Know yourself, know your enemy and know the terrain in which you are going to engage them and you’re more likely to win than if you don’t. I know there’s a whole lot more about burning your boats and smashing your cooking pots before attacking (not to mention beheading a couple of the Emperors favourite concubines pour encourager les autres) but for the purposes of this blog that’s enough.

So this one is about the terrain – the way that market’s consolidate and you need to decide whether you’re part of the Gorilla’s Gang or whether you’re going to play nicely with the other Monkeys.

It also covers the kind of issues you’re going to hit along the way – moving premises, recruiting staff (particularly the sales staff) knowing when you’re going to have to stump up for my IT and a totally unexpected wrinkle that kicks in once the company has more than 10 people in it.

So that’s what this little video is about – its about 15 minutes this one – likely to be the longest one – but it’s interesting stuff.

Well I think so anyway

www.alanrae.co.uk

I’ve now run four of these and spent a lot of the last 10 years carrying out research projects into different areas covering IT and systems, Marketing and Peoople issues.

So I thought I’d try it out on you chaps Any feedback will improve the final product.

Just so you know what’s coming up they’re about 10 minutes worth of voice over powerpoint.

They take a balanced scorecard approach and the 7 topics covered are

1) Business Basics
2) Markets and How companies Grow
3) Innovation and Products
4) Sales and Marketing
5) People
6) Building Value
7) Business Model and Finance

Let me know what you agree / disagree with

Thanks

I’d advise you to look at it in detail as it’s got a lot of meat in it about when to go forward and when to hold back at different stages of the business.

by visually via

1. Help with creating white papers, presentations and other high quality collateral
2. Help with selling successfully to larger organisations
3. Help with Market Research.

Companies were happy with their systems and people motivation and retention – the biggest worry is getting a good stream of new customers.

However experience tells a different story. We know that if you want your business to succeed you have to grow the business in an integrated way. You need to

- Create new products

- Produce and deliver them reliably

- Tell the market about them online and in person.

- Motivate staff to make it happen

All based on the vision and values that provide the energy to drive your company forward

I’ve  run 4 successful businesses in 30 years and the main thing we’ve learned is that your brand depends on performance. You do need systematic ways of developing the products you need. But you also need the systems to deliver without mistakes and attract and keep good people to run them for you.

If you don’t pay attention to these things your business won’t grow. I promise you.

But they do. Both involve supply chain work, both involve accreditations and both are groping towards how you run a business effectively and make use of the tools for collaboration and marketing that are available to us in this strange new business landscape.

The horticultural project has led to me writing a whole new document that wasn’t on the original agenda.  As well as writing the main Growing Jobs report I’d foolishly volunteered to write up the evidence base. However this didn’t stay theoretical for long.

One of the things that really struck me right at the end of the case studies was the way in which the larger horticultural companies – the ones that play in the supply chain – have been adopting lean.

We need some of that here in the nursery. We’ve got the guys a really good training course from the local Horticultural College and the next step is to look at lean. We’re going through that Dawn of Formality transition – the one where you have to do things properly and behave like a real company with HR and all of that stuff that we set up in business to get away from

Writing the paper forced me to look at the evidence for HOW you would implement high performance work practices and how it all started to link with Stafford Beer’s viable systems model and smart working.

To plagiarise Lenin – Smart Working is Lean plus Broadband. Hold that thought – I’ll come back to it another day.

Anyway business is a series of transitions

Getting off the ground, getting noticed, recruiting staff, putting in systems, building a management team, getting ready to scale etc etc.

Getting through them is all about how well you learn – and how well you implement it.

To finish up with, here’s a short list of things that companies struggle with as they approach transitions.

• •A strategic vision of markets, competitors and the way forward
• •The ability to communicate it if they had it
• •Acquiring Professional Management Expertise particularly in marketing, IT, new product development and a balanced scorecard approach
• •Lack of structured HR and training
• •Networking is short term and ad hoc  – aimed at leads rather than acquiring strategic partners.

Next time we’ll have a quick look at some indicators for companies that seem to be getting their act together

I’ve become very aware of this recently as I’m working on two projects here that focus in on this. One is about how companies in the Aerospace industry are using social media to promote themselves – basically linked-in – while the other is about the workforce needs of the horticultural industry.

In practice we grow as businesses until we hit the next barrier.  This can be things like getting through a production or other capacity limit or it can be about becoming formal enough to trade with a much larger partner.

If your playing by monkey’s rules its easy – you just have to come to the notice of enough people who find you attractive and you do this by the time honoured methods we’re always going on about – getting a good story and then telling it often enough in the right places to get the interest, enquiries and sales that you need.

