Rumours are currently rife that Apple is about to open an office, albeit a small one, in Cambridge. The research and development centre would initially employ 20 people, so while it is a coup for the city, it is obviously a drop in the ocean compared to the estimated 54,000 tech employees in Silicon Fen. I’d imagine more people currently work in the electronics department of the city’s John Lewis selling iPads and iPods.
The move comes on the back of Qualcomm buying CSR, HP acquiring Autonomy and the opening of research and development centres by Microsoft and AstraZeneca in the area. Taken together these investments can be seen as a real demonstration of the importance of the ideas and skills within Cambridge – and, the potential benefits (business and PR) of associating with the Cambridge Phenomenon.
However, I think there are positive and negative sides to the interest from tech giants in Cambridge. On the plus side, it reaffirms the city’s strengths as a hub, attracts more skilled staff to the area and, in turn, spawns new startups as employees with ideas leave corporate life to launch out on their own.
But there are also two downsides that potentially impact the good news stories. Firstly, there is a risk that with big investment the tech culture can become too corporate. After all, a lot of Cambridge innovation has come from finding solutions to problems in quirky, very different ways. For example, Intel wouldn’t sell Acorn chips for its new range of computers. The company couldn’t afford to build a billion dollar factory to make its own chips, so came up with the first fabless design. Acorn spun off this knowledge as ARM, now Intel’s biggest competitor.
Before that Clive Sinclair built a scientific calculator that used clever algorithms to run calculations on a single, relatively standard chip. Rivals such as HP used five chips and consequently built machines that were much more expensive. The SureFlap microchip controlled cat flap was created by a physicist who didn’t want neighbourhood moggies invading his house. All of these are examples of the lateral thinking that Cambridge is famous for – but could potentially be stifled by corporate politics (and, ironically too much money).
However I think that while the Cambridge culture may change, it won’t unduly impact its DNA. After all, in Silicon Valley enormous behemoths and nimble startups co-exist with people moving between the two. What is more serious is the second threat of a lack of infrastructure, particularly affordable housing within the city and its locality. It is currently as expensive to live in Cambridge as in London, but with less in the way of facilities. There are plans to build 33,000 more houses by 2031, but the majority are outside the city. And if people live further out and commute by car, rather than bike, it will add to congestion and put further strain on key roads.
Obviously Apple’s 20 researchers aren’t going to add too greatly to current housing woes, but as Silicon Fen grows, now is the time to address infrastructure concerns – or risk losing the city’s status as a tech hub to better equipped rivals.
I’ve always tried to keep my blog apolitical, criticising politicians from all parties equally. But, given the seriousness of the rise of UKIP, I’m suspending my impartiality for a week. Why? Put simply, I believe that Nigel Farage’s party is the biggest threat to face the UK (and in particular Cambridge) tech sector for many years.
First off, I don’t seriously believe that UKIP will garner enough MPs in the 2015 election to be part of a coalition. But what it has done is to shift the debate sharply to the right in two key areas (immigration and the EU), causing the Tories to talk about curbs on the free movement of workers and set a date for an in/out EU referendum. And given that the Tories are likely to be a central part of a future coalition that is potentially very damaging.
Aside from the general business problems that limiting immigration and leaving the EU would bring, it would hit Cambridge and the startup tech scene in four distinct ways:
Many of the highly skilled individuals currently working at or building tech companies originally came from overseas to study in Cambridge. It is already more difficult to get a student visa, and making it harder will simply put off the brightest and the best, who will head elsewhere. And every clever student who goes elsewhere diminishes the wider Cambridge academic population and impacts its reputation and attractiveness to new students.
Pretty much every Cambridge startup I’ve worked with has an incredibly diverse workforce, with employees from every corner of the world. They’ve chosen to come here, or have remained after study, and helped build amazing success stories with their skills. These are incredibly sought after and mobile people – limiting entry for them to the UK will mean they simply go elsewhere.
