The “new normal” is a term that has been used with increasing regularity over recent months. It refers to the lasting changes COVID-19 will have on people’s day-to-day lives.
From social distancing to new health and safety measures, remote working to travel restrictions, exactly what the “new normal” is going to look like will only become clear over time. However, what is already becoming apparent is that demand for technology is going to rise.
With people cut adrift from the physical world, digital solutions have already become increasingly important for both consumers and businesses. Zoom stands as a testament to that; unable to meet in person, colleagues, friends, and family turned to technology to keep connected. On its quarterly earnings call webinar in June, the video conferencing tool reported a total revenue of $328.2 million in the three months to 30 April 2020, a 169% increase from the same period last year.
Not only have consumers relied on technology for everything from managing their financial affairs to ordering groceries online, but industry sectors that have hitherto not been the most forthcoming in their adoption of tech have suddenly looked to digitise many of their processes. Pubs are now reliant on taking online bookings, barber shops are using contactless payments instead of accepting cash, and cafés have replaced paper loyalty cards with rewards apps; examples can be seen all around us.
As a result, the technology sector as a whole – as broad and multifarious as it is – has been one of the few parts of the UK’s private sector to perform well during the immensely difficult coronavirus pandemic.
However, as the use of many tech-based services spiked unexpectantly, the businesses delivering them have faced their own unique challenges – most notably in having to scale operations to keep pace with demand.
Pivoting: The challenges and opportunities for UK tech SMEs
Here we will look at some of the key industries that have undergone a technological revolution over the past six months. What’s more, with digital tools set to play a key role within the “new normal”, we will look at how tech SMEs themselves are adapting to the greater demand for their services.
Kickstarting a technological revolution
Joint research conducted by Lloyds Bank Commercial Banking and UK Tech News has delved into how the country’s technology SMEs have been affected by the pandemic – more than 100 business leaders within UK tech companies were surveyed in August 2020.
The survey uncovered that 72% of UK tech businesses saw an increase in demand for their services between March and August 2020. This spans B2C and B2B technologies, demonstrating the sudden growth in companies’ prospective customer-bases.
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In some areas, the increase in demand has been relatively obvious. Take financial technology (fintech), for example: when the lockdown was implemented, many people were unable to travel to their high street bank branch. Instead, consumers increasingly relied on mobile and online banking – in fact, Yobota recently surveyed 2,000 UK adults, uncovering that 64% have been reliant on fintech to manage their finances since March, which is a sharp increase from before the lockdown, when just 42% of Britons were using fintech.
Although perhaps less apparent, this trend has taken hold in many other industries. Here are two examples – one from the food and drink sector and another from the world of orthodontics – of how technology has been called upon in response to the COVID-19 crisis. And whether it is a company that produces technology that is suddenly in high demand, or a business that now has a far greater need of technology it has previously seldom used, these case studies illustrate the challenges brought about by spikes in demand.
Biofresh Group Ltd
Newcastle-based food tech manufacturer Biofresh Group Ltd has products designed to keep food produce fresh. Before COVID-19, these products constituted 90% of the business; however, sales in this area fell sharply as the pandemic took hold. At the same time, another area of the business thrived.
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Biofresh Group has a separate line of products designed to disinfect a range of internal settings from care homes, hospitals and ambulances; to hotels, schools and public transport. The technology emits a high concentration of ozone gas that decomposes to ordinary oxygen on release – a reaction which completely decontaminates the surrounding air and surfaces.
Biofresh Group has seen orders for this equipment rise more than ten-fold since the beginning of March, as public health organisations and businesses across the UK and Europe tackle the pandemic.
With cashflow damaged by the sudden shortage of orders for its primary line of products, the foodtech company required an injection of capital to enable it to meet demand for its Cubo3 sanitisation product. With help from Lloyds Bank, Biofresh Group secured a £160,000 Coronavirus Business Interruption Loan Scheme (CBILS) loan so it could shift its manufacturing model and acquire the raw materials needed to quickly ramp-up production levels.
Jonathan Caisley, founder and managing director, Biofresh Group Ltd, explained: “Our company changed completely, almost overnight. Our new customers from the UK and across Europe needed sanitisation systems quickly and there was simply no time for a period of readjustment. We had to respond immediately to be able to build the products and protect the future of our business.
“The problem we faced was this meant making fundamental changes to how we operate, from essentially building low volume, high value machines, to large numbers of lower cost products, much quicker. The Lloyds Bank team understood that a delay of a couple of weeks would have had a fatal impact for the business and were fantastic in working to get the funding through in a matter of days.”
North East specialist clinic Queensway Orthodontics has invested in its digital services in the midst of COVID-19, which has supported the company’s expansion in the region.
The firm, founded in 2008, offers a full range of both NHS and private orthodontic treatments for children and adults. It was due to open three new locations in April 2020, with a finance package from Lloyds Bank worth £675,000 – comprising of a blend of asset finance and a commercial loan – used for the fit-out of its clinics in Consett, Bishop Auckland and Darlington with specialist dental equipment, including 3d-digital scanners and x-ray machines. The funding was also used to help in the recruitment of more than 30 staff across its new premises, taking total headcount to 69.
However, the April launch of the new locations was put on hold due to the pandemic. Instead, Queensway Orthodontics shifted its focus onto ramping up its digital offering, such as virtual consultations and artificial intelligence-driven treatment monitoring for Invisalign patients.
The group now offers 30% of its appointments digitally, and over the next year will be trialling the introduction of further virtual services, including fixed brace check-ups, as the trend for convenient digital services continues.
Queensway Orthodontics has also launched a new online store, BraceBrushes.co.uk, to offer customers across the UK orthodontic and oral health supplies. The team is now focusing on expanding its eco-friendly range of products, championing the reduction of plastic waste in dentistry.
