Stoke City of Culture Bid and Innovation

Keele University and the University of Staffordshire are collaborating on the City of Culture bid for Stoke-on-Trent in 2021. I was invited to attend a workshop last week to discuss how we can support the bid.

Colleagues were present from a diverse range of academic backgrounds: criminology, social care, history, human geography, business studies, and sociology. We had a lively discussion on how our varied backgrounds could work together. We agreed on the importance of including people from a wide range of backgrounds who live in Stoke to contribute ideas as to what we could research, to get involved as researchers, and to define what was important about the City of Culture bid to them.

As a business studies academic, I was particularly interested in what the potential impact would be on SMEs in Stoke-on-Trent. Stoke is the largest town in the Stoke and Staffordshire LEP region.  SMEs in this region urgently need support with innovation. Innovation is seen by policy-makers as being crucial, not only for the SME’s themselves, but also for creating high quality jobs and driving economic growth in their region (Department for Business Energy and Industrial Strategy, 2017).

However, the Stoke and Staffordshire region appears to be doing less well than others. The  2015 Community Innovation Survey found that across the government, higher education, and non-profit sectors, the Stoke and Staffordshire region has a particularly low expenditure on R&D.  R&D expenditure is a crucial precursor for innovation. Business enterprise expenditures on R&D is particularly low in the region: Stoke and Staffordshire’s businesses spent only £155 million on R&D compared to neighbouring Cheshire and Warrington’s £1,035 million. The same report finds that Stoke and Staffordshire also has the 4th lowest percentage of businesses engaged in product or process innovation: only 18% as compared to South-East Midlands (the highest) at 34%.

There is clearly a need for Stoke and Staffordshire to improve the innovation activities of SMEs in the region. The MCIL Project (of which this blog forms a part) is a leadership development programme designed to improve the innovation activities of Stoke and Staffordshire’s SMEs.

While Stoke bid is clear that quality jobs and economic growth are reasonable expectations, to what extent can a City of Culture bid encourage innovation?

In the evaluation of the European City of Culture in Liverpool, which ran from 2005 to 2008, the report authors concluded that:

  1. SME businesses in Liverpool and the sub-region were positive about both the change in the perceptions of Liverpool but also about a positive impact on their turnover.
  2. Employment in the creative industries showed a major increase, mostly in contractual, rather than permanent positions.
  3. Retail tourism employment in Liverpool showed above average rises during 2008, but could have been due to other factors, such as a major new retail shopping development.and improved infrastructure.

While increased innovation funding for SMEs may not be an outcome of the City of Culture, there is some evidence that shows that improved “quality of place” has a positive impact on innovation activities. Increased pride in the city, as well as improved cultural facilities and infrastructure, was an outcome of the City of Culture activities in Liverpool. There is some hope therefore that the City of Culture bid in Stoke could indirectly increase innovation activity in Stoke’s SMEs.

References

Department for Business Energy and Industrial Strategy. (2017). Building Our Industrial Strategy. London: Department for Business, Energy and Industrial Strategy.

Garcia, B., Melville, R., Cox, T. (2010), Creating an Impact: Liverpool’s Experience as European Capital of Culture  University of Liverpool

Risual: what a high-growth firm looks like

Risual: what a high-growth firm looks like

The MCIL August 2017 leadership session was all about sales. The two-day session for SME leaders emphasized the importance of ambition and culture in achieving better sales. Luckily, Alun Rogers, co-founder and director of Risual  was on hand to explain how he achieved better sales through a focus on managed growth.

Alun Rogers Risual Aug 2017 photo
Alun Rogers, co-founder of Risual shares his secrets of managing growth

Risual are a Staffordshire based company who provide IT consulting, managed services, and technology to clients globally. Their sales figures continue to be impressive: they achieved a 40.6% increase in sales in 2015, and a 41.4% increase in 2016, based on their latest submission to Companies House. Risual are clearly a high-growth firm.

Alun ascribed their sales success to a number of growth-oriented attitudes:

  1. Being Ambitious: “We wanted to do something and to take it as far as we can”

Alun and his friend Richard Proud set up Risual in 2005 based on a mixture of credit card loans and faith. While ambitious entrepreneurs no longer need to turn to credit cards to source funding (a previous blog post describes the variety of funding sources available: from government grants , to business loans to equity funding), sheer hard work in the early days crucial. Early research into firm growth described the passion of firm owners:

“Small businessmen frequently tend to identify themselves with their firm and to view it as their life’s work, as a constructive creation to which they can point with pride.” Edith Penrose “The Theory of the Growth of the Firm”, 1955.

Illustrating this dedication to their firm, Alun and Richard virtually lived in the business for the first 18 months. They worked 16 hours a day, 7 days a week to pay back their debt and build up client goodwill.

