“Pivoting” has become a 2021 buzzword amid the vocabulary of the UK tech SME entrepreneur. The Coronavirus Pandemic has forced businesses across all sectors to adapt their products and services to fit a business model that can survive lockdown and meet consumer needs.
It has been just over 12 months since offices closed and the majority of us took up at home working. Lockdown caused significant disruption to how we lived…normal business practice was sent into a tailspin, while consumer behaviours changed dramatically and at speed.
For businesses of all descriptions, these changes have presented challenges; some of which have been insurmountable.
But how has the tech sector adapted? What have been the main hurdles tech SMEs have had to overcome? And how can the tech sector pivot to reshape and offer a model conducive to the emerging climate as we move out of lockdown?
One of the main hurdles facing tech SMEs has been restricted cash flow.
Small and medium-sized tech organisations do not enjoy the deep pockets and significant cash reserves of their larger counterparts. SMEs rely upon predictable monthly turnover to run and operate smoothly.
Covid 19 sparked market uncertainty, supply chain disruption, and operational changes; all of which have triggered numerous problems for businesses trying to keep a secure hold on their cash flow.
Tech SMEs facing cashflow problems.
Research using a sample of more than 100 UK tech companies has shown that 42% of UK tech firms have been unable to sell to their usual customer base since the start of the pandemic last March. Furthermore, 48% of business leaders asked said they had to pivot their offerings to suit the current climate.
Despite the need for change, 66% of tech decision makers felt that their tech organisation had responded “well” or “very well” to the challenges dealt by Covid 19. Additionally, 59% of those companies who had pivoted their services stated that the changes they have made will remain; they will not be returning to the pre-pandemic state.
Despite this resilience, the research confirmed just how significant the cash flow issues have become this year. Just over half of the UK Tech SMEs featured in the survey confirmed that they had experienced cash flow issues since the implementation of the lockdown measures.
Tech SMEs facing a spike in demand.
The reliance on tech and digital solutions throughout the pandemic has meant that tech SMEs and the use of their services have spiked. The sudden increase means that many tech-based businesses have struggled to keep up with demand.
The numbers speak for themselves; 72% of UK tech businesses declared an increase in demand for their services. These firms span both B2C and B2B technologies, demonstrating the sudden growth in the customer base.
What does a “pivot” look like?
What a “pivot” may look like will vary from tech SME to tech SME. For some, it may be a case of flipping from a B2B model to a B2C model. For example, an eCommerce platform business may previously have traded letting restaurants order ingredients from local suppliers. However, they may have then had to adapt the product to allow vendors to sell directly to consumers. Variables such as pricing, volume, delivery methods, and payment systems may have changed to accommodate the climate, but the product itself remains the same.
Plan before you pivot.
Tech SMEs should undertake a period of thorough testing and research before making a pivot ensuring that the organisation is making the right adaptions. Once in place, the new technology will require rigorous beta testing to uncover any bugs or bigger issues that may impede a seamless transition toward the new business model.
Pivoting a tech business is often a survival reaction to an unprecedented situation. However, it can be a worthwhile exercise even beyond short-term reward. By undertaking a wide review of the organisation, the enterprise can examine the 360 scope of its offering. The product, service, revenue model, and target market can all be reviewed to ensure that the service proposition is its most relevant, or a more profitable marketplace is identified.
Research has confirmed this. Of the 47% of UK Tech SMEs that undertook a pivot between March and August 2020, 61% of these are intending to stick with their new-look model. They have decided not to revert to ‘business as usual’ once the pandemic subsides.
So, although necessary, these firms have pivoted for the better and have placed themselves in a stronger position to achieve long term growth and success.
Funding a Pivot.
Of course, to build, grow or change a business model is not always possible. One of the most significant hurdles which tech SMEs may encounter when considering the need to pivot is finance and funding.
An existing tech product may need to undergo considerable change, and in some cases, entirely new tech may need to be developed. Whether this can be done ‘in-house’ or through an external third-party, either option will require considerable financial resources.