You can get a long way with this using web 2.0 techniques like blogs and social networks because they were invented b clever monkeys to tell their story effectively.

However once you get into the Gorilla’s world you have to deal with customers who

• Want you to behave in a formal,  regulation compliant and extremely demanding way
• Only want to deal with a few really large suppliers
• Make it extremely difficult to build up good long term relationships with their procurement people (you know – that lot we used to call buyers)

The traditional networking rules of finding where the fish go and then hanging out there become much more difficult. For some industries exhibitions and conferences fulfill the role. In other industries you will need to go through a purchasing organisation – as many of the fruit growers I’ve been interviewing this autumn have to do.

However even there, there are signs that the logic of procurement will mean that ultimately the multiples will want to deal with the biggest grower/marketer left standing.

Definitely a case of  “Yea though I walk through the valley of the shadow of death I will fear no evil …. because I am the biggest damn Gorilla in the valley”

However as small businesses we aren’t going to go there – we’re going either to find  a much smaller niche that we CAN dominate – or we’re going to have to learn to live like a monkey.

And being a big and successful monkey means identifying niches that the big players don’t want more than 50% of so you have the space to build the infrastructure you need to earn the living you want.

If it was easy we’d all be doing it.

Thoughts?

I’ve currently got a business barriers survey running and I’d be grateful if any of you would take part – it’s quite short – much shorter than the networking one.

If you complete it there are a few goodies to choose from.

You can take it here.

Thanks

Alan

• When the Founder cannot sell enough himself
• When more people need to be taken on
• When the organisation needs to change premises
• When the product range needs reinventing
• When the business processes and systems need upgrading

Crisis points currently recur every 3 or 4 years.

To start with, the owner manger engages energetically in sales. However businesses often hit a crisis after about 3 years as a result of several issues needing to be dealt with at the same time. I’ts  common to hit a second crisis after a further 3 years. This looks like a falling away of sales, often as a result of the re-structuring caused by crisis 1.

Crisis 2 is generally resolved by a renewed focus on marketing – product development, talking to customers and by additional finance. In other words – these things are largely about being able to keep marketing activity and delivery capacity in balance. But things don’t grow smoothly – and a real difficulty is the limited range of suppliers.

Most industries are actually quite small. In our own plants for presents business we often only have 2 possible suppliers for many things that we deliver. If we continue to expand we will hit the limits of some of these and may have to start importing things directly with a great leap in finance and storage capacity.

Changing premises which we did nearly 2 years ago involved increasing the IT systems significantly. Needless to say BT behaved with their customary verve and responsiveness and we were reduced to downloading orders from someone’s connection 5 miles away and doing everything manually for a couple of weeks. We had to change our main courier because our existing one with whom we had an excellent working relationship was not allowed by the terms of his franchise to pick up from us any more. It took about 3 weeks before the new franchisee could pick up for us and so white van woman had to drive to Crawley every day during that period.

The most dangerous however, is probably the sales transition to recruiting the first salesman. Most small company owner managers have not had the benefit of working in a formal sales structure.

We were very fortunate in that in the early 80s when we were cutting our teeth in the IT industry there was plenty of sales and marketing training available from our suppliers. In fact most of my practical business education was supplied courtesy of Commodore, Autodesk and Sun. These companies quickly realised what a shower of amateurs they were going to have to depend upon to grab market share. So they thought they’d better teach us something.

Commodore lured away a man called Brian O’Hara from Olivetti who were at that time the last word in sales methodology (where are they now?). He put us through a 3 day training course which was a revelation. I’m still using his stuff now. He taught us that sales is a process and that we need to establish and monitor the conversion ratios between the stages of the sale. I practised this for 15 years with a team of between 3 and 6 sales people that I was responsible for and it’s made a really deep impression.

Most owner managers don’t do this. They get away with a combination of charm and enthusiasm for their products and don’t monitor themselves. So they have no yardstick to use to hold new sales staff accountable. So what happens? They’ve expanded. They can’t sell enough themselves so they try and recruit a salesman. They will pick a “traditional” looking salesman. You know, hearty, affable, presentable, talks a good stick etc etc.

Let me tell you these types will never sell for you. I’ve employed enough of them to know this. Why? Because their need to be liked is greater than their need to get a result. (And anyway they’re only motivated by greed unlike you and me who are often motivated by fear which is a far more potent motivator.)

Some psychometric tests are quite good at flushing this out. It’s always been a swine to get at this in an interview even before we were subject to major restrictions in what you can legally ask in interviews.