Charles Wang, the founder of US software company Computer Associates once had a policy of only employing first or second generation immigrants in management roles. Wang himself was born in Shanghai and moved to New York when he was 8 years old. His reasoning was that immigrants had drive, entrepreneurialism and a desire to make something of themselves. Given they often arrived with nothing, they had no safety net, unlike established citizens who had never faced the dangers of real failure. Wang’s view is limited – I know plenty of driven, successful entrepreneurs from stable British families, but he has a point. Limiting immigration removes these potential entrepreneurs and the benefits they bring to their adopted country when it comes to jobs, taxes and the wider economy.
A tech cluster like Cambridge isn’t about individuals, no matter how skilled they are. It is about how they interact together and share and develop ideas, based on their own knowledge and experience. Diversity is key – if you bring together a group of people with similar backgrounds and experience you’re unlikely to get the range of ideas that comes from a wider group. Ideas play off each other and grow – take away diversity and you severely weaken the idea gene pool.
In answering my points, critics may well make one of two arguments. Firstly, that we’ll still let in the best, most skilled people – it is the jobless benefit seekers that we want to turn away. That may be true but will they want to come to a country that appears so unfriendly to outsiders? And, how do you spot the entrepreneur or Nobel Prize winning physicist to be? They could be the yet-to-be-born child of immigrants that initially came over here to work in agriculture or to escape persecution in their home country.
Secondly, people will point to the US, which has restrictive immigration policies, yet the biggest tech/entrepreneur sector in the world. The difference is that the US is a country built on immigration, with a culture that rewards risk-taking and encourages people to try again after failure. We still don’t have that attitude in the UK, and we need free radicals to act as a catalyst to help change things.
The last 20 years have seen a huge expansion in the Cambridge tech scene, driven by the combination of ideas, skills and experience of people from many different backgrounds. Cutting off or limiting the flow of entrepreneurs, workers, students and researchers from outside the UK would completely change this energy and dynamism. It would still survive, but would be weaker, more insular and less exciting. That’s why it is important to tell politicians of all parties that we want to encourage responsible immigration and EU membership to build a successful Cambridge tech sector that benefits us all.
The news that HP is splitting itself in two (ironically a few years after a previous CEO lost his job for proposing the same idea) made me think about the size and structure of tech companies. Some companies invest in growing rapidly and aim to be biggest in their field, others focus on niches, while a third group aim to be a jack of multiple trades, spanning diverse sectors.
HP was previously in the jack of all trades camp, with its fingers in lots of different pies, from enterprise software and services, through servers and networking equipment, to consumer PCs and printers. It will now become two companies, one focused on the enterprise and the other on PCs and printers. Sadly, it has missed the chance to name one H and the other P, going instead for the more prosaic Hewlett Packard Enterprise and HP Inc.
While the two companies will be smaller, they will still each have over $50bn in revenues, and are likely to be hard to disentangle. At the same time eBay has announced it will divest its PayPal subsidiary, following pressure from shareholders and the entrance of Apple into the payments market. I must admit to being cynical about efforts by many tech titans to refocus themselves – it can look suspiciously like a random throw of the dice that keeps investors happy but has no real long term strategy behind it. After all, the world’s most valuable tech company, Apple provides software, hardware (mobile and desktop) and music and video content, alongside payments, maps and health data. And no-one has yet pressured it to split.
However there are definitely optimum size and types of company, depending on the maturity of the market they are in. Emerging sectors, such as the Internet of Things, change fast, so a company needs to be flexible and focused, with the ability to pivot quickly and respond to market conditions. It stands to reason that smaller players will be able to do this faster than legacy behemoths.
Mature markets run less on innovation, with much tighter margins. You are selling a replacement piece of software/hardware and any new features are likely to be incremental not transformative. Consequently the bigger you are the greater the economies of scale when dealing with suppliers and customers. The car industry is a perfect example outside the tech industry, where you need to be big to have a chance of profitability.
The tech industry is going through a rapid wave of change, driven by the move to the cloud and the rise of mobile devices. Previous shifts (such as from the mainframe to the minicomputer and then the server) have led to market leaders falling by the wayside – does anyone remember the likes of Data General for example? In fact HP has done well to survive so long, with a heritage that dates back to 1939. What will be interesting to see is if can make it to its 80th birthday in 2019, or whether it will be carved into even smaller chunks before then………..
