M Institute

M Institute partners Future Cities Institute in focus on growth hot spots

M Institute partners with Future Cities Institute to empower mid-sized businesses to participate in digital growth hotspots around the world’s great cities.

London, January 9, 2012 M Institute today announced its partnership with Future Cities Institute, the Auckland-based organisation focused on empowering local communities in the digital world. Thanks to the expertise of the two organisations in medium enterprise and innovation hubs, this partnership aims to empower mid-sized businesses to participate fully in growth opportunities in the digital world, which are most often found in city-based hubs.

Through this partnership, city governments focusing on innovation and growth will be able to build specific policy, planning and economic development strategies that include the full participation of mid-sized businesses in their local economies. In addition, these mid-size companies will be supported to participate in programmes that enhance their international growth opportunities through greater integration with the increasingly open and interdependent global mosaic of cities-based innovation ‘hot-spots’ around the world.

MSB 101 for policymakers

As mid-sized business debuts in policy-maker thinking over the next few weeks, led by its (widely expected) coverage as a significant plank of Chancellor Osborne's November 29 Growth Review, M Institute co-founder Jyoti Banerjee was asked to present to an audience of policy-makers at the Department of Business, Innovation and Skills (BIS). Here's a note on his presentation:

My presentation focused on some basic truths about medium enterprises (or mid-sized businesses, or MSBs, as they are increasingly being referred to):

• Although medium enterprises are a tiny fraction of the number of businesses in the UK, their contribution to metrics such as share of employment and contribution to profits, etc, are well over 20% of the national economy. 
• Despite their strength and contribution, they are an invisible segment of the British economy, with very little attention paid to them, either in the media or by policy-makers. They are often confused as being part of the SME cohort, a completely unhelpful segmentation that should be done away with. 
• Being mid-sized is, almost paradoxically, only a little bit about size. Although BIS is using a definition based on revenues around £25m-500m, and the CBI stretches that down to £10m, what makes medium medium is that they are too small to be big and too big to be small. M Institute has for some time pointed to the behavioural characteristics that link medium enterprises together. Focusing on these behavioural characteristics is helpful because they help differentiate small from medium, and medium from large. They also identify the characteristics of good MSBs, something that we need to be able to do in aiding the rump of medium enterprises to "grow up."
• Talking about the rump, although British MSBs feature some very good companies, there is a long tail of under-performing medium enterprises, including a number of family-focused businesses. Anything that improves the performance of this substantial cohort is to be welcomed. 
• Medium enterprises, both good and not-so-good, share some common challenges in improving their business performance. They find it tough to attract good talent to their businesses. They struggle to raise growth finance, particularly if they want to hang on to the shares of the business - the British funding landscape is more suited to equity finance than debt instruments for MSBs. And they lack specialist expertise to help them scale the business up, particularly relating to the behavioural issues listed above. 

You can check out my presentation here:

The MSB story on Prezi

 So what should policy-makers pay particular attention to when it comes to mid-sized businesses? 

I suggest there are three key issues that make up MSB 101 for policy-makers.

National entities

Internationally, governments are learning that mid-sized businesses are national in scale. What do I mean by that? Basically, large enterprises have become so big, they often dwarf whole countries when it comes to economic impact. The ten largest economic entities in the world feature five enterprises and five countries.

The largest of large enterprises are pan-global and cannot be managed by national governments.  As a result, they exploit what works for them, at the expense of the nations they take advantage of. When a Goldman Sachs pays a tiny proportion of its revenues as tax, compared to the proportion paid by ordinary enterprises (let alone individuals), we know that these pan-global entities are not contributing to national economies as they should. 

Policy-makers should be delighted to know that medium enterprises usually operate within national boundaries. Sure, some of them are world champs at what they do, but they are more likely to be regional champions within the economy. The benefits of what they do stay home. That is a good thing for national performance, and polic-makers should focus on such businesses. 

But please don't focus on them to milk them dry - you would be losing the point of earning from growth. 

