According to the UK government, people, not products are the key to scaling businesses. Laura Galloway, Professor of Business and Enterprise at Edinburgh Business School, takes a look at where the focus should be.
The report refers to a report by Innovate UK last year in which personality, communication and resilience of leaders are cited as the key factors investors consider when considering funding scale-up activities. The leader – more commonly referred to as the entrepreneur in such circumstances – is most often the focus of this scale up potential.
But what is scale-up really? Scale up is business growth – an outcome prompted by one of 3 things: sell people more products; sell products to more people; or both – sell more people more products. Conceptually this is not rocket science, though in practice, many business leaders will tell you achieving growth is harder. So there is much time and money currently being spent on looking at how to support business growth and lots of training and funding available to help. I have no beef with any of that, and indeed, if you are in the category – or have the potential to be in the category – of those firms that grow 20 percent over consecutive years – the so-called gazelles – then yes, you’re going to need good and visionary leadership, and probably external investment will be on the cards at various points in that growth journey.
But the fact is, most businesses are not gazelles. Most businesses are small and micro firms and the reason they are not gazelles is that the leaders do not seek gazelle-like growth. This does not mean they have no interest in growth at all, nor does it mean they cannot scale. On the contrary, most business owners will tell you that they do seek to achieve greater market share and greater sales, and they spend a large part of their working lives trying to achieve these. Some will be attracted by the pull of training and support to scale. But it’s hard not to be sceptical about how effective a lot of the training programmes currently being offered can possible be.
Without naming any specific programmes, there is a lot of focus on attracting individuals – entrepreneurs who want to ‘go to the next level’. But the provision typically available – partnerships between public and private initiatives, often endorsed by high profile entrepreneurs and often with the involvement of big brand business schools – smacks a little bit of the establishment trying to do scale up in their own image. And again, that’s fine – no-one can deny the success of our entrepreneurial hero figures. But what do we mean by success? Many of the highest profile entrepreneurs – the rock stars of business – have little real involvement in business. Often they have created, developed and sold before they turn to being role models for others. Their high profile, enviable wealth and status and sheer charisma are being presented as fodder for emulation. But can this emulation actually deliver scale-up?
We know most small firm owners would like to grow, at least a bit. But I know of no evidence that the leaders of the ‘backbone of the economy’ want to be rock stars. In fact, most business owners I’ve met are keen to deflect attention from them as the individual and towards the firm of the product or service.
So my question is this: if we want to scale up businesses to realistically improve the performance of the business base, to improve their rates of employing people and their contribution to GDP, to make micros move towards small and make smalls move to medium, perhaps the focus should shift from the leader or entrepreneur to the firm itself. Rather than focus on the development of skills and attitudes of the owner, we might expand focus to include the identification of other sources of entrepreneurship in firms.
In his paper Entrepreneurship Skills for Growth-Orientated Businesses, Professor Tom Cooney from Dublin Institute of Technology finds that successful growth is based on good products and good people. Good leaders are required too of course, but leadership that enhances business rather than profile and branding of the leader seem more likely to be successful in terms of scaling up and underpinning our local and national economies.
About the author:
Laura Galloway is a Professor of Business and Enterprise in EBS at HWU. She has published widely on entrepreneurship and small firms research and has created and delivered university courses in entrepreneurship and enterprise for 20 years.