Cambridge is rightly highlighted as one of Europe’s biggest innovation hubs, particularly when it comes to commercialising ideas that began in the research lab. This has spawned a huge biotech sector, and helped create a series of billion dollar tech companies that lead their industries, such as ARM and Cambridge Silicon Radio (CSR).
The Internet of Things (IoT) has been identified by many commentators as a key emerging market – and one where Cambridge has the ecosystem, experience and ideas to play a major role. So the news that IoT pioneer Neul has been sold to Chinese telecoms equipment behemoth Huawei depressed me. Not for nationalistic reasons, but simply due to the low reported purchase price ($25m) and the fact that the company has cashed out so early in the growth process. While there was a fair amount of PR spin around Neul’s progress to date, I genuinely believed it could join the billion dollar Cambridge club by developing its technology and building alliances and routes to market.
At the same time, Cambridge Silicon Radio is mulling a multi-billion pound sale to US firm Microchip Technology, reducing the number of major, independent, quoted Cambridge companies. Obviously investors and founders do look to realise their profits at some point, but it is important to balance this by looking longer term. While those that put money into Neul no doubt got a decent return, think how much more they’d have received if the company had been allowed to grow and exploit its market position.
I’m not alone in taking this stance. Cambridge Innovation Capital (CIC), the University of Cambridge-backed VC fund, recently warned its portfolio companies against selling out too early and promised to provide long term, founder friendly, capital to help grow the next ARMs and CSRs.
So what we need is the support, both financial and in terms of time, that gives companies the ability to achieve their potential. Not all of them will make it, and many will be niche players that logically fit better within bigger companies – but at least they’ll have had the ability to aim for the stars before finding their real place in the world. Otherwise Cambridge (and other parts of the UK tech scene), will simply act as incubators that turn bright ideas into viable businesses that can be snapped up and digested by tech giants looking for the newest innovation. It is much better for both the local and national economy that some of these startups make it the stock market as fully fledged businesses, creating ecosystems that generate new sectors and jobs. This requires longer term thinking from everyone involved – otherwise the number of billion dollar Cambridge companies will shrink even further.
The tech market across Europe is on a roll. According to Dow Jones VentureSource European startups raised €2.1 billion (over $2.8 billion) in Q2 2014 from VCs, the highest amount since 2010. The average size of the 365 deals was €2.2 million, up from €1.5 million in Q3 2013. Essentially that means every day of the quarter four startups got funding from VCs.
At the other end of the company journey, Tech.eu counted 92 tech exits in Q2 2014, up 70% from Q1 2014. 10 of these were IPOs, showing a healthy move back to the stock market for tech companies. And while deal size was undisclosed in 72% of cases, 15 were for over €100 million.
So, does this mean that everything is rosy in the tech market and your startup will receive its deserved funding in a heartbeat? Unfortunately not, and there are three worrying points behind the figures:
1 What is a tech company?
I’ve always been suspicious/puritanical on what makes a startup ‘tech’ rather than part of any other sector. Taking a look through both the Tech.eu list of exits and its corresponding index of EU tech funding rounds so far in 2014, I don’t see that many companies I’d class as technology. IPOs and exits included:
- Takeaway platform Just-Eat (food)
- Zoopla (property)
- Markit (financial information)
- Oldford Group (gambling)
- M and M Direct and Game Digital (retail)
- eDreams Odigeo (travel)
- Jobsite (recruitment)
Companies that received the largest amounts of funding mirrored this list – Delivery Hero, which has raised $285 million to date, is an online food ordering platform, while Ozon ($150 million) is an online Russian retailer.
There are what I’d consider genuine tech companies receiving funding (Klarna is a payments provider, Tradeshift is B2B software and Elasticsearch is a search and analytics engine). And looking at the IPOs, Zendesk (customer service software) also fits into my narrow definition of proper tech.
