Teams are lead­ers in the race for growth

En­trepreneurs are the poster peo­ple of busi­ness but should we be look­ing to in­no­va­tive, yet tra­di­tional, SMES to fuel real re­cov­ery? Rob Stokes in­ves­ti­gates

The Herald Business - - Sme Matters -

LET’s hear it for the teams rather than lone en­trepreneurs who star ted busi­nesses that be­came high-growth firms (HGFs) with­out so much as a scin­tilla of knowl­edge about IT and DNA.

It is al­most two years since re­searchers ex­am­ined Scot­tish HGFs, busi­nesses with aver­age g rowth i n the num­ber of em­ploy­ees or turnover greater than 20% per an­num over a three-year pe­riod, and with more than 10 em­ploy­ees at the start of the ob­ser­va­tion pe­riod.

HGFs made up 4.1% of busi­nesses in Scot­land em­ploy­ing more than 10 staff, found Colin Ma­son, pro­fes­sor of en­trepreneur­ship at Strath­clyde Busi­ness School’s Hunter Cen­tre for En­trepreneur­ship, and Dr Ross Brown, who was then in strat­egy and economics at de­vel­op­ment agency Scot­tish En­ter­prise, which spon­sored the anal­y­sis. How­ever, th­ese HGFs made a dis­pro­por­tion­ate con­tri­bu­tion to, and played a crit­i­cal role in, the growth of the Scot­tish econ­omy.

Pre­vi­ously, the archetype was bright aca­demic-cum-en­tre­pre­neur spins out tech­nol­ogy from univer­sity, at­tracts savvy busi­ness an­gels, strug­gles through the ven­ture cap­i­tal fund­ing cy­cle but sur­vives to be­come a fast grower, then floats or sells the com­pany to reap riches be­yond avarice.

The re­al­ity is that Scot­tish HGFs are gen­er­ally older and


larger than the ‘archetype’; of­ten grow through ac­qui­si­tion af­ter or­ganic growth by the ini­tial com­pany; of­ten suf­fer growth set­backs soon af­ter pe­ri­ods of rapid or­ganic growth; and fre­quently come out of ex­ist­ing busi­nesses rather than uni­ver­si­ties.

Team-based busi­nesses are more likely to grow than those started by sin­gle en­trepreneurs.

Pro­fes­sor Colin Ma­son now says: “Of­ten, one per­son gets the lime­light but the oth­ers beaver away in the back­ground with­out of­ten get­ting the ku­dos and are equally as im­por­tant in run­ning the busi­ness.”

Ex­am­ples in­clude AIM-listed Craneware, the Ed­in­burgh­based health­care soft­ware firm where CEO Keith Neil­son is very much the face. How­ever, co-founder and chief tech­nol­ogy of­fi­cer Gor­don Craig plays a vi­tal role as pres­i­dent of the firm’s im­por­tant USA op­er­a­tions ... where fis­cal and reg­ula- tory pres­sures on hos­pi­tals con­tinue to drive in­ter­est in its mar­ket-lead­ing so­lu­tions that help to max­imise rev­enues and cut costs.

Other im­por­tant char­ac­ter­is­tics iden­ti­fied as boost­ing pro­duc­tiv­ity in Scot­tish HGFs are man­age­ment’s prior ex­pe­ri­ence; strong vi­sion; mo­ti­va­tion to grow; a fo­cus on sales; de­volved de­ci­sion mak­ing; busi­ness strat­egy in gen­eral and mar­ket po­si­tion­ing in par­tic­u­lar; own­ing in­tel­lec­tual prop­erty such as brand names and copy­right; and care­ful re­cruit­ment and em­ployee em­pow­er­ment.

The par­a­digm- shift­ing con­clu­sions for pub­lic pol­icy were that tech­no­log­i­cal in­no­va­tion per se was not as­so­ci­ated with growth, and HGFs did not make ex­ten­sive use of public­sec­tor busi­ness sup­port, al­though ap­pre­ci­ated the re­la­tion­ship when they did.

Dis­tin­guish­ing be­tween man­u­fac­tur­ing and ser­vices was also prob­lem­atic, Ma­son and Brown found. “Ser­vices are in­creas­ingly em­bed­ded within prod­ucts and play an in­creas­ingly piv­otal role in the com­pet­i­tive­ness of firms. Thus, tar­get­ing sup­port at the man­u­fac­tur­ing sec­tor alone may not be ap­pro­pri­ate,” they said.

They con­cluded that cri­te­ria for sup­port should be as flex­i­ble as pos­si­ble – which sounded like heresy when gov­ern­ments were bang­ing the man­u­fac­tur­ing and high-tech drums, and when the solo en­tre­pre­neur is the su­per- hero of our Dragon’s Den, celebrity-ob­sessed age.

“Most of the HGFs in the study are in­no­va­tive, but few of t hese i nno­va­tions are an out­come of their own R&D ef­forts. Even fewer are at the fron­tiers of science. We there­fore need to see in­no­va­tion as an ac­tiv­ity that is of­ten in­de­pen­dent of R&D,” Ma­son and Brown com­mented at the time.

Most spend­ing on in­no­va­tion is in busi­ness pro­cesses or in do­ing some­thing new with ex­ist­ing t ech­nolo­gies and pro­cesses. Work­ing with cus­tomers and end users is im­por­tant, and in­no­va­tion spring­ing from recog­ni­tion of mar­ket op­por­tu­ni­ties stands a bet­ter chance of com­mer­cial suc­cess, the pair re­ported.

Pol­icy mak­ers, there­fore, need to un­der­stand that sup­port for in­no­va­tion is not the same as sup­port for R&D, they urged.

“There may be a case for shift­ing sup­port from tech­nol­ogy (with its em­pha­sis on R&D ex­pen­di­tures) to in­no­va­tion sup­port fo­cus­ing on closer en­duser en­gage­ment,” they sug­gested. “Newer forms of pub­lic sup­port could in­clude sub­sidised place­ments f or SMEs and their cus­tomers, and fund­ing joint in­no­va­tion projects be­tween firms and their cus­tomers.”

Nearly two years on, Dr Brown, now a lec­turer in man­age­ment at the Univer­sity of St An­drews, told The Her­ald: “The pol­icy-mak­ing com­mu­nity still very much equates HGFs with hi-tech sec­tors even though our work showed that hi-tech com­pa­nies are a very small pro­por­tion of HGFs in Scot­land. Also, very few univer­sity star­tups grow to any size or sig­nif­i­cance. Cor­po­rate spin-offs are a key source.”

So who should be to­day’s role­model in­di­vid­u­als and com­pa­nies? “HGFs come pre­dom­i­nantly from pretty ba­sic sec­tors,” Dr Brown said.

PULL TO­GETHER: strong teams ap­pear to be the real driv­ers of busi­ness suc­cess.

John An­der­son: “the big op­por­tu­nity is to take es­tab­lished busi­nesses and get them to start grow­ing”.

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