Qi3 – Quality, Insight, Integrity & Innovation - UNITING TECHNOLOGY & MARKETING

Capturing the vital six per cent

A recent NESTA report focuses on the 6% of companies in the UK that exhibit high growth rates of over 20% in a year.  These 11,000 businesses are responsible for over 50% of new job creation, vital in these days of austerity and high unemployment.

Interesting findings are:

  • High growth doesn’t just result from technological invention.  High growth businesses are spread across many sectors
  • High growth mainly comes from businesses over 5 years old

Of course, the skills, ambitions and characteristics of  owners and managers is the key.  Entrepreneurial attitudes towards innovation in technological and business processes correlate with growth performance.

The report’s conclusions are sadly somewhat more public sector focused and predictable.  It argues that government should:

  • Remove regulatory obstacles to growth
  • Support ‘access to finance’ through measures such as co-investment funds
  • Develop a skilled workforce
  • Support flows of knowledge and collaboration
  • Improve demand for innovation by harnessing the government’s own £200bn annual spending on products and services

That’s all very well, and it’s hard to argue with much of this.  But (and you should have felt a ‘but’ coming) I have some concerns about this approach:

  • Government is extremely bad at removing regulation – look at the discussion over the past weeks about the impact of April 2011’s new regulations on microbusinesses.
  • I’m a huge fan of using government’s expenditure to favour innovative solutions, but with the laudable exception of small amounts of SBRI funding, the drive in government procurement is leading towards favouring large businesses through a series of insidious barriers to entry.
  • Tax isn’t mentioned.  Whilst the new government is encouraging entrepreneurship and risk investment, entrepreneurs face considerable penalties for earning above average salaries.
  • Most importantly, the NESTA report focuses its recommendations on the supply side (government intervention).  I feel that it should be rather more focused on what makes people want to put themselves out on a limb, move out of their comfort zones and grow their businesses.

Anyway, I’m off to try to find another one of those 6% of businesses to invest in.

2 Responses to Capturing the vital six per cent

  1. Interesting that you say “High growth doesn’t just result from technological invention”. How many times have we seen good ideas and innovation wasted because the developers didn’t have skills to commercialise them? At the same time, you see companies with “me too” or inferior solutions capturing the market, simply because they were better at business.

  2. It doesn’t surprise me that “high growth mainly comes from businesses over 5 years old” particularly for technology based businesses. Even with business development closely integrated with and influencing technology development from the outset, it can take a remarkable length of time to move from a first sale to a pipeline of sales. However, far too many inventors, focus on getting the technology right, second guessing the market and then looking for a customer. This approach requires more funding, takes more time and gives potential competitors space to deliver an alternative solution to address the customers’problem.

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