Walled garden

A great danger of the new-found fashion in mid-sized business is that a brand new "walled garden" is constructed, focusing on initiatives that fit in with the current MSB zeitgeist. That would be a huge error. We don't need a walled garden of policy initatives focused on medium enterprise. What we need is for the thinking and understanding around medium enterprise to infiltrate and penetrate every corner of business policy. 

So, policy-maker, whatever your focus, ask yourself how your work contributes to removing the problems that mid-sized businesses face when it comes to raising finance, or finding qualified graduates to employ (a big concern for MSBs, by the way) or finding room for them on your ministerial delegations to growth hot-spots in other parts of the world. 

Policy-makers have often been encouraged to "think small first." I too drank the Kool-Aid on regulatory impacts on small businesses, when I was part of the Better Regulation Task Force. However, today, I know differently. Most small companies miss the threshold on regulations, or they get their accountants to sort things out, or they just go AWOl when it comes to compliance. Medium enterprise pays the price on regulation, by having to deal with regulation, without having the luxury of special teams to do it, as large enterprises do. 

Abolish SME

By clumping small enterprises together with medium enterprises, the SME definition is completely unhelpful at best. Worse, policy-makers end up focusing on the needs of the millions of small companies, rather than the substantially different needs of medium enterprises, which are much more impactful as a cohort. 

Now I am guessing that SME is enshrined at a special altar somewhere in Brussels, and it would be highly inconvenient to change a lot of government text about SMEs. That, I am afraid, is your problem. But don't let the breadth of the problem put you off the fundamental truth that SME is wrong, wrong, wrong. 

One silver lining: you don't have to throw away the SME acronym altogether, as you can re-use it for Small and Micro Enterprises, a job it does rather better than its current use.

Summary

The biggest single difference that government can make to MSBs is to put them on the map, make them visible, celebrate the best of them. If you do nothing else, please, please do just this. And you can tell the Chancellor it is not even an expensive recommendation...

Getting smart about mid-sized business

A number of interested (and interesting!) parties are keen to see what can be done to make mid-sized businesses the powerplant of growth in the British economy. Already, the Chancellor has indicated that medium enterprises will be front and centre of the Growth Review that will be announced at the end of November. And the CBI has made its contribution via the Future Champions? research it has carried out jointly with consultant McKinsey. 

M Institute is not a representative organisation but, as a think tank, our insights and commentary have already been part of the inputs used across government as well as by organisations like the CBI. Our goal remains a key focus on medium enterprise: making visible this hitherto invisible segment. For more on our proposals in this area, check out Jyoti Banerjee's presentation to Mark Prisk, minister for business, Department of Business, Innovation and Skills. 

What can government do to get mid-sized enterprises performing as they can? Here's a list of some of the key ideas we think government can work on:

• Making medium special / aspirational – this is about defining the space, what makes it different, and identifying the characteristics of the best companies, including celebrating the best ones. Currently, medium enterprise is not appreciated as a separate segment, and its best performers are not seen to be the heroes they really are.

• Helping medium businesses attract the best talent, through making our graduates more useful in work. At the round-table chaired by Mark Prisk, we talked about driving change in universities on issues around the priority accorded to teaching students, including making them employable through greater focus on team-based working, internships, etc. We also need to see greater emphasis on STEM (maths, science and technology) teaching. The US has already recognised that it has been left behind in this area by countries such as China and Korea, and has put in place the 100kin10 programme as a way of creating 100,000 world-class STEM teachers in its schools. Yes, the UK needs such an initative too, which enables the private sector to participate in raising the next generation of teachers for our STEM-starved students.

• Medium enterprises don't have the means of the freedom to help their managers develop world-class skills in new areas of performance. Large enterprises do this pretty well, but there just isn't the bandwidth for medium enterprises to invest in their staff in this way. We would like to see the development of opportunities for ongoing development of management capability in medium enterprises, through a collaborative programme with business schools to enable “top-up” teaching that helps middle and senior managers to grow in the areas that are significant for the improved performance of medium enterprises

• Multi-national firms have a halo effect in that medium enterprises that come into contact with them, or compete with them, have to sharpen their game. We would like government to build the impact of this through a scheme by which senior managers in large enterprises can become mentors and non-executive directors of medium enterprises, particularly when the companies operate in their ecosystems.  

