The following is an extract from a letter to the Herald, sent by Alastair Balfour, Chair of 2in10 arguing we need to build market driven companies:
“Like many commentators on business issues, Iain Macwhirter (Sunday Herald 3rd January) mistakenly blames the credit crunch for an event which, for once, was not the fault of the banks – in this case, the collapse of MicroEmissive Displays, the Edinburgh-based manufacturer of tiny display screens which went into receivership in November 2008 (“Small wonder the Scottish economy is lying in tatters”, The Herald, January 4).
While MED’s final demise may have been due to the reluctance of banks to keep basket cases going, in truth the company sowed the seeds of its fate some years before when it went down the path trodden by so many Scottish tech ventures: launching a clever product into a world for which there was, at the time, little or no demand. As a result MED struggled for sales: it took the company seven years from its launch in 1999 to secure its first orders. So despite the brilliance of its technology, despite its success in achieving a flotation on the AIM market, and raising significant equity capital, it was inevitable that it would run out of money.
What is significant about the MED case is that its failure was caused by the same institutional, endemic issues that lie at the heart of our failure to create a technology sector worthy of the remarkable intellectual property that pours out of our universities and research institutions. Time and again, Scottish spinout companies launch exciting products into a vacuum where no sustainable, global markets exist. Strive as they might, they cannot create such markets: only customers do that. So they fail to secure healthy sales, and as a result die or reach a level beyond which they cannot grow – typically £1m-£2m of sales.
This issue is caused by a national lack of awareness of a technology marketing process called product management – defined as building only products that meet the proven needs of active markets. Inevitably, product management originated in the US and it is no coincidence that time and again US companies with inferior technology to that of Scottish companies succeed in grabbing and keeping market leadership. Scotland has very few professional product managers, and most are employed by the global corporations. It’s worth pointing out that the undisputed leader of Scotland’s small technology sector is Wolfson Microelectronics, with £122m revenues in its last full year. Wolfson embraced product management in the late 1990s, which then powered its tremendous decade of growth to become Scotland’s first £100m homegrowth tech company.
It is imperative we create a new professional class of product managers in Scotland so that the next generation of tech ventures does not fall into the same trap as MED.”
[Read the full article in The Herald here ]