Business incubators have become a common feature of public sector enterprise support in recent years; many of these establishments have proved to be highly effective in nurturing early stage entrepreneurs. They don’t just provide a desk and somewhere to turn up every morning, their added value comprises: a place to network, share ideas and collaborate. The really good ones offer mentoring and coaching, this is often what makes the real difference between success and me too performance. In many UK regions, incubators have become a hot bed of exciting new businesses, the potential employers of graduate talent – Autonomy in Cambridge is a fantastic example.
This concept of incubation needs to feature prominently in the culture and mindset of winning businesses – any ambitious entrepreneurial company should have a “department” or function responsible for building a pipeline of new thinking that delivers potential new revenue streams or adds value to existing customer experiences. I don’t mean a department literally – it’s about having an organisational process that brings together thinkers, doers, sellers and controllers, one that not only develops new ideas but also implements the commercially viable nuggets that emerge from the process of discovery. The concept of incubation delivers a major thrust for gaining an edge in the market place.
It is my opinion that creative intelligence is the ultimate source of competitive advantage – high growth companies tend to be disproportionately more innovative than the rest of the SME population. They explore, embrace diversity, live in their customer’s world, experiment with new possibilities and avoid complacency by making creative thought a habit, not something they do once a fortnight on a Friday afternoon. It must form part of an organisations “soul”.
There has been extensive research into the business life cycle, however few studies have pointed to the practicalities of the intervention that are pivotal at each stage of growth. There is undoubtedly some common ground and overlap across the different phases, however some conclusions can be drawn in relation to – what support is needed at these critical stages. My experience shows that companies hit major challenges at a number of key points on their growth journey, particularly as it relates to employee numbers:
When a business reaches 5-7 employees – this is when a company starts to take shape and the founders find themselves faced with a set of challenges they never envisaged. Leadership skills become tested at this point as does managing people and cash. Funding for growth becomes a critical issue.
When a business reaches 25-30 people – the leaders are now faced with the issue of relatively high monthly costs to run the business. Structure and team working becomes vital. I believe this stage presents a real danger zone as organisational development and financing, along with more strategic selling become vital to sustained development. It is at this point that business owners set out to recruit a sales manager/director – a challenge for many! Financial control becomes a full time job
When an SME approaches 50 people – corporate thinking and mindsets are presented with KPIs becoming even more important as business issues become more complex and demanding. Management teams become preoccupied by sustainable revenue streams – key functions start to emerge and divisional perspectives give rise to profit centre management. Tight operational monitoring, management and control need to be embedded to ensure lean processes prevail. Staying ahead of the game is vital otherwise a disconnection from the market place will lead to stagnation and potential decline – not a good place to be!
An entrepreneurial mindset conducive to embracing constant change is vital to making the above transitions. The most common challenges for entrepreneurs along the journey present themselves in the form of how to:
- Achieve clarity in relation to business and personal aspiration – vision, strategy and plan
- Effective sales and marketing in increasingly competitive environments
- Organisational development – the right team in place all working towards a common goal
- Financial engineering – getting the right funding in place and managing the finances
- Managing costs and ensuring lean and efficient processes across all functions
Non-executive directors (NEDS), coaching and mentoring prove to be vital external inputs to addressing these key challenges and stages of growth. One thing that inhibits the growth wish of many entrepreneurs is the management of people. Embedding effective organizational processes and systems are vital. A business can only grow as quick as its team so getting the people elements is vital.