• We need to see the business networks develop in the medium enterprise segment so that firms access skills that are relevant to their scale of enterprise, as opposed to stuff aimed at small businesses. Let's face it: most of the target audiences for organisations like the Institute of Directors and the British Chambers of Commerce is the SME market. We need to see more action in the space above them. We think the CBI will be better placed to meet this challenge, but we also feel other organisations with good coverage in the medium enterprise space, like the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Family Business, or EEF, should all step up to the plate. Government and the various professional bodies should also encourage these businesses to understand that there are certain behavioural issues (such as professionalising their management, putting information and systems processes into place that enable the business to scale, funding options, etc) around which they can benefit from external input where appropriate.

• We think that the most likely growth opportunities for medium enterprises will be through being close to the hot growth markets. Currently, these focus around the BRIC economies in regional terms. However, there is a huge opportunity working through the massive investments that countries like China and Korea are making in the low-carbon sustainable economy. We need to see British enterprises playing in these spaces: this is not just about renewables and carbon, but is significantly deeper and wider in  terms of products and services that will be needed in a lo-carbon sustainable future. The Green Investment Bank, as currently defined, does not begin to come close to the scale of commitment being made in some other countries.

• For some time, we have advocated the need for a different type of credit rating scheme for medium enterprises, as well as a debt market aimed at these kinds of companies. We feel that this area is much-needed, especially as bank finance dries up  in general, but particularly for knowledge economy companies with few or no collateral assets.

Overall, we think that most of the things that government can do to help medium enterprises do not have a high price tag in terms of the need for large-scale investments. Smart focus on certain key interventions can make a huge difference, in our view.

If there is a foundational issue in this, we would say that there is a need to address the invisibility of the medium segment. A lot of the other issues will come into clearer focus if the segment is more widely recognised, appreciated, celebrated and dealt with.  We think M Institute's model using behavioural characteristics helps define the segment, and lays out the stepped-growth problems that firms have to deal with. Of course, we are going to say that, but we think there are good reasons why this is so.

Dealing with management challenges

M Institute co-founder Jyoti Banerjee presented at a round-table on medium enterprise issues, hosted by Mark Prisk, minister of state for business at the Department of Business, Innovation and Skills.

Jyoti's presentation focused on the state of management in medium enterprises and presents a number of policy options available to government. According to research done by BIS, management capability is one of three main hurdles facing medium enterprises in the UK. The other two issues are access to finance and exporting. Representatives from the CBI and the British Chambers of Commerce presented on the other two issues. 

Check out Jyoti's presentation (in Prezi form) here below. If the presentation window does not show on your screen, you can access it directly at the Prezi site. 

 

Empowering medium enterprise on Prezi

8 half-hidden truths about medium enterprise

Medium enterprises are suddenly getting a lot of attention, here in the UK as well as in other parts of the world. M Institute co-founder Jyoti Banerjee lays out some home truths about midsized business that should not be forgotten as new players jump on to the medium enterprise bandwagon. 

I have taken part in more meetings about medium enterprises in the last two months than across the previous three years. These meetings cover government departments, membership organisations, academics, researchers, event organisers and business people.  

It looks like medium enterprise, the long-hidden secret of economic growth in western economies, is not going to be hidden any more. In fact, it is going to come leaping out into the open, particularly once the UK government announces its Growth Review in the autumn, which focuses on the opportunities in the medium business segment. 

Thanks in part to its inclusion in the Growth Review, medium enterprise is suddenly hot property among all the agencies that want to influence policy thinking in the UK. Who does not want to know best, and to be seen to know best, when the policy-makers ask for help.

But it is not just the UK where this is happening. In the next few weeks, M Institute will be announcing partnerships with international organisations that want to play roles in reaching medium enterprises, and enhancing their performance. One is based in Australia and the other one is global. 