Obviously consumer facing companies need large amounts of funding – they have to market themselves and launch into competitive marketing which takes cash. But my complaint is that technology is part of every business, so just because you sell via the web, that doesn’t make you a tech company. After all, in the early days of the telephone, no-one created a new category for businesses built on the communications power of the phone. By lumping these companies into ‘tech’, investors and commentators overlook the genuine technology companies making software and hardware in favour of more glamourous consumer businesses. It was exactly the same issue in the dotcom boom, with anything that had a website being lauded to the skies as a tech pioneer.
2 Europe lagging the US
The European figures for funding look strong, but in the US private tech companies raised $13.8 billion in the same period. We’re talking about a similar size market in terms of people, yet nearly five times the investment. No wonder that many EU tech firms are crossing the pond to tap into US funding. Zendesk is a good case in point. While founded in Denmark, its successful IPO was on NASDAQ, where it has seen its share price nearly double from $9 to around $17.97 currently.
Clearly, there are structural and funding issues that need to be addressed to convince European companies that this is where they need to build their startups if we are to build a vibrant tech sector across the EU.
3 Selling out too soon?
Some companies are never going to have the scale to survive on their own and fit better as part of a larger entity. So, trade sales are a vital part of the tech ecosystem – investors get their money back (hopefully), enabling them to invest elsewhere, while founders and management teams are able to move on to the next big idea.
But looking through the crop of acquisitions the largest amount (37%) were by US companies. Facebook and TripAdvisor made two European acquisitions, and the likes of Cisco and Intel bought one business each. The risk is that too many smart European tech businesses don’t turn into long term, billion dollar companies with their own ecosystems around them, as they don’t get the chance to grow before being snapped up for their technology or market position. That holds back the wider European tech economy and reinforces US dominance. It would be good to see longer term backing for European tech, with more IPOs and acquisitions by local companies, rather than selling out to US giants.
I don’t want to come across solely as a whingeing naysayer, as it is great news that funding is up for tech businesses across Europe. But I think there needs to be a narrower focus on what tech actually is amongst the media and investors, and a longer term attitude if Europe is ever to come close to building a sustainable tech economy across the continent.
Unless you’ve been living under a rock for the past few days, you’ll have seen that the Tour de France, the world’s biggest annual sporting event, visited the UK. From the Grand Départ (race start) in Leeds on Saturday to the final British stage from Cambridge to London on Monday, the race has been typified by enormous support, with an estimated six million people turning out to watch at the roadside.
Putting that in context the normal total number of spectators for the entire, three week event is 12 million people. Riders described the noise levels at the roadside as ‘like being in a disco’, with climbs in the Yorkshire Dales resembling Alpe D’Huez when it came to the number of spectators. Even the normally insouciant French admitted it was the biggest start to the event ever.
I was one of the six million spectators, on both the Yorkshire stages and as a Tour Maker volunteer marshal in Cambridge and am still reeling from the exhilaration of the experience, with a sore throat from the shouting.
What makes the success even more amazing is the ratio of waiting to watching. The speed of the race means that the bunch tends to be past in less than a minute – even spread out on a climb it is less than 15-20 minutes for the final stragglers to come through. Yet people were in place the day before on climbs and 5 hours ahead of the race coming through on the flat. As someone pointed out to me, at 2 hours, the gap between the publicity caravan and the cyclists themselves was longer than a football match.
What makes people, many of whom had no interest in cycling, turn out in their millions and give up their time? And, what can marketers learn from the event’s success? I’d distil it into six characteristics:
1 Ownership and Pride
From the very start, the Grand Départ was billed as Yorkshire’s chance to shine, with the chance for God’s own country to show the world what it was capable of. This spurred a frenzy of creative ideas, from knitting miles of coloured jersey bunting to painting houses, people and sheep in tour colours. Every community wanted to outdo its neighbour in a friendly, but very serious rivalry. And this spread to the South as well – events and decorations in Cambridge and Essex stepped up a gear as they were determined to rival Yorkshire.
I saw thousands of people on bikes around the stages – and importantly you could cycle on the roads for hours before the race came through, and immediately afterwards. And the bikes (and cyclists) came in all shapes and sizes – from ultra light carbon machines piloted by whippet-thin athletes to shoppers and standard bikes with enormous child carrying trailers. There may have been too much Lycra on display, but it really felt that everyone could take part without being judged on their knowledge of rear sprockets or cycle computers.
