Scottish small business must embrace digital or die, FSB report warns

Scottish businesses need to understand how digital technology could transform their industries before it is too late, a new report for the Federation of Small Businesses Scotland (FSB) warns.

The report’s stark prediction is that small businesses need to “adapt or die”, arguing that all business sectors are likely to change dramatically as the use of emerging technologies becomes more widespread.

“The days of treating digital as a peripheral add-on are over,” it says. “Many organisations have become, or are in the process of becoming, digital dinosaurs due to their inability to adapt.”

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The study also cites an international study that suggests four in 10 of the largest firms across a spectrum of industries will be displaced in the next five years as a result of digital innovation.

Andy Willox, the FSB’s Scottish policy convenor, said that Scottish firms must “surf the wave of digital disruption or face being swept away”.

The report, Digital Disruption and Small Business in Scotland, has been produced on behalf of the FSB by Dr Jim Hamill of the University of Strathclyde Business School.

The research highlights a number of areas where it says a response is required from public policy makers.

Among the recommendations for government are that the Economy, Energy and Tourism Committee should investigate the opportunities and threats from digital and social media.

It also advises that systems of taxation and regulation be looked at to ensure a level playing field for new and existing businesses.

A property-based taxation system may disadvantage traditional businesses over digital ones, for example, and existing regulation may not cover the innovative new start-ups such as Airbnb or Uber, giving the newcomer an advantage.

“Government can give Scottish business a hand by, for instance, ensuring new players aren’t given an unfair advantage,” said Willox.

“Regulation needs to be sufficiently smart to adapt to new business models while not stifling innovation,” he added.

The report recommends that the Scottish Government’s Regulatory Review Group examine how to encourage innovation without disadvantaging traditional operators.

The research comes ahead of the Scottish Government’s National Economic Forum on Wednesday 18 November, which is looking at the digital economy and cyber resilience.