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Archive for the ‘Technology’ Category

Just turn it off and on again? The digital economy blow back

As the digital economy continues to balloon, influencing markets, people and society, policy makers are wrestling with its impact and how it can be managed better. While these questions began to take shape in 2018, thanks to exposés on the sheer quantity of data storing and poor practices of social media giants leading to inquiries and calls for action, concerns have continued to gather pace in 2019.

Consumers have reaped the benefits of digital advancement for years, such that negative aspects either seemed unimportant or possibly did not impact them. Faster internet, easier shopping, greater convenience, and access to the latest tv shows; all were noticeable and popular benefits. Yet, while advances have continued, consumers and the media have become more discerning or simply unwilling to accept the negative consequences of the unfettered digital economy.

One of the most obvious instances is the impact on high streets and business who have lost out to the convenience of internet shopping. Unable to sustain themselves, with chains like HMV citing rising costs and business rates pressures, businesses are leaving the high street behind. One in 12 shops have closed in town centres since 2013, with some communities losing over a fifth of high street shops. Traditional financial services like bank branches are also leaving communities behind as more consumers use digital payments and bank online. According to Which?, 60 bank branches are closing a month with some areas such as Scotland being disproportionately impacted.

The decline of physical retail stores and financial services puts some consumers at a disadvantage. Not every community has the broadband or connectivity to live a digital life, and some consumers simply prefer not to. Rural communities, older consumers and the financially vulnerable are acutely impacted by these changes, and forced to become adopters or travel sometimes excessive distances to continue their way of life. This is not the convenience the digital economy promised.

Moreover, the digital economy is now more clearly and negatively impacting the lives of others in our society. Safeguarding has become a key concern, with greater scrutiny on the content children can access on social media and the freedom allowed to post malicious and hurtful content. Government has at least in part sought to address this, if slowly, with the industry still awaiting the results of the Internet Safety Green Paper consultation. Internet safety and the responsibilities of companies such as Facebook have come under intense scrutiny and every additional story contributes to the push for action.

Yet it also extends more widely into mediums that, until now, were niche interests. Video games and interactive entertainment used to be the focus of a select few consumers and policy makers. Now, with an expanding market and interest from a wider audience, policy makers too are looking more closely. The Digital, Culture, Media and Sport Committee has openly sought views on expanding duties of care to video game developers to prevent exploitative behaviour, and the Labour Party wants to crack down on loot boxes and micro-transactions, fearing that they are similar to gambling.

Not only are parts of the digital economy leaving consumers behind, in the minds of some in media and political circles it is now actively harming and exploiting them. This is a far cry from the days when digital innovators were admired as entrepreneurs and champions of consumers.

As greater numbers of companies and sectors are pulled into scrutiny of the impact of the digital economy, it is tempting to see the case for clear intervention. Policy makers openly consider the benefit of new regulations, levies, taxes and restrictions to overcome these issues. In the last 12 months we have seen proposals for a digital services tax, a social media regulator and levy plan, an expert panel on digital competition, and wider proposals for a digital super-regulator to take the place of self-regulation. Andrew Tyrie’s plans to bulk up the powers of the Competition and Markets Authority (CMA) also open up the prospect of more investigations into this space as well.

For some of the companies that make up this sector, particularly those outside the giants of the industry, these could have a significant impact on their business’ outlook and ability to grow and compete.

Companies caught in the cross-hairs must accept there is no easy ride and that the cultural and societal impact of the digital economy will now always leave them open to scrutiny. The digital economy has helped to empower consumers and address some imbalances old markets did not or would not address. While this should not be lost, companies must be ready to address the wider ecosystem they are a part of and have in part helped create. This means digital platforms will have to not only be able to address their direct impact, but also be prepared to answer questions on how their platforms have facilitated undesirable outcomes and what mitigating steps they are taking. Policy makers are now far less likely to accept deflection or give companies the benefit of the doubt.

Telling the story of a company and its work, communicating the beneficial role it plays and managing criticism is now essential corporate messaging and not the nice extra it once may have been. Without it, digital and technology businesses may be at the mercy of quick political fixes, or find themselves left isolated as others take the lead on safety and responsibility in the digital environment.

