurum Solutions
The importance of clusters
Michelle McClean, Sector Growth Manager at Hampshire County Council, highlighted the importance of regional tech clusters and university partnerships in fostering innovation and collaboration within the tech ecosystem.
She said: “We are seeing clusters developing here that are supporting local talent and ensuring that graduates stay in the region. Five years ago, there wasn’t a space cluster in Hampshire and now it’s recognised as the biggest in the UK."
“This month we’re launching a defence and security cluster, led by Airbus, with a focus on cyber security.”
Matthew Lea, Corporate Partner at Herrington Carmichael, said defence would prove a key growth area for the South in the coming years.
He said: “Companies that are associated with cyber warfare, such as those preventing hacking or improving poor security, will see growth over the coming years. The need for these services will be huge, especially with the geopolitical situation in the world at the moment.
“The UK is behind the curve on spending on this and will have to increase its capability.”
Ian Cruickshank, Managing Director of Southampton recruitment firm Spectrum IT, whose firm sponsors The Business Magazine’s South Coast Tech & Innovation Awards, said he was a big believer in the power of building communities, particularly in the tech sector.
He said: “We have put a lot of time and energy into building communities in the tech space. Our Women in Tech events in Hampshire bring people together to talk about tech and encourage confidence. We have had people land jobs off the back of attending these events due to the confidence it has given them.”
Hampshire County Council has also launched the Hampshire Prosperity Partnership which has taken on much of the economic growth responsibility previously carried out by local enterprise partnerships.
Stephen Baker, Head of Dispute Resolution at Herrington Carmichael, said this was a welcome development and would help companies, particularly those at an early stage, find the advice they need when it comes to funding and growth.
He said: “Initiatives like the Hampshire Prosperity Partnership will help to provide consistency as companies have so many options when it comes to funding for growing their business.”
Darren Cheeseright, Head of Technology at Bournemouth-based Procode Technology, said that the clustering of fintech firms in Dorset had led to benefits for the wider tech economy.
He said: “During mid-2010 to 2015, there was a big explosion of fintech. As a result, the talent retained has spawned off and created their own businesses. The SMEs created an ecosystem that encourages collaboration.
“The talent is coming from universities and we have focused on providing pathways for these students by working with universities to make sure we have engagement with them and are on their graduate schemes.”
Clusters also create connections for services that businesses need, according to Mark Chapman, Partner and Head of Commercial at Herrington Carmichael.
He said: “The clients we have seen do very well are those that have been able to surround themselves with the right people from the start because they have had a good support network in place.
“From a legal perspective, some of the biggest decisions you make might come quite early on in the process. Even if you’re not engaging lawyers, talking to people who have been there before can be really helpful.”
The impact of remote working on innovation was also discussed round the table, with participants in agreement that a careful balance had to be struck between home and office working.
Alistair McArthur, Partner and Head of Employment at Herrington Carmichael, said that people needed to come together to work but the fact that the world had moved on since the pandemic also had to be recognised.
He said: “We’ve seen people now almost rebelling against that and coming back together again. The loss of office space will impact people, absolutely, because they won’t have the ability to come together and work.
“Amazon ordering all of their staff to get back to the office five days a week – I don’t think that’s helpful. It doesn’t encourage people to take time out and go to different environments.
“But equally there have to be opportunities for people to come together to make sure that people innovate and work together.”
The scaling back of large corporates from the Thames Valley was also discussed at the roundtable, highlighting the work of the Reading Tech Cluster, which aims to create a formal cluster in the region.
Tiago Veiga, CEO of Reading-based fintech Aurum Solutions, said: “Many of the large corporates in the Thames Valley are reducing their footprints. This has an impact on the tech economy and many people move from larger to smaller companies, and some also set up their own start-ups.”
Stuart Weekes of Crowe UK was optimistic that the Reading Tech Cluster could provide some focus to the Thames Valley tech sector. He said: “I’ve been working in the Thames Valley for nearly 30 years and there has always been an enthusiasm to do business together.
“I wonder whether some larger companies have taken their eye off the ball, whether they’ve lost focus, whether they’ve got too complacent?
“It is good to see a new tech cluster emerging which will hopefully bring some much-needed energy.”
Culture
While it was agreed that innovation and improvement was the key to tech growth, providing a culture of safety where experimentation can thrive was also highlighted as an essential driver.
Thomas Dodd, Commercial Director at Entrust IT Group, said: “Encourage people to do things differently and create an environment where there are no stupid questions. The thing that’s blocking people is the fear of not understanding something new, so let them try it.
“Leaders have to enable a psychologically safe environment where people feel that it’s okay to take this slight risk and that if it doesn’t work then that is okay also. If you encourage that psychological safety then you get more engagement and more ideas coming from more places.”
Gemma Hood, CEO and Founder of Reading-based HR consultancy Culturehood, said management was key in creating this culture and that they had to be open to a number of inputs and malleable in their outlook.
“Company culture eats strategy for breakfast,” she said. “For businesses to be successful, they have to listen to their staff and understand what their wants and needs are.
“Leaders also need to be sponges rather than rocks deflecting feedback. They need to actively listen, be vulnerable and understand what is and isn’t working.”
