Thursday, 29 October 2020

 

At times of uncertainty – how do you scale up your business?

It is hard to make decisions at times of uncertainty when data is limited and when we have a huge number of choices. This is a rather obvious statement. What does this mean for us?

Irrespective of the uncertainties we need some kind of hypothesis that we can work to so we can test, re-test and firm up actions that work to either reduce the risk of mistakes or optimize our decisions for success.

Management theorists and practitioners have developed a huge range of tools for shaping strategy and even for managing operations. Few of them connect in a coherent way.  One of the reasons for the incoherence is that most management theories emanate from Business Schools, which are arranged according to focused departments that, in-turn, align with academic journals. So the faculty that want to progress in their careers need to remain focused on their departmental affiliations.

As one entrepreneur said to me many years ago…..”You have Departments – we have problems to solve”.

Therefore a typical growth strategy does not necessarily connect to manufacturing, services, deployment of technology, the funding or the cash flow projections. Often we see budget projections of growth that reflect some kind of hockey stick sales line. But how does this connect to what we have to do to make it happen? Gross profit margins are derived from assumptions or recent data but not tied into something that is unseen in the general conversation – for example cost of customer acquisition, development of distributors’ programmes and so forth.

Actually what we need once a growth strategy has been formulated, taking into account the market spaces the firm operates in, its competition and the opportunities and threats they perceive is a framework to help keep in step with the chosen direction. This is described below.

Meanwhile here are three steps that we can take to scaling up our businesses.

The first is to recognize that there are possibly three very different timelines. One may be for the type of business you have in mind. Is it for a lifestyle, where your horizon is set for say 20+ years? Another is for capital gains using venture funding. In this case your horizon may be much closer – say 7 years.

But there is a third, which is rarely factored in and that is how long will it take for our venture to reach its own level of maturity, i.e. when we have reached the maximum potential of customer numbers.  This can vary hugely from about 5 – 7 years to 12 – 15 years depending on whether we are in light touch “tech” or in highly regulated and complex industrial projects. In summary – it is crucial to understand our customer acquisition journey time.

The second element is about gaining a deep understanding of our market space and the implications that has on our value proposition, distribution and sales channels and where we compete and with whom.  This is actually quite hard because of the challenges of securing a fine grain view of markets, customers’ needs and how the overall distribution system works.

One of the reasons for this difficulty is that markets are impacted by technology and there is a convergence and it is at the intersections of these sources of convergence that we find opportunity. Therefore the old fashioned ways of segmenting according to industry classifications and geographies are insufficient for the way markets are becoming spaces rather than remaining static.

It can be argued that because we are not able, fully, to understand our market spaces and the resultant actions with our external world, we tend to throw money at the problem by seeking venture funds, loans and grants.  The typical metrics in firms are sales, cash flow and these are managed through budgets as the core performance measurements. These are of course crucial but we default to them because we can rather than because they tell us what we need to know and use.

We do not, for example, measure the rate of customer acquisition against the total potential; we do not measure our deployment capability or review our IP position vis a vis competing technologies and solutions.  In order to properly deploy our scarce resources into the most lucrative market spaces we need to bring about a business and revenue model that ties together the journey; the nature of our offer and how best to harness our value proposition to the customer bases we have identified. It is the tying together of these rather operational sounding activities that gives us our scale up strategy.

Finally, sometimes, just sometimes, teams need a helping hand to pull all this together especially when times and scenarios are uncertain and there are so many make or break decisions to navigate. It is here we return to the idea of a framework that can help navigate all the various vectors of growth.  Understanding the outside world, deploying resources to harness the changing opportunities and trading off one set of resources against another to make the most of what we can through business and revenue models that link back to strategy.

To get you started with bringing coherence to your decisions in uncertain times please take a look at https://www.thetriplechasm.com/ for helpful blogs, tools and thoughtful articles.

 

 

 

Wednesday, 15 July 2020

Looking for jobs or creating jobs! We need the jungle cry of a new Tarzan!



There had been a perfect storm in the 1970s, just as the UK economy had started to recover in the post war era. The perfect storm included the oil crises of 1973 and 1979 when the price per barrel of oil shot up by 400%. The Coal miners went on strike and this led to a 3-day week. I can remember that quite vividly, as I started my working life during the cold winter months, working in the office with lanterns and coats on!  https://en.wikipedia.org/wiki/Three-Day_Week
This led to a sense of an urgent need for a new agenda and Mrs Thatcher came to power in 1979 on a strong right of centre agenda to reduce government’s role in industry and to take back control from the Trade Unions. Privatization followed and capitalism took root. There is another story to be told another time. The point here is that the decimation of the publicly owned dated industries in coal and  steel (in particular) meant that something had to be done to cope with the mass unemployment that resulted from the new policies.

