Alan Middleton’s head office at PA Consulting contains a stash of goodies and, like the Holy Grail in the Indiana Jones and the Last Crusade, it’s the least glamorous object that has the most interesting story. Between the box of translucent seaweed capsules that serve as a zero-plastic alternative to water bottles, developed by sustainable packaging start-up Notpla, and an internet-of-things enabled mousetrap that’s transforming the business model for pest control giant Rentokil, is an innocuous piece of circuitry that PA developed with Virgin Hyperloop One for its eponymous and much-fêted mass-transit system.
The idea of rapid transport by vacuum-tube harks back to the “atmospheric railway” concept of Isambard Kingdom Brunel, explains Middleton, who has run Britain’s oldest and largest home-grown management consultancy since 2007. Hyperloop is not without detractors but the potential is enormous – with almost no friction to slow it down, the technology could achieve the volume of rail with the speed of a jet plane, unlocking untold productivity as the distance between cities shrinks, all achieved in a sustainable way.
But while Sir Richard Branson, who has previously unveiled plans to bring hyperloop trains to the UK, races with Elon Musk’s The Boring Company to build the world’s first working hyperloop, the country currently most likely to capitalise on it is India. The state of Maharashtra has approved plans for a tube connecting Mumbai and Pune, built by a consortium of Virgin Hyperloop One and global ports owner DP World, that could bring $55bn in economic benefits to the country.
“I don’t know about you,” PA’s CEO says in a voice that wouldn’t be out of place on late-night Edinburgh radio, “but my commute takes one hour and costs 60 quid each way, so that’s £120 to come and go 90 miles on the train – it’s shit.
“HS2 is very big, very expensive and will take a very long time. So instead of pumping gazillions into legacy infrastructure and technology that frankly hasn’t changed much since the 1850s, how about we get on the front foot and take first-mover advantage with hyperloop instead?’’
Middleton’s restless optimism about technological progress has served him well during his time atop PA, a 3,000-person consultancy with a long, proud and eclectic history, which began with its first project – instructing wartime housewives how to assemble tail sections of Lancaster bombers. Since then, its story has, in many respects, mirrored that of the UK companies it advises.
PA is famed for its ingenuity. Uniquely among major consultancies, it develops and monetises its own intellectual property (IP) and has been involved in notable technological advancements, including pioneering the modern asthma inhaler, helping Motorola to develop the first working 3G technology and designing the British Army’s vehicle-mounted IED (improvised explosive device) detector in Afghanistan. However, it fell on hard times in the 1970s, at one point coming to the brink of bankruptcy, before rising again in the late 1990s.
Middleton’s own time at the helm has been marked by PA’s survival of the professional services drought that followed the global financial crisis, a high-profile spat over public-sector contracts, and the sale of a 51 per cent stake in the company to American private equity house Carlyle in 2015. The idea was to bulk the company up for future bouts against US giants McKinsey & Company, Boston Consulting Group and Bain & Company and it appears to have paid off – revenues have increased by 23 per cent in the past two years to a record £455m.
Despite this recent success, Middleton believes PA’s best times are ahead of it – and the same goes for the rest of the country. Here, he tells Management Today why.
The global economy’s slowing down, technology’s changing at a faster pace than a lot of companies can keep up with and the UK is staring down the barrel of a disruptive exit from the European Union. What is there to be optimistic about?
In the 1980s, when I set out in consulting, I really felt I was changing the world. The stuff I was working on was often leading edge: setting up brand-new banks, denationalising the power generators and distributors, working on the start of cellular communications. Over the intervening 30 years our industry somewhat lost its way.
There’s an awful lot of commentary in our industry about disruption and the loss of jobs but I don't believe there is a need to be so negative. I think British industry has the opportunity to get its mojo back.
There’s never been a better time to be a leader in business, because all this new technology allows you to do things you just couldn’t a few years ago, and, for the first time it creates an opportunity to do them sustainably. So if our grandfathers sought to implement world peace and our fathers sought to bring people out of poverty, we can be remembered as the generation that made business better.