So what could you do differently? Hire an office dragon – work out a system with them and get them to monitor you – insist you collect your ratios and discuss them. At the end of 6 months you’ll probably be selling better but more importantly you’ll have the all important ratios. Then you can say – if this is what I do – as an amateur – I will expect you as a professional salesperson to do better. How will you go about delivering against this?

Nothing works all the time but I guarantee it will be better than settling for the most affable suit and kipper tie.

These are just a couple of illustrations from our own business life which shows that  you need to be aware of these transitions and plan them in well ahead.

The real truth is that despite people telling you that there are 4 million small businesses here in the UK, the truth is that about 2.5 million are sole traders. There is a massive long tail. Governments and IT companies are always looking at the small business market because they believe that stimulating demand here will be to there advantage. But there aren’t really that many of actually.

I did some work for PCWorld a couple of years ago and I dug all this stuff up because it was relevant to them. Here are a few stats to make you think.

• Only 7.5% employ 5 or more people
• Only 25,000 UK companies employ 50-250
• Only 250,000 UK companies employ 10-50

Business link considers a high growth company to be one that can consistently grow 25% per year. By that definition we are a high growth company. However when you get bigger it gets more difficult.

I’ve come to believe that growth companies are planned from the outset and that certain abilities that are needed to progress. These are summarised here.

Everything depends on the values and vision of the company of course but the key skills you need are

1) Being able to systematically create new product sets

2) Being able to create systems to deliver them

3) Being able to tell the world what you’ve got – in the right place, to the right audience at the right time

4) Being able to attract and keep the best people to make it happen

Companies exist in an unstable landscape. They need to be able to grow to control a scalable niche which is part of the overall global economy if they are to be ultimately successful. Growth companies tend to start with a management team rather than a single entrepreneur and undergo defined transitions.

One transition occurs when the organisation needs the infrastructure to behave “formally” – deal with regulation, demonstrate the ability to monitor KPIs and the other constraints of dealing with larger organisations which need exchanges of structured information.

A second occurs when the organisation needs to scale having achieved proof of concept in its niche. This means implementation of an enterprise type IT solution capable of scaling as far as is necessary. (We believe that while innovation is often not only about technology per se, it often needs an IT infrastructure development to leverage value.) Many growth companies of course sell out as this point is reached.

These IT issues are illustrated in this chart from a recent survey carried out by IOD / Dell which clearly shows peaks in investment at these 2 transitions. [1]

We believe that innovative, growth companies consciously put their IT infrastructure at the heart of their activities. However, in order to be successful they need to deploy IT effectively by engaging and motivating their staff by making it clear that technology lets them be more effective in serving their customer base with a continuing string of new products and services. This engagement involves integrating systems and people skills as well as being able to demonstrate the characteristics of a learning organisation as outlined by Senge[2]

It’s surprising how few growth companies there are. We know that only about 1600 companies grow past the 10 employee barrier each year.[3] In a study carried out in the 90s, Deloittes only identified 317 fast growing companies defined as 25% sales growth per annum for 4 consecutive years (15% for companies over £10m turnover) out of a total population of 6,786 companies which were UK owned, with sales of between £5million an £100 million and which had 5 years of financial records.

Deloittes found that successful companies had learned how to develop their product range from a well established base and they avoided things that distracted them from driving the business forward.

Research carried out by Smallbone found that proactive management of product and market development is what most consistently distinguishes high growth firms from the rest.

Smallbone et al looked at 6 marketing activities

• New Market Opportunities
• Wider customer base
• Change in product range
• Innovative products
• Number of competitive steps
• Type of competitive steps.

High growth firms (those who doubled their sales turnover in 5 years) actively pursued 4.3 of these activities while average firms did 3 and companies that declined did 2.2

So this suggests that product innovation is more important than process innovation except in industries undergoing a step change in production processes.

Changes in organisation and management were a distinctive and consistent feature of high growth firms. Introduction of professional managers, and external consultants was a key indicator (although only 36% of even high growth firms did that)

The most successful firms worked to create time for the leaders. This is more difficult to obtain in the 10-19 size band than elsewhere. Job generation occurs in high growth firms as their focus on productive advantage sucks in more individuals.

In summary Smallbone concludes that growth companies

• Develop new products and markets from existing base – using the Ansoff Matrix approach
• Systematically develop more profitable market niches
• Knowledge Economy companies increasingly function as stages in other peoples networks – a more fluid version of Porter’s Value Chain ideas
• More managers, devolved management responsibility – make time for thinking
• Thinking time a particular challenge for the 10-19 firm
• Owners think like businessmen, not managers

So there you are guys – easy peasy, So why aren’t we all doing it?

[2] Peter M Senge – 5^th Discipline 1990

[3] Business Link for London Data 2001