The Business World: Britain's ready for the Internet challenge

The British love of video games, satellite TV, and doing business by phone all help UK firms to find the technological successes of tomorrow

I WAS about to take a dip in the pool of a Swedish hotel a couple of weeks ago and out of the locker-room shower strode a dripping Swede, totally towel-less - but chatting on his mobile phone.

I had two thoughts. The first was that I didn't know they made waterproof mobiles, and the second was that if you want to be at the forefront of new technologies you need inventive, demanding customers.

Scandinavians have the world's highest penetration of mobile phones, thanks to Nokia and Ericsson. Americans have a relatively primitive mobile phone system. But they spend an average of 55 minutes a day on the Internet, accounting for 95 per cent of the world's e-commerce, which helps drive US leadership in this area.

Customer demand determines which technologies are commercial successes. Few people in the telecoms industry foresaw the success of mobile phones, soaring in Britain to an extent not predicted even at the beginning of the year.

On the Internet, the most important aspect that distinguishes it from most new technologies is that it was bottom-up, not top-down. It was created by consumers, who took an existing technology developed for something else, and found new uses for it. Once this was clearly a winner, the big companies came in. The driving force that enabled big US companies to be so successful was the inventiveness of the American consumer.

So what about Britain? What comparative advantage, if any, might UK consumers confer on companies here - or to broaden the point, what advantage does the combination of customers and market conditions confer on UK-based companies? I can see five areas that look promising.

First, we are unusually adept at using the phone for commercial purposes. Phone banking and phone insurance services have developed much more rapidly here, partly because we have more demanding consumers than does the US. Many American firms have sought to develop phone services, but either tried to cut costs by excessive automation (and delivered a lousy service as a result), or have simply met cultural resistance to buying and selling over the phone.

As the mobile phone becomes a more important way of accessing the Internet (and there is a debate about whether it will become as important as the computer), expect our experience in areas such as phone banking to be applied to other commercial activities.

Second, Britons seem to be particularly hooked on video games. That has already helped British games software writers to capture 30 per cent of that world market. Now it seems likely video games consoles will develop to embrace Internet access and provide another way into e-commerce. From a selling point, they have advantages on conventional PCs. They are particularly user-friendly, they are widely used by the high- spending young, and they reach parts of the market PCs have yet to penetrate. The trick will be to turn our experience in developing games software into developing commercial software, making e-commerce more fun. And the more e-commerce migrates to games consoles the greater the benefit to UK-based software writers.

Third, UK consumers have grabbed direct-to-home satellite TV broadcasting relatively swiftly. About 18 per cent of our homes have dishes, a much higher proportion than the cable-dominated US and, among the big countries, second only to Germany. If this too becomes a more important technology for e-commerce then we are well-placed to take advantage of it.

Four, we have the advantage of an English-language consumer base, an edge pioneered and powered by the US English-language base.

But we are part of European culture. So we share with Europe global games such as football and Formula One, and the US has been largely unable to export its national games. The importance of language has been increased by the Internet and related technologies, and we are lucky to be able to create English-language products and services easily.

And finally, education. The Open University gave a head-start to the UK as an exporter of e-education, long before the Internet existed, and got to know a great deal about quality control and after-sales service of distance learning. We developed demanding consumers of education. This is being picked up by conventional UK educational establishments, which are now exporting their programmes on the Internet. But I suspect we are only scratching the surface here. The education industry is still in the very early stages of a gigantic shift from being producer-led to consumer-led and the more the emphasis shifts to the latter, the more important it will be to have experience of demanding consumers.

Yet are our consumers demanding enough? Probably not. But they are inventive and open to foreign ideas and products. One of the features that dominated the UK economy, at least since the Second World War, has been the way that the country sucks in lots of imports when demand rises. Much the same happens in the US. For most of the past 40 years this has seemed a problem, the way a trade gap opens every boom. The same characteristics that encourage us to buy foreign goods are also the characteristics which enable us to develop and export intellectual services. Unless you have an open mind to importing goods you do not have an open mind to create services.

That point is impossible to prove. One can look at the United States, where there is a similar tendency, and contrast that to Japan, which imports very little, but finds difficulty in generating (let alone exporting) successful new service industries.

None of this means we should congratulate ourselves for the adept way we are developing e-business. I don't think at the moment we are doing particularly well: we remain a long way behind Scandinavia in many areas. But we clearly have a lot to play for and are not at all badly positioned to do so.

Besides, there is such a thing as quality of life. I'm not sure that the effectivenesss of a shower is really enhanced by making a phone call while you scrub.