3 Planning and providing something for everyone
Recognising that cycling itself wasn’t of interest to everyone, there was a huge range of activities around the tour. From French-themed markets to public art projects, the organisers used the Tour to stimulate a whole programme of activities that brought people together. It wasn’t just the preserve of big business either – from the smallest shop to the largest company, there were opportunities to get involved without spending megabucks to become an official partner. Even if the Tour was just a chance to have a party or visit one of the fan parks with big screens, you could enjoy yourself without travelling far. Planning was meticulous, even if the sheer number of people caused unexpected delays on trains, and all the relevant authorities worked well together to deliver the event.
4 Make it real
For generations reared on seeing sports stars at a distance, the Tour is a complete change. It comes to your town and the riders pass within centimetres of the crowd (admittedly leading to some incidents as spectators misjudged the amount of space needed by a charging peloton). You have the chance to get close to the stars, rather than simply seeing them on screen. From riders signing on before the stage to warming down by their team buses afterwards, the whole spectacle is public and accessible.
5 Not stopping after the event
Too many brands are focused on initial engagement, then treat customers as expendable. Like the Olympics, the idea of legacy was central to the Tour’s success in the UK. Before Saturday, Yorkshire was probably not known by many outside Great Britain. Now, thanks to the power of the TV coverage, it has been seen by billions of people around the world. Already Yorkshire has plans for a follow-up race, and has set out its ambition to be one of Europe’s cycling hotspots, boosting tourism and the economy. We’re in the midst of a massive growth in cycling in the UK, with its associated health benefits, and the Grand Depart will spur many more people to switch to two wheels.
6 Deliver a damn good show
There’s a reason the Tour de France is the biggest annual sporting event in the world – it is absolutely enormous. 198 riders, 440 vehicles in the race convoy, at least four helicopters, and a requirement for over 14,500 beds every night give you an idea of the scale of the thing. The publicity caravan alone takes around 45 minutes to pass any particular spot. People I talked to at the roadside were blown away by the spectacle, the noise, the sirens and the free stuff thrown from the caravan. Spectators really felt that they’d been part of something to remember – no mean feat given the time they’d spent by the roadside.
Marketers should take note from the success of Le Tour en Yorkshire (et Cambridge) and learn lessons on how they can create an equivalent buzz with customers going forward. And Lycra doesn’t need to be part of it………..
Amidst all the hype about the rollout of 4G and the excitement around fibre optic deployments (note to BT – I’m still waiting, and you said I’d have it in June), the UK has a hidden issue when it comes to communications. Too many rural areas still don’t have a decent, basic mobile phone signal.
In my village, in the middle of Suffolk, only one provider has any reception – and that is just 2G, not even 3G. When the local mast went down for a month last year it paralysed rural businesses, as well as impacting on the lives of local residents. And this is not the Outer Hebrides – I’m less than an hour from Cambridge and Norwich, and 20 minutes from several major towns.
Given my experiences, the news that the Government is considering forcing mobile phone operators to share their networks (so called national roaming), to widen choice, looks like a positive move. Putting aside the fact that the starting point for the new rules was apparently David Cameron being unable to get a signal while on holiday in Norfolk, it should benefit anyone living in the countryside. It will help stem the growing gulf between rural communication ‘have nots’ and urban dwellers with 4G and superfast broadband. A similar system operates in the US, which has a lot more challenging terrain than over here.
Obviously the mobile phone operators are crying foul, pointing out that they have spent heavily on masts in rural areas, and being forced to share their infrastructure will jeopardise future investment. Frankly, I just don’t buy this. Everywhere else they have competition and somehow survive – after all, most people pick a network operator on price/what you get for your money, rather than “do I actually get a signal?” At the moment they have captive markets that they have carved up amongst themselves, forcing people to choose by postcode, not package. Sharing infrastructure makes it more cost-effective and opens up new markets. Additionally the government has promised £150m to improve areas where there is no coverage at all.