With a strongly held philosophy of individual responsibility, the Government, together with big businesses began to establish support for start-ups. They also introduced subsidies for small established firms to assist them with marketing, training and various Awards were also born at this time to help create a positive atmosphere and help celebrate success (however it was defined).
At regional levels Agencies were created to direct the funding from Government towards all the various campaigns of activity (I can recall evaluating 22 of them), while social enterprises were created such as Business in the Community; Prince’s Youth Business Trust and Shell Livewire.
The Government’s iconic Dept of Trade and Industry was led by Michael Helestine who was very active in promoting a strong message. His demeanor and golden hair bobbing about in interviews earned him the nick name of Tarzan. There was no question – his drive and passion pushed along the free market agenda and support for SMEs, as did the energy of Lord Young and numerous others.
The point here is to learn from the lessons of history – and for Government which is being amazingly proactive in supporting firms to hold on to talent and families’ survival – might consider directing some of the unemployment benefits and regulations towards enabling individuals into self-employment or the creation of new businesses.

Owing to the effects of the period of austerity (by the Conservative Party) we have been left with Agencies that are dehydrated and lacking anything other than boxes they can tick. From national agencies that existed in the 1970s and 1980s, policies changed to go regional and have since been further localized with Local Enterprise Partnerships. So, we are now in a position when no one can take a big picture view of what to do. For local, I also read parochial and this is where the disconnects can arise between what we need now to recover from the shock of Covid 19 and what exists as infrastructure to help solve the problems.

Employment protection and shielding the economy from bankruptcies is crucial for now but I suspect we will all change the way we do things and so entrepreneurs need to be encouraged to come forward with creative and sustainable solutions.

Over the past few decades Universities had become hubs for new venture creation through investments in the Higher Education Innovation Fund and a variety of other resources being directed to them. But – the main source of funds have been international students and that is going to be very hard hit, compounded by narrow views on the issuing of student visas. This means that what would otherwise be strong regional institutions with the capacity and capabilities for stimulating new venture creation are vulnerable.

The Government, especially the Chancellor seems to be jumping from one policy tree to another on job retention but who is there are the senior policy level to put out the Tarzan like jungle call for job creation? Does the Government expect job creation to be from state and established enterprise. What will fuel their growth to create those jobs? We are back to the debates of the later 1980s when Business Growth became the focus on policies – in search of the magic 4% of firms that were so-called Gazelles. These were due to create the jobs, but in reality as policy makers abandoned the search for Gazelles and more recently for unicorns, private sector business angels, accelerators and incubators have been filing the void. And they too are now challenged by what has happened to financial markets and rental incomes.

Having checked with the Chairman of Enterprise Educators UK – Gareth Trainer – we agreed that it is time for a flagship business creation agency or campaign to go beyond enhanced career prospects. The reality of trying to find apprenticeships with companies struggling to survive just seems unrealistic if worthwhile.

As Gareth pointed out: “The Government has rightly identified that youth unemployment and career glass ceilings are going to apply. Why not stimulate youth entrepreneurship?  They commissioned the Prince’s Trust to review youth entrepreneurship policy ages ago and the Government still haven’t allowed their report to be fully published… what are they waiting for? Meanwhile Ofsted have removed from the inspectorate the role of national lead for business, economics and enterprise, leaving the remaining subject heads to “look out’ for enterprise in schools… I think without expert help that is likely to be challenging. I guess, in summary, there doesn't seem to be comparable levels of Government noise about self-employment and entrepreneurship as there was following previous economic crises." 

There is some good news on the horizon, in the sense that policies are going to be put in place for a Green agenda that is going to make a difference. We are also likely to see other measures for the enhancement of science and technology and perhaps various rescue packages for certain industries.
We clearly need new ideas and solutions at this time. This would be good news at macro levels together with any fiscal and economic policies to support the movement.

At meso levels we need regional and industry sectors to be strengthened to cope with what happens on the ground. Many of the agencies that exist – just exist. Austerity has affected them all and we need them to be empowered and skilled up as well as scaled up to cope with what is needed.

And at a micro level, COVID 19 has made us look both inside and outside for how we not only come out of the crisis, but how we recreate the future. At Universities(for example)  – can placement years in universities be converted to self-employed placement years; fewer businesses will have the funding or environment to support traditional placements so this seems like a fix that could have broader impact.

We need fresh insights in policy and a new discourse needs to be created from the Billions being put into the economy for job protection towards job creation, turbo charging the agenda through new venture creation and appropriate work experiences.
And, can we get a modern day cheer leader, a new Tarzan, whose word counts for something working with a community of people who know what they are talking about.