What is the single biggest mistake an SME owner can make?

Today’s blog post is by David Lowe, Entrepreneur in Residence at the MCIL programme. David talks to us about the MCIL programme, how it helps entrepreneurs and shares his many years of insights from working with business leaders.

davidlowe photo
David Lowe

What is your role on the MCIL project?

I’m one of four and soon to be five Entrepreneurs in Residence for Keele’s Mercia Centre for Innovation Leadership.  We co-develop and deliver high quality programme content, alongside the academics from the Keele Management School.  We share practical insights to ensure the content of the programme is suitable for practical implementation. We also coach business leaders on the programme on a one-to-one basis to help them grow and develop their businesses.

What skills do you bring to your role?

Strategy is my personal forte, and as a coach/consultant I have successfully assisted a large number of SME’s over the last 14 years to both grow and to innovate. I’m a problem solver by nature, and I’m fortunate enough to have a talent for the assimilation of wide ranging information; either adding strategic value or simply applying my knowledge towards helping to solve the more practical day to day challenges. My colleagues have complementary skills sets: Will Pritchard is experienced in working with start-ups; Carolyn Roberts is a product innovation expert; David Townson is expert in product design.  This means that there is a lot of synergy as well as a lot of energy across the team.

Why do you enjoy your job?

I get a real kick out of helping businesses to solve their strategic problems and to drive innovation. We challenge all of our participants positively, try to ask the right questions, and we help wherever we can with new approaches. I absolutely love what I do.

What is the single worst thing that a business owner can do?

I’d say that the single biggest bad habit that business leaders get drawn into, is where they are doing so much working in their business that they don’t spend nearly enough time and effort working on their business. Indeed, for me, working with business leaders, no matter what the theme or the headline task, it nearly always means actually getting them doing something tangible as opposed to just saying they do it.

Why is innovation important for a business owner?

I also try very hard to get them to buy into the fact that there is very solid evidence of a strong relationship between innovation, growth and profitability: innovative companies do genuinely tend to have higher profit levels for example. Putting it simply…

Innovation = Good

No innovation = Bad

When helping leaders to see innovation as part of their thriving and surviving, I always do my best to ensure that they understand that ‘doing it’ is what actually matters!

Why should an SME owner join the MCIL programme?

Whether working with me or one of my colleagues, we offer energy, enthusiasm, focus, and commitment to making a real difference. We can help businesses get to where they are going much more effectively than they may otherwise have done without us.We are just entering the final phase of delivery for the very first cohort of MCIL, and its plain for all to see that all the business leaders on the programme have benefited as individuals, and that their businesses are all the better for the experience too!

What has been the most exciting MCIL programme achievement?

Beyond the immediate theme of innovation, what’s got me most excited personally is that the companies we are working with are creating jobs! In fact, they are creating significantly more jobs than we’d originally envisaged. This very tangible ripple of new employment that we are helping to drive will have positive associated benefits for the Stoke and Staffordshire area for years to come. This makes me even more proud in terms of being involved in the delivery of this leadership programme.

To set David’s insights into context, try the reading list below.

Further Reading

Working in the Business, not On the Business Geri Stengel for Forbes, June 2012

Dynamic Delegation: Shared, Hierarchical, and Deindividualized Leadership in Extreme Action Teams Klein K., Zieghart, J., Knight A., Zhao Y. (2006), Administrative Science Quarterly, vol: 51 (4) pp: 590-621

 

 

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.

 

Leadership in a Liquid Modern World

We are now in the the second of our six month leadership development programme. This month we covered the theme of leadership. Our guest speaker, Professor Monika Kostera Professor Monika Kostera, delivered a fascinating lecture on the challenges of leadership in a changing world.

Monika holds a number of visiting professorships and is an accomplished writer and speaker. Her research  themes include imagination and organizing, disalienation of work, organizational ethnography and organizational archetypes.

Monika opened her lecture by describing the transformation of society from the “solid modernity” of the 1960s to 1980s. In those optimistic years, we believed that technology would improve lives to the point where we didn’t have to work, that science would answer all the questions that religion could not, and that equality for all was on the horizon. Remember the malleable, friendly “maintenance drones” in the 1972 film, Silent Running?  They did all the hard work, so that humans could spend their time doing useful work.

Huey Dewey Louie Silent Running
Huey, Dewey, and Louis as examples of helpful robots that would make our lives easier

 

However, the last twenty years have been characterised by “liquid modernity”, namely the growing realisation that technology created as many problems as it solved, a loss of religious faith, and an increase in inequalities. Zygmunt Bauman (1925-2017)  is the brilliant sociologist and philosopher who introduced the concept of liquid modernity . Monika explained that liquid modernity has caused our current state of psychological instability. Whereas before we thought that we were walking to a future utopia, we are now increasingly unable to predict the future. Just look at Brexit, Trump, and the recent UK general election for examples of how difficult it is to predict what will happen next.

Furthermore, the refusal to use history as a template for learning from our mistakes leaders to discontinuity. Monika discussed constantly changing fashions in the field of business studies. For example, the  balanced scorecard  is still an excellent tool for strategic leadership, yet it has fallen out of fashion.

Finally, the loss of religious faith in many societies has created a hyper-rationality, whereby linear thinking and logic are prioritised over mystery and uncertainty.

So what does this mean for leadership in a liquid modern world?

Monika argued that leadership requires storytelling and imagination. Telling a compelling, uplifting story about their organisation helps to reassure insecure staff. Given the high failure rate of many businesses, staff may not otherwise believe their organisation has a concrete future. Leaders can exercise their imagination collaboratively, to build and strengthen teams. Creating a shared story for an organisation can be done together with staff. The ability to think creatively also helps leaders to avoid simple solutions to complex problems.

This is where archetypes come in: the leader as adventurer, for example: Odysseus who bravely led his men through various dangers in a long and epic journey

330px-Arnold_Böcklin_-_Odysseus_and_Polyphemus
Odysseus protects his men from Polyphemus

Further reading was suggested: Gareth Morgan’s Images of Organization“Images of Organization” as a way to understand how archetypes and metaphors can be used by leaders to describe their organisations.

Monika’s most recent book, Management in a Liquid Modern World, is a more detailed examination of the themes of how managers can survive in a society where alienation and confusion are rife.

Our participants were stimulated by Monika’s lecture, particularly by her wider perspective and sociological theory. One attendee said “This is the benefit of coming to a leadership course run by a University. Where else could we hear someone like this speak?”

Monika used one of Albert Einstein’s quotes to emphasise the importance of imagination in leadership: “Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”