 

 

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The future is female: how women’s health got technical

The #MeToo and Time’s Up movements have created (and been a direct response to) some of the biggest headlines of 2018. They have created a renewed focus on many of the lingering inequalities women continue to face in the workplace, as members of society (both in the UK and elsewhere) and in the eyes of the law –  a study by the Fawcett Society in January 2018 found that the UK system continues to fail women, and called for fundamental reform to increase access to justice and offer additional protections against harassment.

Despite ongoing challenges, ever greater numbers of women from all walks of life are continuing to step into formal and informal political arenas, with a record number of women elected in the US Midterms, sparking comparisons with ‘the year of the woman’ in 1992.

Against this political and societal backdrop, $400 million has been funnelled into femtech startups.

The term “femtech” was coined in late 2016, when Ida Tin, the founder of menstrual tracking app Clue, came up with the word to describe a sector that had started to quietly gather momentum. The femtech industry, made up of largely female led start-ups focusing on women’s health and wellbeing, has developed as a result of the desire among women to seek out alternatives to hormone-derived contraceptives and has expanded to include tech specifically catering to all aspect of women’s health, including post-natal care and female specific medical conditions. Consumers are increasingly demanding a major point of difference between medical options available to them, for example in contraceptives, where all conventional options are hormone derived, rather than offering non-hormone-based options. Start-ups are increasingly filling the gap that conventional pharma companies have yet to fill, creating apps and devices for women that range from daily monitoring of reproductive cycles to new treatments for chronic long term medical conditions based on technology, rather than pharmaceuticals.

The negative impact a lack of diversity (not only gender-based) in boardrooms has on business success is well-documented. A report by Grant Thornton found that a lack of diversity means companies fail to challenge their own assumptions and bring new ideas to the table. This is having a particular effect on the ability of the femtech industry to expand. There remains a disparity between the amount male-oriented health companies can raise, and the amount female-oriented companies can expect to raise. Ro and Hims, both specialists in male specific conditions, raised over $170 million between them this year, nearly half the amount raised by an entire industry of femtech leaders. This has been partially attributed to the makeup of the boardrooms femtech leadership pitch to, with femtech leaders stating that the disproportionately high concentration of men in the investment community make their products ‘unrelatable’, leading to ‘uncomfortable’ pitches that hamper sector growth.

Market analysts Frost & Sullivan have forecast femtech will be worth $50 billion by 2025 – a rapid expansion for an industry currently made up of 200 start-ups scattered around the globe. They found that women are 75 per cent more likely to use digital tools for health than men and that working age women spend 29 per cent more per capita on health than men of the same age. Given these figures, the opportunities are clear, however, currently just 10 per cent of global investment goes to female-led start-ups.

From a political perspective, much of the drive for women to take charge of their own health has been helped along by the re-politicisation of reproductive health and women’s rights. The election of President Trump in America is frequently cited as a galvanising moment for women globally, who have become concerned by his tendency to insult women he disagrees with and brag about sexual assault prior to his election. Additionally, while in office, Trump has become known for his promotion of anti-choice judges and politicians.

Battles to normalise women’s issues have taken place in Parliament too. In 2015, Stella Creasy MP made headlines for forcing Conservative MP Sir Bill Cash to say the word “tampon” in a parliamentary debate. The image of a young, female MP persuading a middle aged male Conservative to talk directly about the ‘taboo’ subject of women’s health and menstruation was something of a milestone in a parliamentary system not known for moving with the times. Creasy made headlines again in October 2018 when, following a referendum in the Republic of Ireland in favour of ending the ban on abortion, she and fellow MP Conor McGinn successfully passed a series of symbolic amendments to the Northern Ireland Bill in Parliament forcing the Northern Ireland secretary, Karen Bradley, “to issue guidance” to explain how officials can continue to enforce the ban. Given the issue is a devolved one, the real-world ramifications are likely to be limited, but as a symbolic gesture it was a powerful one –  it became an embarrassing subject for the UK government, given their confidence and supply agreement with the DUP, who are stridently anti-abortion. The DUP is unlikely to change its opposition to ending the ban on abortion, but they are increasingly isolated on the issue, with their view seen as increasingly unacceptable across all mainstream parties.