The roundtable also discussed how innovation tends to thrive in smaller, founder-led companies compared to large corporates, which often resist change due to embedded systems.
Madhur Srivastava, CEO of Worcester-based healthtech firm Doc HQ, said: “Large corporates are like an immune system and they’re used to certain things. They will reject anything that comes inside to try to change their behaviour.
“The NHS is an example of why it’s difficult. There are departments and layers that you have to work through if you are trying to work with them. They have a certain way of doing things and when you bring innovation in it can get rejected.”
Stephen Jones, Chief for Consulting at Berkshire-based AND Digital, said large companies had to invest in their R&D capabilities. He said: “Experimentation is a beautiful thing, because it means you are fundamentally finding out how something works.
“You need a vision and leadership in terms of understanding the commercial return of what you are trying to do and what the customer need is that you are trying to fulfil.”
Funding
Funding is the lifeblood of innovation, with the panel discussing how companies can best access funding and what challenges they had experienced in accessing capital.
Crowe’s Stuart Weekes said it was vital that innovation is linked to constant improvements in the bottom line. He said: “Innovation is fuelled by funding. It is great to have an innovative culture of experimentation, however if you are not getting that bottom line higher to fund the next stage of your development then you are not going to succeed.”
Space Solar has been granted more than £7 million by the government to fund its mission to develop solar technology which can harness power from space. The company is also working with a number of private investors.
The company’s Co-CEO Martin Soltau said that it was difficult to attract investors for capital intensive early-stage projects when they might have to wait a decade until they see a return.
He said: “We’re trying to solve a huge problem and top of the government’s list is how to maintain affordable energy security as we go through an energy transition.
“There’s billions in green money sloshing around but no one is prepared to really go for high risk, high reward. It’s difficult to bring public and private finance together and share risk in a more ambitious way. It feels like the system is quite broken.”
James Harcourt, founder of Southampton-based digital solutions provider Novatura, said that being ingrained within the tech ecosystem of the area in which you are based was vital.
He said: “Being affiliated with the university and the accelerators, the enterprise programmes down there, is really good for start-ups.
“In this country there are so many options. If you are looking for investors, you’ll find them here if you have a plan and can deliver returns. That’s what investors, in my opinion, are looking for. This is what I advise my clients. I give them a plan. If you can lay out the steps, so you’re not just saying, give me money and I’ll do something with it.”
Innovation key to growth
Raj Raghavan, Co-founder and CEO of London-based software development firm Rootquotient, said: “A problem can only be solved through innovation.
“Using technology to solve a problem allows a company to differentiate itself in the market. To solve a problem, you need to use technology. With that use comes growth and innovation.”
Stephen Jones of AND Digital said that large game-changing technology innovations were rare and that organisations should focus on small continual improvements to their operations. “There is massive commercial mileage in making things slightly better, as in iterative improvements,” he said. “Whether you regard that as innovation is up to you, I don’t. Driving better outcomes, improving websites and applications are examples of this.
“However, breakthrough innovation, the genuine lifeblood of things, is not that common. It’s not something you can bank on happening in your financial year or your plan.”
Tax as an enabler
The run-up period to the budget is a period of uncertainty according to roundtable participants. The potential changes to the tax system had dented investor confidence, they said. (The Roundtable took place before the government’s budget on October 30.)
Stuart Weekes of Crowe UK said: “Government needs to create certainty, consistency and an environment of knowing what the future looks like. At present there are predictions that the government will raise capital gains tax rates in the forthcoming budget, but the lack of clarity is creating uncertainty in the market. In terms of capital gains tax, currently when you sell shares in a trading company you pay between 10 and 20 per cent in tax.
“The highest published income tax rate is 45 per cent and the government is talking about aligning rates.
“Does this mean that people are going to pay 45 per cent tax when selling a business or a property?”
The first year of any new business is tough, with money tight. For many young entrepreneurs it means the prospect of dealing with a complex tax system for the first time.
James Harcourt of Novatura, whose firm spun out of the University of Southampton, said more start-ups would prosper if they were given assistance from HMRC during the early stages of their enterprises.
He said: “The tax system creates obstacles for young start-ups and creates a barrier to entry. There is not enough help available to help young companies through the process.”
Research and development tax credits for small and medium-sized entities (SMEs) have been curtailed in recent years due to perceived abuse within the system. However Stuart Weekes of Crowe UK said that when properly administered, tax credits could provide a much-needed economic stimulus.
He said: “R&D tax credits can be a positive stimulant, but they need to be made more accessible and beneficial. Lately, the move has been away from that. It’s not as beneficial for SMEs and seems to be focused more on the larger companies. The government needs to review the competitiveness of the UK’s R&D tax credits compared with R&D tax credits available in other countries, especially close neighbours such as France and Ireland.
“I’m very much in favour of tackling non-compliance within R&D tax credits. Those who don’t qualify shouldn’t claim them. Not addressing this effectively has caused problems.
“One issue at the moment is that our tax authorities have not adequately trained people to challenge those claims. Let’s improve the process of compliance.”
Collaboration is key to firing the engine of tech growth and if enthusiasm is the fuel of innovation, as demonstrated by the participants of this roundtable, then the South’s tech economy is on the right track.
