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June 3, 2016

Start-ups, robotics & skills gap: How Cisco has been using $1bn to end UK’s productivity gap

C-level briefing: Part I – Cisco UK&I CEO Phil Smith talks to CBR on the company’s UK digital plans and the country’s state in terms of digital readiness.

By Joao Lima

"Countries need to be competitive; they need to have digital services available to the people, they need to have a strong digital infrastructure that underpins all the systems in the country, including broadband."

Cisco’s UK and Ireland CEO, Phil Smith sat down with CBR to discuss how the company’s $1bn investment in the UK has been used since it was announced exactly one year ago.

CBR: How is Cisco’s $1bn UK investment being used?

PH: The plan fits in a number of areas. It is predominantly about helping the country digitise, but we said we would do that through a set of particular vehicles. We opened a new office over in Finsbury Square [in the City of London], we have another office for the expansion of our Meraki business, and that office can potentially handle up to 300 people and it is already expanding very rapidly.

We are also putting forward $160m to facilitate for the UK to invest in start-ups and technology companies here in the UK.

I met with the Prime Minister [David Cameron] and subsequently met with the Secretary of State for Business [Sajid Javid], and also with the Digital Minister [Ed Vaizey] and we updated them on the progress of the plan.

We spoke about areas such as national infrastructure, public services, etc, and also the regions in general, and in particular the Northern Powerhouse. We have done work in Manchester to build some of the capabilities we have in London: innovation centres, some of the collaborative environment we have, and we are building a hub in Manchester as well.

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CBR: How much have you invested so far and will you be getting more funding?

PH: We are doing a lot of stuff at the moment, we are well on track with our billion dollar investment. If we estimate, we have probably spent $300 or $400m of that already.

We also made a couple of very significant acquisitions during that time which we have not specifically counted into the total but if we did we would have already spent over a billion dollars. We will continue to invest over the next two years.

We are totally committed, we will continue to track, continue to report the results, and use it as way of helping to grow the UK economy.


CBR: What is the main digitisation pain-point in the UK?

PS: The key one, and it is not just a digital issue, is the productivity of the country. The country is 17% below of the G7 average on productivity. It is obviously that there are some key industries like manufacturing and retailing in the UK which clearly have got some very good examples [of success], but at the bulk of what they do is unproductivity and there are real opportunities for productivity improvement which we are intending to work on as a company.

There are also things like automation and robotics, logistics and inventory management, environment design, process control, etc. All these areas, which we are not doing as well on [as a country]. But not all is bad.

If we look at robotics for example, we have got a lot of robots which are single function robots but what we do not have in the UK is a very good sensitivity of flexible robotics, the sort of stuff that we can re-commission to be able to use in other parts of the manufacturing process.

CBR: How serious is this specific robotics issue?

PS: Statistics from the Copenhagen Business School, which carried out a cross country comparison on automation, labour productivity and employment, has found that that if we look at major countries [like Japan, Sweden, Denmark, Germany, etc], the UK has the biggest gap in terms of productivity in manufacturing based on the level of robotics used.

If the UK took its average company up to the highest performing country average, it would be a 22% productivity increase in the UK. We are behind most other countries in robotics implementation.

CBR: You mentioned robotics, and this has been a hot topic lately especially because of job loss fears. A study has found that nearly half of Brits think their job will be replaced by robots by 2066. How would that increase in using robotics impact workers?

PS: I am not quite sure it is that black and white. Robotics doesn not of course not always mean elimination of a human job. One of the things other countries do a better job than we do is human-robot collaboration, to help speed up manual tasks and make them more productive.

We need to improve the UK’s productivity overall, whilst potentially preserving some jobs. There is no doubt that the technological change does potentially mean that people have to reskill in some way.


CBR: From job losses, to job vacancies that cannot be fulfilled: how bad is the skills gap in the UK?

PS: The skills shortage is significant. We are talking about a million jobs over the next five to ten years that are going to be created in the digital space, but potentially we do not have people to fulfil them at the moment.

We are also looking at a significant lack of skills in some of the key areas we will require in the future, like regular STEM skills, but also software skills, data skills, and so on. Much of which are not being created at the rate we need to use them in the country.

We have a real opportunity here with apprentices, for companies to potentially use that levy to actually up-skill a lot of their people with digital skills, potentially having a digital apprenticeship scheme.

This goes for other sectors as well [not just the technology space], such as retail, manufacturing, etc. There a set of things around skills that we need to be conscious of.

It is definitely a critical challenge for us, and I think it is a particularly critical challenge for young people and young women, who maybe do not see technology companies or even technology within companies as being an attractive area to work in. That is an area we need to do some work and change.

CBR: What sort of skills is Cisco struggling to find today ahead of digital 2020?

PS: Clearly, we still need people doing core science, maths, technical maths, and other science areas, like chemistry, etc. They are always going to be good for people who may well be going to technical roles.

However, there is also a significant opportunity for people from non-technical roles, because as we evolve technology wise, a lot of the questions will be about how do we adopt technology, how do we actually absorb the amount of technology we need to take on board.

Degrees like psychology, sociology, etc, may well become increasingly important to companies, when people start to think about the softer ways you absorb technology.

Also design skills. Obviously some of those come from science and maths. We need core technology skills, but we also need people that understand how to apply technology.

CBR: How is Cisco investing in the skills space?

PS: [In the skills space,] we are looking at how we can help improve the skills of the country. One of the things we are doing is increasing our network academy.

We already have 300 or so network academies around the UK. We are working at much more significant user apprenticeships. We see apprentices as a real opportunity.

CBR: What is your final ‘digital’ message to the UK public?

PS: The first thing to say is that with digital, and digital in the UK in particular, we have some really good opportunities. We have an interesting government who are keen to champion digital, we have good regulators who are going to regulate digital in an effective and sensible way.

The way digital touches our life, as consumers, is huge. From the UK, if we take our core capability, which I think it is strong in digital, the UK is in a great position. We just need to keep the momentum up, and genuinely find ways to capitalise on digital as much as we possibly can.

If we do that, we have got a chance to catch up on the productivity gap we have got and also potentially going ahead of other nations in Europe and the world.

In Part II – The UK is not only faced with a Brexit, but also with a "Techxit". Smith explains how the UK needs to change its business culture to win digital.

"Technological adoption is not just about the fact that there is new technology, it has much more to do with the culture of the company and how it is willing to embrace technological change."

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