As more femtech products show that new ways of approaching female health are not only possible, but popular, investors will become aware of their growth potential and transformative effect on the health market. Elvie, a femtech start up that manufactures pelvic trainers, has just entered into a contract with the NHS that has the potential to save the NHS over £400 per female patient annually.

It hasn’t all been plain sailing for femtech companies, particularly those dealing with female contraception. In August 2018 an advert for Natural Cycles, one of the most high profile contraceptive apps, was banned by the Advertising Standards Authority after it found that their claim to be “highly accurate” at preventing unwanted pregnancies was misleading. Such headlines have caused some reputational damage for the fledgling industry, raising doubts about the viability of non-hormonal contraceptives, which remain a significant focus for femtech businesses. However, wider enthusiasm for alternatives to conventional contraception and medical treatments remains high, proving the continuing consumer enthusiasm for femtech.

Against this backdrop, femtech has the potential to make it far easier for women to take control of their own health. The consumer market is ready and willing to pay for innovative new options, as opposed to just dealing with the pain and side effects that are often dismissed as being ‘part and parcel’ of being a woman. As investors who benefitted from the consumer interest in men’s health over the last decade can attest, the personalisation of female healthcare holds benefits for both consumers and investors.

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Nurture or regulate? How government is supporting investment in AI

Investment in the UK’s tech sector is booming despite the cloud of Brexit uncertainty, with Britain leading the way among European countries. UK tech firms attracted £3 billion in 2018, more than double that invested in 2017. Boosting the trend further, the government has announced a series of funding strategies for Artificial Intelligence (AI) and future tech. The government certainly feels that it has the policy ideas to help boost the sector further, but will these policies help or hinder private equity investment in tech?

 

£3 billion investment in 2018

 

2018 has been a big year for government policy on AI in particular, with a new Office for AI set up, a new “Sector Deal” between government and AI stakeholders, and the launch of the Centre for Data Ethics and Innovation. These measures have committed the government to working with the tech and business sectors to help AI develop, meaning portfolio assets will have the opportunity to influence the direction of AI policy. Greg Clark MP, Secretary of State for Business, Energy and Industrial Strategy, has previously said that government wants to “help our world-leading businesses exploit the potential of AI, encourage companies to engage and grasp the opportunities ahead.” This all shows a willingness from the government to put the UK at the forefront of AI development and to invest in its growth. The issue with this policy is not one of enthusiasm from the government but ensuring that the tricky balance between the commercial opportunities for business – that it wants to help deliver – and the ethical questions about the use of AI are addressed.

 

Regulation that enables innovation

 

Currently, the Office for AI is run jointly by the Department for Digital, Culture, Media, and Sport (DCMS) and the Department for Business, Energy, and Industrial Strategy (BEIS). Tellingly, when the House of Lords Artificial Intelligence Select Committee published a report on AI in April 2018, the government response came only from BEIS. On this basis, BEIS is likely to be the department in the driving seat on AI policymaking, meaning funding and policy priorities could be influenced by business, and aligned with their commercial priorities.

 

The recent cabinet reshuffles are also likely to have an effect. While all the government’s new policies on AI were being established, Matt Hancock MP, a man infamous for his love of tech and innovation, was Secretary of State for Digital, Culture, Media, and Sport. In July he was replaced by Jeremy Wright MP, who has demonstrated decidedly less enthusiasm for the subject. Across his parliamentary career, Wright has largely sought to steer clear of all things technology related, only intervening as Attorney General to remind social media companies they were not above the law and to say that international law must keep up with the rapid rate of technological development or risk cyberspace becoming “lawless.” While this is unlikely to alter the direction of government policy, it may temper ambitions within DCMS, leaving BEIS with the bulk of the de facto responsibility for AI. This gives rise to the potential for the governments’ AI policy to become focused on its business potential, rather than technical innovation, alienating developers. The respective remits of DCMS and BEIS theoretically mean that DCMS will focus on supporting innovation during the current development stage of AI, while BEIS focuses on future business applications. In the absence of attention from DCMS, the government risks becoming too focused on the future without doing enough to help the industry grow in the present. Measures like the Sector Deal will help businesses maintain lines of communication that may alleviate this issue, but leadership within DCMS is unlikely to have been as enthusiastic as they once were.  