It doesn’t stop here. Due to the changes that are made, it is likely that an entirely new customer base will need to be marketed to. The reformed business model will require communicating to ensure the new target market is aware of the changes. Again, this will require a reassignment of funds or an entirely new marketing budget altogether.
Where can UK Tech SMEs turn for funding?
A pivot requires an injection of capital…and quickly. Where can UK Tech SMEs turn for financial support if they are unable to self-fund a swift 180?
In September 2020, the Chancellor unveiled his Winter Economy Plan. This initiative had key business loan schemes extended as part of the announcement. Under the current plan, more businesses can benefit from the Coronavirus Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. In particular, the latter will be of most interest to the UK’s Tech SMEs.
The Future Fund scheme provides government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. These convertible loans are appropriate for businesses unable to access other government business support programs because they are either pre-revenue or pre-profit.
Tech SMEs can also consider private bank loans and investments. Despite the pandemic, the UK technology industry had a solid 2020. In fact, over the last 4 years, British Tech start-ups and scale-ups in the UK have more than doubled their collective value since 2017, according to some sources.
Collectively, they are valued at $585billion (£422.55billion). This figure is double that of Germany; the next most valuable European scale-up ecosystem.
Tech Nation’s Gerard Grech, says
“This year has highlighted the UK tech sector’s enormous resilience and world-beating innovative spirit. In the face of a major global crisis, it has not only survived; in many areas, it has boomed. From edtech to health tech, tech scale-ups are at the centre of rebuilding the British economy and setting new standards worldwide.”
Additionally, Brexit appears not to have dissuaded investors. The UK has powered ahead of Europe with a record level of VC investment into its tech sector over 2020.
Figures reveal that investment reached $15billion; $200million higher than 2019’s record-breaking year.
Investment gained momentum throughout 2020, reaching a peak in December 2020 at $1.9billion.
Looking more closely at the regional distribution of this finding, London, Oxford, Bristol, Cambridge and Edinburgh were the main hubs to attract investment.
Pivoting; A case study.
23-year-old, The Furniture Practice is a contract furniture dealer and consultancy for commercial spaces. At the start of 2020, the company was exploring ways to move into the eCommerce space. However, as the pandemic drove us into a work from home model, the organisation was forced to rethink.
The Furniture Practice launched a new sister business called curatd. This sister organisation offers a fully integrated online platform designed to simplify the selection, delivery and long-term management of furniture.
Employees can purchase or lease pre-approved and fully compliant furniture and equipment for their homes, allowing companies to better support staff who are working from home via a custom procurement platform.
Doug Bodenham, Curatd’s CEO explains that;
“The Furniture Practice was already well established in providing furniture for a wide range of commercial spaces. But as entire organisations began working from home almost overnight…we had to embrace technology to make it quick and easy for organisations to create a list of suitable furniture for their staff to choose from. In turn, home workers can now go online and within a few clicks acquire all they need to create safe, comfortable and compliant workstations.”
Many thinkers believe the pandemic to have changed traditional office working for good. It is believed by many that office spaces will now become hubs which employees will dip into rather than use as 9-5 destinations.
Curatd is an example of an organisation that has secured long term growth beyond the pandemic. They have built a model with forethought; one that will integrate seamlessly to the new normal working models of 2021 and beyond.
Pivoting has been a necessary, and in some cases, business saving practice throughout the pandemic for many UK Tech SMEs. Some have had to evolve due to a shortfall in need for their pre-pandemic offering, but for some, the pivot has resulted from a sudden and unexpected increase in demand as we increasingly turned to tech and digital.
As we have seen in the case of The Furniture Practice and sister company Curatd, this re-evaluation of service, usership and product will become the new normal; a model better suited to post pandemic commercial activity and customer need.
Whatever the future holds though, it is clear that those with an agile approach are in the best position to remain solvent during these unprecedented and challenging times.