The government claims it has big plans to turn the UK into a skills-based, technologically literate society. Entrepreneurship is being encouraged (albeit focused heavily on the media-centric Silicon Roundabout), coding is being re-introduced into schools and infrastructure projects promise faster links between major cities. So far rural areas have been left behind – with high speed broadband projects running late and a lack of skilled jobs hitting local economies. It is time for the government to address these issues or risk creating a two speed economy that deprives those of us in the countryside of the same opportunities open to the rest of the United Kingdom.
The Raspberry Pi is a quintessentially British invention. It was originally created because the University of Cambridge Computing Department felt that new students hadn’t a high enough level of programming experience when they began their studies. So a cheap, accessible machine was designed, using off-the-shelf components and plugging into available devices such as USB keyboards, SD cards and TVs. Like the webcam, another Computing Department invention (it was trained on the filter coffee machine at the other end of the building to avoid wasted journeys if the jug was empty), it combines technology with quirkiness and the British love of tinkering.
From these humble beginnings over 3 million have now been sold. To put this in context it is double the number of sales of the BBC Micro, the original government-backed home computer of the 1980s, and not far off the 5 million Sinclair ZX Spectrum machines that spawned a generation of programmers back then. It has even been shown to the Queen at Buckingham Palace, with founder Eben Upton ticked off by the Duke of Edinburgh for not wearing a tie.
However, the impact of the Pi has gone far beyond sales figures. It has created an ecosystem that spans everything from desktop arcade machines to funky cases. It is also being used within a whole range of other projects, from weather balloons to creating a pirate radio station. You can even run Spectrum games on it, linking back to the 1980s. And all of this from a non-profit company, that is now manufacturing in the UK.
And I’d argue that it has actually had a major hand in putting programming back at the heart of UK education. From September all primary school pupils will be taught programming, as opposed to how to use word processing applications. This will introduce a whole new generation to writing their own programs.
Even if just 5% go on to forge a career in technology, it will deliver a vast new workforce to the sector in the UK – as well as giving the other 95% some basic skills that will help them thrive in a world run by software. The availability of the Pi means it will be central to delivering these lessons, and the community has already created a huge volume of materials for teachers.
Once lessons start I’d expect many more parents to invest in a Pi (either driven by pester power or because they want to help their children succeed) – and at 20 quid for the most basic version it is within the majority of families’ budgets, at less than the price of a new PlayStation or Xbox game.
So I’d argue that the Pi’s rise to prominence hasn’t even really started yet. The combination of its community support, simplicity and the growth of programming means it will go from strength to strength. If you’ll excuse the pun, the Pi really is the limit…………..
Governments across Europe are always obsessing about creating their own Silicon Valleys, rivals to California that will catapult their country/city to international tech prominence, create jobs and make them cool by association. As I’ve said before, this is partly because such talk is cheap – bung a few million pounds/euros into some accelerators, set up a co-working space near a university and you can make some tub-thumping speeches about investing in innovation.
Obviously there’s a lot more to creating a new Silicon Valley than that. So I was interested to read a recent EU survey of European ICT Hubs, which ranks activity across the region. It doesn’t just analyse start-up activity, but also factors such as university strength, external links and business growth. While Munich, East London and Paris top the table, (with Cambridge at the top of tier 2), what is interesting is the sheer number of hubs and their relative strengths, despite many being quite close to each other.
There is a European obsession with a single hub to take on Silicon Valley, but as Paul Stasse points out in this piece on Tech.EU, if you zoom out and centre your ‘hub’ on Brussels, a 400km radius will bring in the majority of the EU’s ICT hubs. So consequently you need to go beyond individual cities or regions to move to a larger scale view. After all, Silicon Valley itself is not a single place, but a collection of cities and towns, that spreads from San Francisco through the Santa Clara Valley. So, while the Santa Clara Valley is geographically 30 miles long and 15 miles wide, the actual area of ‘Silicon Valley’ itself is much bigger.
In that case, why can’t Europe create its own Silicon Valley encompassing multiple hubs? Or even Valleys within countries – it is around 60 miles from London to Cambridge, so it wouldn’t be a stretch to build the M11 Valley (though with a catchier name).