 

“Sensationalist” or “clear and present danger”

 

Underneath all the investment announcements and sector deals, there is a concern that there will be a backlash from some on AI. Greg Clark MP has spoken before about the ‘sensationalist’ way AI is portrayed in the media and has suggested that the government needs to take the lead in marketing AI to the public. They are likely to have a difficult job on their hands, with a 2017 report from PwC estimating that up to 30 per cent of the UK’s jobs could be under threat from AI, a figure which won’t go down well with workers in the diverse array of sectors likely to be affected. The government must perform a balancing act – supporting AI growth without adding to the perception that workers will be left without a job as a result.

 

There have been accusations from Labour and the academic community that the government has failed to tackle the ethical consequences of AI. Shadow Culture Secretary Tom Watson has argued that the government must do more to protect those in jobs that could be replaced by AI, while a group of 26 academic and research institutions described AI as causing a “clear and present danger” to society if unregulated.  It is highly unlikely that the government will seek to introduce heavy-handed regulations while AI is still in the development phase, and high funding levels will likely continue in the short term. However, investors should be conscious that regulation of the sector is largely inevitable once AI reaches the consumer market, whether that is self-driving vehicles or new advertising algorithms. In an era of cyber-attacks, fake news and Big Data, the government will have to be prepared to mitigate the risks if it wants to reap the benefits of AI.

 

Investors will have to be conscious of the mood in government going forward as this will remain an evolving and politically sensitive issue. The government has indicated that it would seek to introduce regulations for AI on a sector by sector basis while regulators have been encouraged to adopt an approach that both protects the public and “enables innovation.” How they approach this balance, and whether it is possible, will be crucial for the development of AI and investment in the sector.

 

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Looking beyond subsidy: does the Agriculture Bill miss the opportunity to innovate?

Working in the bubble of a city, it can be easy to forget that just under 70 per cent of the country is farmland. But the sector’s economic and political significance is large. While the industry is not one of the UK’s top employers, it still provides around 475,000 jobs directly, as well as supporting a further 30,000 indirectly. Last year it contributed £10.3 billion to the national economy in Gross Value Added terms (a rise of 20 per cent from 2016). It also plays a vital supporting role, providing 61 per cent of the raw materials for the wider UK agri-food industry, which is worth around £108 billion of GVA to the national economy and provides over 3.7 million jobs.

But the sector is facing significant challenges. Changes to industry methods from disruptive and emerging technologies promise to revolutionise how food is produced in the UK. Furthermore, the sector is facing a fundamental change in how it is regulated and funded post-Brexit.

For investors, the economics of the sector have been dictated by EU policy for decades. The Common Agricultural Policy (CAP) was described last year by MEP for South West England Molly Scott Cato, who is a substitute on the European Parliament Agriculture Committee as “unfit for purpose.” Its Direct Payments System, which pays income support based on the amount of land farmed, is unpopular among many in the farming community. Small farmers see it as rewarding land ownership rather than innovation and good farming, as it pays the most money to the largest landowners. In the UK, ten recipients receive 50 per cent of the total farming subsidies.

As the first example of major agricultural legislation introduced since 1947, and one of the first practical departmental bills to map policy for a post-Brexit UK, the Agriculture Bill is an attempt to address the way farming in the UK is subsidised and to take advantage of the demise of CAP. It seeks to shift the emphasis of subsidies away from land ownership, in favour of paying farmers for sustainable land management such as better air and water quality, improved soil health, higher animal welfare standards, public access to the countryside and measures to reduce flooding.

While the Bill provides an opportunity for the government to set out its vision for the future of agriculture in the UK, it also has the potential to put in place a regime as controversial as the CAP that is being replaced. Investors and potential investors in farming, agricultural land and associated assets will have to understand the implications it will have, as well as the details of a newly forged and unexplored system where payments are linked to outcomes.