Gavin Bennett, managing director at Queensway Orthodontics, stated: “The last few months have been a gamechanger for us, not just for our physical expansion, but the acceleration of our digital offering to help provide access to dental treatments throughout lockdown.
“The team at Lloyds Bank has been incredibly supportive, providing us with the flexibility to push back the opening of our new practices and focus on maintaining an outstanding service for our patients. Our online consultation platform, Smile Mate, has helped us reach more than 500 new customers, as well as maintain routine care for our existing clients.
“We have plenty of exciting plans in the pipeline to not only continue our recruitment drive to welcome more dental nurses to our practices, but also to continue to invest in the business’ digital transformation.”
The challenges of keeping pace with demand
How to keep pace with demand for your product or service is a problem that most businesses want to have. But that should not underplay the challenges that sudden increases in prospective customers will present. This is particularly true for tech SMEs – with fewer employees, more restrictive cashflow and smaller funding reserves, rapidly scaling up can prove difficult.
Over recent months, Lloyds Bank Commercial Banking has worked closely with tech SMEs across Britain. These are the most common challenges that they have faced, along with some advice on how to overcome them:
Adapting the offering
“Pivoting” has become a watchword in the private sector throughout the coronavirus pandemic. Unable to deliver the same product in the same way, many tech businesses have had to adapt their offering to make a better fit for the current climate.
The aforementioned research between Lloyds Bank Commercial Banking and UK Tech News found that 47% of UK tech companies have pivoted their service proposition in some way since March 2020. Indeed, the two examples above illustrate this clearly.
Pivoting to capitalise on where there is the most demand presents several business challenges. For one, the technology itself will likely need to be adapted for different users or be used in different ways. Secondly, changes to the service proposition will need to be clearly communicated to current and prospective customers.
Importantly, tech SMEs should undertake thorough research and testing when pivoting. Businesses must ensure they are making the right adaptions – and speaking to their loyal customers about how they could be better served is a good place to start. Once a new version of the technology is ready, it should undergo rigorous beta testing to uncover any bugs or bigger issues.
Just as with bringing a new tech product to market, if an established tech SME needs to pivot – even slightly – then a diligent approach is required to make sure the process is as smooth as possible.
Growing the team
An increase in demand often requires a tech SME to grow its team. Even if the tech itself is easily scalable – as is usually the case with SaaS offerings – it typically still takes significant human resource to acquire and on-board new customers. And as the customer-base grows, so too should the account or relationship management teams.
When looking to hire new employees, tech SMEs may find it difficult to meet potential candidates in person. Even as social distancing measures are relaxed, many businesses are still working remotely, and jobseekers may not feel confident travelling into an office for an interview.
Video conferencing tools will likely remain the default option for conducting interviews, so employers might need to think of creative new ways to create a more natural atmosphere and properly get to know the person they are speaking to.
Moreover, if tech SMEs are looking to grow their teams, they will also need to have a good understanding of their own working practices in the “new normal”. For example, will the new recruit be expected to work in the office, or will it be a remote role? Do the terms of the employment contract need to change to reflect a shift towards remote working? How will they effectively train new team members and help them to settle? These are all key questions that should be answered before any recruitment efforts begin.
To scale quickly in the face of greater demand, investment might be required. The acts of pivoting and growing a team – as outlined above – themselves will come with their own costs, which an SME’s existing cashflow or cash reserves might not adequately cover.
Positively, even in the midst of the pandemic, there are still many options available to tech SMEs in need of funding. These include both state-backed initiatives and private sector investment.
Most notably, the Future Fund is a government scheme that could be of interest. 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 that are unable to access other government business support programmes because they are either pre-revenue or pre-profit.
More information about the Future Fund can be found on the British Business Bank’s website.
Investment could also be sourced from angel investors, VCs and private equity firms; however, these types of private investment are more difficult to secure at present. Data from Plexal and Beauhurst suggests that between 23rd March and 19th July 2020, UK startups raised £2.67 billion. This is down 39% when compared to the same period in 2019.
It is important, therefore, that tech SMEs are aware of the funding options that lie within these institutions.
Lloyds Banking Group has committed £2 billion* to help customers manage any ongoing cashflow needs caused by supply chain interruptions or employee absences, and to minimise the disruption to their overall business operations over the coming weeks and months.
Lloyds Bank Commercial Banking has facilities such as invoice finance, overdrafts and term debt. Furthermore, as part of Lloyds Banking Group, we have Lloyds Development Capital as part of our portfolio, our private equity business which for over 35 years has built a proven track-record of backing management.
Support for tech SMEs
Whether they are struggling to pivot their product, experiencing growing pains in the face of rising demand, or requiring an injection of capital into their business, the COVID-19 pandemic will have brought about significant challenges for thousands of UK tech SMEs. It is important, therefore, for business leaders to remember they are not alone.
As well as the different avenues for financial support that are available, broader advice and guidance can be provided. And at Lloyds Bank, we see this as a vitally important part of what we deliver for our business customers.
We have grown our lending and support to businesses across the UK for this very reason: to help with day-to-day business needs. Our relationship managers are experienced in the tech sector and are keen to support further growth of this vibrant industry. Please get in touch today to discuss how we might help your business, too.
Darren Cable, Area Director Technology, Media and Creative at Lloyds Bank Commercial Banking
07841 780 343 || [email protected]
For more information about how Lloyds Bank supports UK tech businesses, click here.
*Figures obtained from Lloyds Banking Group press release dated 23rd April 2020.
All lending is subject to status.
Lloyds Banking Group is a financial services group that incorporates a number of brands including Lloyds Bank. More information on Lloyds Banking Group can be found at lloydsbankinggroup.com.