Everyone’s talking about the Scale Up report and its recommendations to government – but does it tell the whole story about what’s holding small and medium sized enterprises (SMEs) back?
The SME sector is an important one, accounting for over 59% of UK employment and 48% of private sector revenue. Our experience of working with growing businesses means we have seen many of the challenges facing SMEs wanting to expand. We agree that government support can be a great help, but we know that there is a huge amount businesses need to do internally to ensure that they’re ready for growth.
Scale-up or start-up?
Both the research into high growth firms going on at Nesta, and the recent Scale Up report from angel investor Sherry Coutu point out that there is significant potential in what Nesta calls high-growth businesses, and the report terms scale-up businesses. They’ve chosen the term scale-up deliberately to contrast with start-up businesses, which are often talked of with breathless excitement as the powerhouses of innovation and growth.
In fact, the Nesta research has shown that even the most dynamic of start-ups are not necessarily any more productive than established firms. Not only that, but productivity is no guarantee of long life and sustainable competitive advantage: highly productive firms are going out of business all the time, according to Nesta.
The growth challenge
The big challenge isn’t productivity itself, but growing a business rapidly and maintaining levels of productivity in the process. And this isn’t just a challenge for the businesses themselves, but for the economy as a whole – Nesta estimates that the UK economy could have been £96bn larger by now if businesses scaling up between 1998 and 2007 had been able to access all the resources they needed.
Many of our clients are high growth businesses and we have first-hand experience of the challenges they face. Growing fast requires resources, from talent to finance and infrastructure, and many of the recommendations from Nesta, the Scale Up report and Deloitte’s research supporting it, are about improving the business environment to improve access to these resources.
Taking the long view
But access to resources isn’t the whole story. We know that for many businesses the barriers to scale aren’t external, but down to a lack of long-term planning. This leads to internal processes and technologies not being able to support growth, resulting in failures and downtime.
A powerful example is growth in staff numbers. Bringing in new people is often a pinch point for businesses: getting them working and productive as quickly and smoothly as possible relies on a clear process that joins up aspects such as hardware, remote access, mobile devices and bring your own device (BYOD), as well as security and connectivity. It’s no wonder that the APSCo Deloitte Recruitment Index for 2014 found that growing headcount was the top challenge for 59% of respondent companies.
Without someone thinking strategically about their technology and planning for future growth, companies risk being hamstrung by outdated, inefficient or inappropriate IT, or suffering from uncoordinated buying decisions.
Are you ready to grow?
So if your business is, or has the potential to be, high-growth, then ask yourself: do you have someone on board thinking strategically about your IT infrastructure? Are you confident that your current infrastructure will scale smoothly and efficiently as you grow, including internationally?
Enjoyed this post? Why not read: 7 signs your business needs an (outsourced) CTO
If you want to discuss this topic, please contact Edmund Davis on +44 (0)20 7043 7044