Under current proposals, cuts to Direct Payments will begin in 2021 and continue until payments cease after 2027. These cuts will be introduced progressively, with annual payments of up to £30,000 cut by five per cent in the first year of the transition, while payments of £150,000 or more will fall by 25 per cent.

Payments will be delinked from farms themselves, allowing farmers to use payments to boost their pension pots rather than having to reinvest all the income. Environment, Food, and Rural Affairs Secretary Michael Gove MP has said this is a deliberate tactic to encourage older farmers to retire. The average age of a farmer has now risen to 59, and the shortage of viable farmland coming to market is driving up prices, creating barriers for new market entrants. Commentators have predicted the uncoupling of the payments from farms will eventually lead to a reduction in the price of land, with an increase in retirees leading more land to come to market.

Publication of the Bill provoked a concerned reaction from the industry, with many disappointed about its lack of vision and the neglect of wider related topics like food production, food market price volatility, free trade and access to labour.

At a Liberal Democrat Party Conference fringe event entitled “What should the UK’s future food policy look like?”, Ian Wright, CEO of the Food and Drink Federation, Elise Wach of the Institute of Development Studies and Stuart Roberts of the NFU all agreed the bill is a “missed opportunity for the whole food supply chain.”

Wright commented that the government significantly underestimated the role of food and farming for the UK economy and that it was “really important to see food and food policy as an arm of economic policy.” More vocally, Glyn Roberts of the Farmers Union of Wales has described the phasing out of the Direct Payments System before the economic consequences of Brexit are known as having “potentially catastrophic consequences for food production.”

Meetings between Environment Secretary Michael Gove and the industry since the initial unveiling of the legislation, have reportedly allayed some fears about the bill and the perceived lack of government vision, with Richard Griffiths, CEO of the British Poultry Council commenting that the bill was a “good first step.” However, the lack of wider vision or connection to broader economic issues in the bill may still prove an issue for some in the industry and limit what it is able to accomplish.

One area not included in the bill, but part of a newly prioritised workstream by DEFRA and a new £90 million fund from BEIS, is Smart Farming. The money provided by BEIS will help farmers and agricultural supply chain businesses to utilise robotics, AI and data science, and will help to develop solutions to issues within farming, such as land availability, unpredictable weather conditions, and poor supply chain management. New “challenge platforms” will bring together businesses and academics to tackle specific issues, and “innovation accelerators” will explore the commercial viability of new technologies.

There is much to interest investors keen on innovation in the UK’s urban agriculture industry, with new farming and food projects developing in the UK’s cities, particularly in London, around the use of hydroponic systems. These systems allow the growth of food products without soil or natural light, using blocks of porous material where the plants’ roots grow, and artificial lighting such as low-energy LEDs. Such systems overcome cities’ lack of space and allow growers to simulate any set of environmental conditions for food production they need. The new market in medicinal cannabis, which could potentially open up once regulations are changed to allow forms of the drug to be prescribed by doctors, could also see these types of spaces used to develop optimised marijuana farms in the UK’s cities.  The advances in this field of technology are abundant, with many companies looking for funding to scale new products or enter new areas.

Other examples of innovation include drone use to better assess crops’ performance across large farms, and enhancements so fertiliser and pesticides can be applied precisely to each plant to reduce over-use and wastage, improving the environment and saving on costs. Better monitoring of climate conditions can inform farmers’ sowing and harvesting plans. The benefits of automated and autonomous vehicles are also a potential game-changer for the industry, with combine harvesters, tractors and other farm machinery being able to operate independently.

The potential opportunities for businesses and investors in the industry are significant and potentially far greater than might be suggested by the Agriculture Bill as it stands. While subsidy and what will replace the Direct Payments System will be of obvious interest, it will be interesting to see what, if anything, will be added to the bill as it makes its way through Parliament that presents more niche opportunities, particularly if the bill is supplemented by further government publications to make up for what is perceived as lacking.

Speaking to the Grocer Magazine, NFU Director of Brexit Nick von Wesneholz neatly summarised the key problem with the Bill: “the key issue is not what the bill does, but what the current and future government does with it.”