Take quantum computing. That’s bleeding edge for sure, but it’s something we’ve just got to pursue. Within the next five or six years, a fifth of the world’s energy consumption will be powering computer equipment and mobile devices. A fifth!
With quantum, you can run the most powerful data centre off a handful of atoms and, all of a sudden, you’ve got all the computing power you need, but generated sustainably. Why I am optimistic about that? Just look at history. This summer, for the first time, the UK delivered more energy in one day from renewable sources than we did from non-renewables.
Ten years ago we didn’t think we could even get close. Rewind six or seven years, and I think most people in the room would have been sceptical about battery-powered cars taking you 350 miles down the M1 at 70mph while you shave and eat your sandwich. But it’s happening.
Have enough businesses actually taken these opportunities? The fact that our productivity continues to grow more slowly than it did before the downturn implies otherwise.
We create more billion-dollar companies than any other European country. In the UK we’ve got a phenomenal amount of brilliant IP being churned out all the time, and we’ve got foreign investors increasingly willing to come over here and find it and fund it. For me, that takes away one of the big moans we have as a nation – that we can’t keep hold of our success stories.
Look at the negative spin Arm Holdings got when it was sold [to Japan’s SoftBank, which paid £2.4bn in 2016 for the UK chip designer]. We say “there goes another great British asset” but, surprisingly enough, when I went up to Cambridge last month, Arm was still there and it was still employing people and creating lots of great IP.
But the problem with our productivity growth doesn’t lie with companies like Arm Holdings. If anything, it’s that we don’t have enough of them. Is the answer to be found in helping to scale our start-ups?
When we talk about innovation, we tend to get fixated on the massive generation of value through start-ups, but innovation is not all about start-ups.
What are they actually selling, when you really boil it down? What makes people invest or take a pay cut to go and work at a start-up? They’re buying optimism, nothing else. Start-ups are selling a future that looks wonderful and that their leaders believe in. And their optimism is something all business leaders can adopt.
The majority of productivity gain comes from applying existing technologies in very creative ways, often to very mundane businesses. It’s about being ingenious with what we have today.
So why isn’t that happening?
Everyone is born with natural curiosity but we start to batter it out of our children as soon as they reach school – at least in the western world. You will sit in a classroom and learn, you will do these exams, you won’t do scientific experiments because they create a mess.
So then you have all these great brains coming out of British universities, and where do they end up? The audit business. They look at the same things for 30 years, they progress because they’re on the treadmill and the most exciting thing they can say is that they found a bit of a problem in the accounts. It’s the ultimate expression of Fordism and Taylorism at work.
The good news is that we’ve got the opportunity in the UK to preserve that curiosity we’re born with. At PA we bring 17- and 18-year olds from disadvantaged, inner-city backgrounds in on work experience and coach them as consultants. You’d be staggered by the brilliance and ingenuity they show. And these are so often people who end up in the trash can because they've not applied themselves in the way that we believe they should apply themselves.
Do you think we can we be optimistic about Brexit?
When private equity came to PA, it sharpened us up, made us take a much more mature view of risk, pace and ambition. Private equity says to people that they can do so much more – it may be 6pm but there are still 12 hours to go before tomorrow morning, so crack on.
To some extent, Brexit in all its guises is delivering a not dissimilar injection of pace and urgency into the UK. I think it will cause many British organisations to sharpen up their act, to be more effective and streamlined and so on. So if farms on the east coast can’t get access to eastern European workers for five months of the year to pick vegetables any more, how are they going to get it done? The answer is they’re looking at how to automate. And, strangely enough, productivity will improve as a result.
The ingenious amongst us are always watching. We’re seeing investment still coming to the UK, our IP generation has not waned. We’re an absolute hotbed of innovation. The winners will not sit back and say: “My goodness, if we’re not still part of the EU, I'm going to stop having great ideas.”