Sir Brian Souter: The magic of entrepreneurship
There’s nothing mythical about today’s unicorns… Sir Brian Souter, ICAS Conference speaker, looks at embracing change and shaping our future.
Those of you who know me will be aware of how passionate I am about business and the role of the entrepreneur. And there is no more exciting time to be an entrepreneur, with the Internet, social media and advances in science and technology all creating opportunities for disruptive businesses.
When I started my career, CAs were not renowned for their entrepreneurial characteristics, and when I announced my intention to leave Arthur Andersen to start Stagecoach in 1980, my move was treated with some disdain and hilarity. It was an easy choice for me; I was the son of a bus driver and, from the age of 18, was a part-time conductor on the buses. It was a business I loved and I thought I could do things differently.
Becoming a unicorn
Today Stagecoach has a market capitalisation of £1.2bn, employs 40,000 people in the UK and North America and operates some 13,000 buses, trains and trams. It took us 16 years to become a “unicorn” (that is, a start-up company valued at more than $1bn). That was good at the time, but pales in comparison with more recent examples. Online retailer Jet.com apparently reached this goal in four months.
All businesses have been affected by the World Wide Web since it became available to the public in 1991, and new technology, including targeted drug delivery, graphene, robots, artificial intelligence and self-driving cars, will also have a dramatic impact on our lives over the next few decades.
Out of the highest valued companies on the US stock market, five of the top six – Apple, Google/Alphabet, Microsoft, Amazon and Facebook – were founded in the last 40 years and two in the last 25 years. Together the five have a market value of $2.6trn. The pace of change is quickening. Uber was founded in 2009 and has since raised $12bn. In April Tesla became the most valuable US carmaker, despite producing less than 1% as many vehicles as General Motors last year. Not all entrepreneurs run large tech companies. Many are sole traders, others are businesses struggling to compete against either new technologies or larger entities benefiting from economies of scale at home or overseas.
We must embrace change
Competition forces the continual reinvention of business models, to the benefit of the consumer. Entrepreneurs have made a huge difference to living standards worldwide. Not everybody has benefited from entrepreneurship and globalisation, however, and in many countries there is an active debate over the distribution of wealth, social mobility, welfare and the appropriate level of taxation. This is likely to continue as more low-grade jobs are lost to automation. We cannot adopt a Luddite attitude, though; we must embrace change and work to make the best of the situation.
New businesses are capable of growing rapidly to employ those likely to be displaced by technological changes and even grow to become unicorns themselves. As a society we need to encourage new business formations.
Government needs to get more involved in shaping tax policy to encourage entrepreneurs and SMEs. I will return to this subject in a later issue.
The importance of small business
Defined as those with fewer than 250 workers, small businesses employ 16m people, representing 60 per cent of all private sector employment. They are therefore a critical part of the economy. I find myself agreeing with the Scottish Government, which states on its website that: “New business formation is one of the key drivers of economic growth. A high business birth rate drives up levels of innovation, competitiveness and productivity, as firms are replaced by competitive enterprises in the important process of business churn.”