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Tech giants are creating sink holes – startups should be careful not to fall in

tech giants

UKTN regular columnist Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, on the interaction between startups and tech giants.

July has been a big month for ‘big tech’. Share prices have been volatile, big fines have been dished out and public scrutiny has been widespread. The likes of Facebook, Google and Uber have dominated the headlines, but sadly for all the wrong reasons, even as tech profitability continues to grow.

The tech giants of today are pioneers in their own right – treading new ground, improving our lives and pushing the boundaries of innovation and disruption. With ever growing prevalence in society comes greater responsibility, and we are seeing issues, challenges and missteps. Yet, turbulence at the top can be catalyst for change and a golden opportunity for startups and scaleups to get it right.

Data & transparency

In recent weeks, Facebook has been hit the hardest, with the social media giant experiencing the biggest single-day market cap loss ever suffered by a US public company. It comes as a result of the company losing a battle with the public – trust and credibility is at an all-time low, with growth in user numbers dropping and a reputation in tatters.

Facebook’s struggles clearly show that to sustain growth and build on early success, clarity of intentions and transparency are a defining component – no company can afford to take public trust for granted.

Now more than ever, tech businesses must avoid breeding complacency. Facebook saw a growth opportunity that appears to have clouded its own vision of data use, and is now paying the price, working hard to correct missteps.

Great masses of data – which are increasingly a pivotal part of tech businesses, particularly in the retail and deeptech space – can be a source of substantial commercial success, but also invite significant risks.

The most disruptive technology of tomorrow is predicated on data – it is at the heart of AI, machine learning and the tech that will transform society. Startups are driving the agenda in these new fields, but must handle data with transparency and caution.

Once trust is gone, there can be a mountain to climb in rebuilding a reputation that sponsors innovation and growth.

Business model

Google has similarly stumbled on the transparency front, as the recent fine from the European Commission revealed. The €4.3bn slap across the wrist also exposed issues with the way Google packages the services it sells.

The company’s business model is predicated on the ability for advertisers to reach end users. The software that Google offers through the Android platform is not designed to make a profit on its own – it is intended to draw people into its advertising and product ecosystem.

In the digital age, businesses are predominately focused on topline growth. They are able to benefit customers, transferring efficiency savings and ploughing millions into R&D to stay ahead of the innovation curve – Google is a prime example.

However, with such scale come issues, as vast companies can be perceived as too powerful to challenge and too complex to change.

While startups exist in a different phase of their journey, the principle applies. Google has been stopped short by regulators, young businesses can apply these learnings as they grow.

Regulatory standards are intensifying and business models must come to reflect this, as shown by GDPR. Today’s founders should have one eye on the horizon, whilst attempting to manage the day-to-day execution and running of the business.

Startups are defined by their flexibility and nimble approach. These are exactly the characteristics they will need to embody if they are to ensure business models keep pace with the constantly shifting regulatory landscape.

Diversity

While Google and Facebook have had a turbulent July, Uber has faced internal upheaval for over a year. Last month the company’s Head of HR resigned, having been accused of dismissing reports of racial discrimination. This further shines a light on a company that suffers from an internal culture that is proving rigid and detrimental to the reputation of the business.

Uber is a case study for the societal issues we face, that we must tackle more broadly. Tech companies are setting new standards, pushing the boundaries of how we live, interact and do business – this is all the more reason to operate with clear principles for diversity and inclusion.

Whether you hold unicorn status, or are just starting off, an inclusive environment should underpin a company’s culture, as it’s ultimately beneficial both morally and economically.

The startups of today are the tech giants of tomorrow. They must aim to craft their teams, business models, and customers bases in ways that generate sustainable growth.

Learning from the mistakes of those that come before us is a vital step towards success – and today’s startups have an increasing supply of relevant examples from which to learn.