The trouble is, California has some pretty big advantages that have helped Silicon Valley grow. While entrepreneurs and programmers flock there from all around the world there’s one business language (English), one legal system and one predominant culture. Being part of the US gives immediate access to over 300 million people in a single market. Europe’s diversity is both a strength and a weakness – you can’t simply up sticks and move your company from, say, France to Belgium, with the same ease as from San Jose to Palo Alto.
In my opinion what is needed are three things:
1 Be more open
I’m as guilty as the next person, but individual hubs need to look outward more, rather than believing that success ends at the ring road. Only by encouraging conversation between hubs and idea sharing will innovation flourish.
2 Make movement easier
You are never going to change cultures, but the EU has a role to play in standardising the playing field when it comes to creating companies, harmonising legal systems and generally helping create a single market. That way entrepreneurs and companies can move more easily and collaborate, without having to duplicate bureaucracy or red tape.
3 Celebrate what we have
It is time to end the obsession with creating the new Silicon Valley. It isn’t going to happen. Instead, celebrate the ability Europe has to build multiple, interlinked hubs that play to our strengths, rather than bemoan our inability to spawn the next Facebook.
Silicon Valley, Europe may not happen but by supporting existing, successful clusters and hubs we can build a technology industry that can drive innovation, growth and jobs.
Ultimately the fate of Anglo-Swedish pharmaceutical company AstraZeneca, under siege from US giant Pfizer, will be decided by its shareholders. But that hasn’t stopped the potential takeover from becoming a political football, with MPs, ministers, businesspeople and scientists all providing their views.
Some of them are justified in sharing their opinion – the MP for Cambridge Julian Huppert wants assurances to protect the high value jobs coming to the city from AstraZeneca’s proposed new research campus. University of Cambridge Chancellor, Lord Sainsbury, is concerned about the impact of a takeover on scientific research in the area and beyond.
Others however have fewer grounds for comment, but with a general election next year (and a European poll looming), it is a chance for the main political parties to try and differentiate themselves. It is a delicate balancing act, particularly for the Conservatives. On the one hand, they want to demonstrate their free trade credentials, but on the other they champion investment in scientific research as critical to moving the UK away from being a services-based economy. In many ways it is easier for Labour, as they are able to call for decisive action to stop the takeover, without having to actually implement anything.
Pfizer under attack
On the PR front, Pfizer is facing an onslaught from multiple sides:
- The positive tax implications of buying AstraZeneca and moving its headquarters to the UK have been highlighted as a major attraction of the deal, rather than a desire to invest in research.
- It is also hamstrung by previous behaviour – it shut its research centre in Kent (where Viagra was developed), leading to 1,500 job cuts and has slashed staff numbers following other takeovers. Indeed, the ex-CEO of AstraZeneca has said he has concerns that “they will act like a praying mantis and suck the lifeblood out of their prey.“
- A pledge to keep 20% of R&D jobs in the UK in the event of a takeover has led to worries that posts will be cut in the US.
- Finally, its first quarter revenue fell by 9%, $730m below analyst expectations, as patent protection runs out on key drugs.
The reason for much of this ire is actually retrospective. MPs and the general public are still smarting after the hostile takeover of Cadbury by Kraft, and in particular the broken promises on factory closures given to parliamentary committees by CEO Irene Rosenfeld. There’s a public determination not to be made a fool of again driving a lot of political behaviour.
The Pfizer PR strategy
This means that Pfizer is being cautious and taking the time to get its message across, with CEO Ian Read making trips to the UK (note how his Scottish background is being played up), intense lobbying of the government and assurances being given about jobs in the short-term.
However with less than three weeks until the bid deadline of 26 May, expect the tactics to evolve, depending on what will sway stakeholders. In a way AstraZeneca wants Pfizer to turn nasty, so it can claim protection from the Big Bad American, but I think that its opponent’s PR strategy is too clever to fall for that. It will just chip away, giving what appear to be increasingly concrete reassurances in public on jobs, while lobbying investors and politicians behind the scenes, potentially raising its bid without going overboard.
Will it be enough? Time (and PR) will tell, but I fear that the combination of Pfizer’s stealth approach and the short-term focus of many investors, will take the prize.