As a London resident, I’m proud of all of the attention that London has been getting as a preferred hub of new Technology Startups. However, the sad truth is that a lot of these companies are doomed. Leading up to my “Build your Innovation Leaders” London workshop, here is why there is problem:
Over the past 5 years, East London (especially around the Old Street area) has been growing rapidly as a centre for development of Digital and Technology-focussed companies. In many ways, it’s been a huge success:
- Growing from approx 200 companies in the area in 2010 to 1,300 today, according to Tech City UK
- Government investment supporting early-stage companies
- Big established Tech players like Google and Facebook (central London) opening offices which aim to use the developer talent. They’re attracted by concentration of creativity & ability of the developers here
- A number of profitable and successfully innovative British tech companies already established themselves, like those on the Future Fifty list (personally, I love the innovativeness of Shutl, Deepmind, Mind Candy, Huddle, Swiftkey, Graze, Hailo, Transferwise and Gocardless, amongst many others)
There is also a lively social scene where people from all companies drink, mingle and discuss what’s going on. I’ve been going to these events for the past year, and its from speaking to the people on the ground that I’m worried about the future for a lot of these companies.
Scratch beneath the surface, and real questions begin to appear about the apparent success of innovations coming out of London, especially considering the growth in the number of companies and the apparent creativity of the people here:
- Where’s an app developed in London with 100 million downloads? In fact, name me an app with 10 million downloads? Or 1 million outside the UK?
- Where’s a tech company that is even close to an IPO on the major London stock exchanges?
- How many companies have proved to have a sustainable and profitable business model (or, how many will still be here in 5 years)?
Here’s the top 5 reasons I fear for the long-term innovation success of the majority of East London Tech companies, what can be learned from London’s success stories and what they could easily do to improve their situation.
1. Short term thinking, App-arently
You know what’s sexy to work on in East London? Apps! Either for phones or as Web Services. You’re probably shaking your head now, thinking “Well, that’s super obvious Nick! Thanks for nothing”. Yes, some apps and websites can become extremely innovative, especially when they get the perceived customer value mentioned above done right (Snapchat, Tinder, Facebook, Twitter, Google, etc). And everyone accepts the fact that not every App or Web service is ultimately going to make it.
The issue with innovation here though is that this focus on getting a job at a startup developing Apps is likely harming the UK’s ability to develop more long-term innovations which disrupt industries beyond the digital screen. It’s become less sexy to work in more traditional roles which innovate over 5+ years, like engineering or R&D departments in FTSE350 companies. University degrees like Computer Science are becoming more popular as kids dream of working at companies like Facebook or Google, or the next hot upstart.
Yiren Lumarch from the New York Times wrote a truly excellent article last month on Silicon Valley’s Youth Problem, where similar issues are being faced in America’s Tech Hubs, which I highly recommend you read (although it is quite long).
The timeframes within which these types of companies think is also shorter term. Apps are all about the here an now, about getting things done instantly. This fits in with the development mantra made famous at Facebook: “Move Fast and Break Things”, telling them to continuously improve their service or app based on real-world feedback. The issue here is that this development methodology is more likely to result in incremental innovations, rather than big disruptive innovations which ultimately make the biggest impact. Short-term development cycles also mean that these companies will almost always be developing for the current needs of the population, not necessarily those which will exist (or create the future). There is only so far that PHP, Ruby on Rails and Python can take you.
In fact, I would say the most innovative company from East London is the one which is investing in developing its technology over at least a decade. In fact, they were recently bought by Google for £240m, and are called Deepmind. They are developing technology on deep learning that could directly translate into artificial intelligence. That is an innovation that will add more value to millions of customers, and the valuation shows it.
2. Data, Data everywhere, and yet not a Byte is yours
London appears to have an obsession with companies that want to organise information. Make it easier to compare, easier to find, easier to provide opinions on, faster to buy and more beautiful to look at. I’ve even been to community parties which showed off the prettiest work which local Data Visualisation companies had done for clients like Formula 1.