Their determination and effort is typical of the “Introductory” stage of the firm below.

firm lifecycle stages

The lifecycle theory of the firm argues that sales increase as the firm grows over time. As Risual  moved into the second year of their business, they moved into the “Growth” stage. This required them to invest their cash reserves into recruiting more staff.

  1. Focus on Growth: “If you are the product, you don’t scale”

During the next few years, Risual would meet the OECD  definition of a high growth business:  “a firm of 10 or more employees that grows either its employees or turnover by an average of more than 20 per cent per year for three consecutive years.” It is important to note that there have been cautions against using this definition (Daunfeldt, Johansson, & Halvarsson, 2015), particularly as firms grow in different ways. Growth can be organic (as in the case of Risual, which grew through sales) or through acquisition (where a company buys another company and instantly adds jobs and turnover to its balance sheet).

Alun and Richard were looking for organic growth and quickly realised that they needed to recruit more staff in order to grow their business. This was a wise decision. SMEs who recruit more staff than they immediately require (as Alun and Richard did)  are said to have “slack resources” (George, 2005). The slack resources argument suggests that additional staff or funds provide a cushion that allows firms to respond quickly to new orders or to initiate a change in strategic direction. SMEs with slack resources have been found to grow more quickly than those without (Moreno & Casillas, 2007).  Risual now have over 100 employees and are focussed on sales growth and product diversification.

  1. “Stop doing what you love to start doing what you love.”

Over time, Alun realised that he had to focus less on technical innovations (which he loves) to set up processes and structures for the business. In time, this would mean that the business would run itself and he could re-focus on working with technology. One example of how a new process helped manageable growth was in the area of recruitment. Risual use the SWAN formula for staff recruitment which was originally developed by the American Management Association (Thompson & Tracy, 2011). The acronym stands for: Smart, Works Hard, Ambitious, and Nice. Alun explained how he applied these 4 characteristics to Risual:

  1. Smart” people have the right skills for their job.Jim Collins describes the importance of smar people in his business classic, Good to Great, where he wrote about “getting the right people in the right seats on the bus.” (Collins, 2001).
  2. People who “work hard” are essential for growing SMEs. People who are unaccustomed to hard work do not fit with Risual’s culture of doing what it takes to succeed and dedication to the job.

    3. “Ambitious” staff should clearly demonstrate why they want the job.Risual only promote from within. This means that staff do not have to compete with external candidates for a promotion. But staff do have to be self-motivated to provide the leadership that Risual required as a growing company.

    4. “Nice.” Risual’s culture is positive, supportive of others and unconventional. Risual’s values have been crucial to building long-standing relationships with their customers and energizing their workforce. For an example of Risual’s unconventional approach to corporate life, enjoy their “Zombie Employee of the Year” video below:

https://www.youtube.com/watch?v=9NU6ngFwQtM

Risual are now firmly in the “Maturity” stage: confident, with a solid revenue stream from consulting and managed services that funds the innovations developed by their technology division.  Their growth ambitions required hard work, long hours, and structured management processes. They have never lost sight of their values, and have embedded their culture into all aspects of their business.

 

Reading List

Collins, J. (2001). Good to Great: Why Some Companies Make the Leap…And Others Don’t. New York: Random House. https://doi.org/0712676090

Daunfeldt, S.-O., Johansson, D., & Halvarsson, D. (2015). Using the eurostat-OECD definition of high-growth firms: a cautionary note. Journal of Entrepreneurship and Public Policy, 4(1), 50–56. https://doi.org/10.1108/JEPP-05-2013-0020

George, G. (2005). Slack Resources and the Performance of Privately Held Firms. Academy of Management Journal, 48(4), 661–676. https://doi.org/10.5465/AMJ.2005.17843944

Moreno, A. M., & Casillas, J. C. (2007). High-growth SMEs versus non-high-growth SMEs: a discriminant analysis. Entrepreneurship & Regional Development, 19(1), 69–88. https://doi.org/10.1080/08985620601002162

Thompson, M., & Tracy, B. (2011). Now, Build a Great Business. New York: AMACOM.

 

A Short History of the Purchase Funnel

Grant Leboff is back! This time with a short video about how today’s short attention spans have transformed marketing. Grant explains how the classic “purchase funnel”, which describes how customers decide to buy a product, no longer works.

The image below shows the classic “purchase funnel” with a wide opening.  SMEs fcus on raising awareness over a wide audience, then help “funnel” customers towards a purchase decision. The problem is that large numbers of potential customers are required for this model to work.

classic purchase funnel

 

In his video, Grant argues that the classic purchase funnel is outdated. This is because social media has drastically shortened our attention spans. SMEs can no longer rely on capturing the attention of large numbers of potential customers. Instead, SMEs should work on building long-term relationships with individuals who will recommend their products to friends and family. Check out the short video below where Grant recommends a purchase model for the digital era.