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What does Hancock’s ‘tech revolution’ mean for health-tech and AI?

Given his well-publicised love of all things tech and digital, it comes as no surprise that Matt Hancock’s main priority as Health Secretary will be to overhaul technology in the NHS. Steeped in his family’s software company before entering politics, and driver of a much-praised digital government and economic strategies he seems, on paper, the ideal candidate for ushering in the ‘tech revolution’.

But Hancock will be equally aware of the challenge ahead, and that the dreaded fax machine has outlived many a Health Secretary. So, will his ambitious plans lead to a tech revolution in the NHS, or will the fax machine outlive him?

Last week Hancock unveiled “The future of healthcare: our vision for digital, data and technology in health and care” introducing minimum technical standards to ensure interoperability and upgradability in the NHS. Any system that fails to meet these new standards will be ‘phased out’, and any providers who do not adhere to the new principles will see their contracts terminated. No deadline for this phasing out has yet been given.

The DHSC also reaffirmed its commitment to delivering upon the AI and Data Grand Challenge set out in the Industrial Strategy to ‘use data, AI and innovation to transform the prevention, early diagnosis and treatment of diseases’. Just last month, health minister Lord O’Shaughnessy announced a ten point ‘code of conduct’ for AI intelligence and other data-driven technologies that encourages companies to protect patient data and seeks to ensure that only the best technologies are used by the NHS.

Under the changes, the use of ‘off-the-shelf’ technologies is encouraged, and CCGs and trusts will be free to buy whatever technology they need – so long as it is compliant with the principles. The DHSC said that “this should encourage competition on user experience and better tools for everyone”.

So far, so positive for healthtech and AI companies – especially for those who can meet the new standards. For new and emerging companies, that is unlikely to be a problem – it is older, more dated and less interoperable companies that are likely to suffer under the changes.

This is, of course, not the first time that a Health Minister has sought to upgrade NHS IT and tech. The doomed NHS National Programme for IT cost the tax payer nearly £10 billion before it was scrapped in 2013, one of a string of failed tech reforms.

Hancock is well aware of these failures and of the pressure to make his reforms succeed where the others did not. A key difference between the new changes and the previous attempts is the cost – so far, funding has been limited. Investment in the plans is unlikely to come out of the £20 billion announced earlier this year, and it is improbable that there will be any tech funding announced in next week’s Autumn Budget. In August, Hancock unveiled just £450 million of funding for new technology across the NHS. Alan Woodward, visiting Professor of Cyber Security at Surrey University pointed out that the funding would likely not go far in reality, saying: “Think about it per head, and what it could actually do”. The NHS spent £157 million on simply upgrading its systems to Windows 10.

This time around, reforms are less of a top-down, funded programme and more about making the market more accessible for new providers. Companies will need to show their worth and make a case for how their technology can make a substantial difference to the individual trusts. With the NHS endlessly battling its debts, a company that can highlight how its software can help to save money in the long-term will be an attractive prospect.

NHS trusts can also provide immense non-monetary value to tech companies. The NHS trove of patient data is often cited as one of its most valuable assets, and healthtech and AI companies are keen to access it to further develop technological solutions and diagnostic programmes. Partnerships like that of Google’s DeepMind and Moorfields Eye Hospital have enabled the development of software proven to be as accurate as world-leading eye experts in detecting over 50 different eye diseases.  The DHSC highlights DeepMind in its policy paper and describes it as technology that has “the potential to transform the way professionals carry out eye tests.”.

Moorfields is not paying DeepMind anything, but DeepMind is benefitting enormously from the partnership – through harvesting the patient data, it is designing and building diagnostic AI programmes that have the future potential to be adopted around the world.

With the DHSC increasingly cognisant of the importance of safe-guarding patient data, it is important for companies like DeepMind to provide reassurance they are adhering to the new guidelines. Whilst the lack of funding might initially seem discouraging for the healthtech and AI industry, there remain significant benefits and opportunities to working with the NHS and an ever more accessible environment to doing so. If companies create a compelling case for their value, efficiency and safety and if commissioners are receptive to change, the long-held dream of a technologically advanced NHS may just be realised.

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