So the medium enterprise contagion is spreading. And that is a good thing, from my perspective. In fact, as I reflect on all the newbies jumping on to what has essentially been our very own bandwagon, I can quote Mr James Brown directly and say, "I feel good." When we set up M Institute, we did so because we felt that the power, stability and growth that medium enterprises bring to an economy are largely hidden because people failed to distinguish medium business from SMEs.  Now that everybody else is getting involved, we can feel vindicated. 

But, and there's a big but here, I would like to reiterate what we have learned over the last five years or so of delving into medium enterprise because we see some common errors being made in people's understanding of midsized business. Some of the home truths about medium enterprise are easily missed, especially to people coming in from the cold. So, for the benefit of all, here are some things that we recommend all the new players in medium business pay attention to.

Video series: Deciphering medium enterprises

Wondering what the story is with medium enterprises? Convinced you should know more but don't want to spend time reading still more stuff on the web? Well, here's the answer you have been looking for. In fact, it's a series of answers.  In a series of video interviews, M Institute  co-founder Jyoti Banerjee tackles the questions every one is asking about medium enterprises. 

The first one series defines a medium enterprise by asking what makes a medium enterprise different from a small enterprise or a large enterprise. And isn't a medium enterprise just an SME anyway? No it isn't, and if you want to know why, then check out these videos. 

The videos were produced by GuruOnline and sponsored by IBM. 

• Characteristics of medium enterprises
• Growth issues facing medium enterprises
• Business processes in mid-sized businesses
• CIO challenges in medium enteprises
• The CFO's influence on IT in medium enterprises
• Sustainability in mid-sized businesses

Check out the first video here:

   

 

 

 

Growth policy: confusion among policy-makers

Ever wondered how governments come up with policies on growth? Well, on March 14th, M Institute co-founder Jyoti Banerjee got some insight on how this is done.

The UK Department of Business, Innovation and Skills, or BIS for short (nee BERR, even more nee DTI, if you have not been keeping up with the changing alphabet soup), invited a mix of policy-makers, academics and industry players to listen to some long-range views on growth policy. Long range? There were no announcements regarding policy, just an exchange of views on issues that might impact growth policy in the future.

Did I learn anything? Was I encouraged? Will UK growth policies change the growth opportunities for medium business in this country? In short: yes, no and probably not. In that order.

CBI is right: concentrate on medium enterprises, Mr Cameron

Paul Druckman finds himself agreeing with the CBI on its new focus on medium enterprises.

'Britain's forgotten army' - this couldn’t be a more accurate description by the new Director General of the CBI, John Cridland, who makes a strong case for medium-sized business. And quite rightly so. David Cameron’s speech has been much publicised in the media, with its focus on enterprise as the catalyst for UK growth moving forward. But as Cridland points out, investment is usually focused on small and large organisation, with little mention of those in between. 

It’s the mid-sized organisations where focus is required for they are the bedrock of this country and it is here, as the Director General rightly says, that the majority of growth and jobs are likely to be found. However, these organisations need support including access to capital. If the Prime Minister wants to see the return to prosperity that he desires, he should take heed of the CBI’s advice. 

These are themes that M Institute has focused on many times previously. For a quick summary of our views on policy issues relating to medium enterprises, please read here. This particular blog item was written before the global financial crisis but points to many of the issues that make it so hard for medium enterprises to raise capital, particularly when the banks could not see the kind fo return they could get from real estate (pre-2008) and now can't see the point of lending.

Looking ahead: a perspective on 2011

What are the major trends that medium enterprises will need to pay attention to in 2011? M Institute co-founder Paul Druckman checks out the nearest crystal ball.

Right at the outset, let me explain that I’m not an economist or a futurologist; simply, a businessman who has many connections to those with intellect and foresight!

There are all sorts of trends that consultants and the economists are predicting for 2011, including further developments in cloud computing, GDP growth and more general strategic and technology advancements. Here's my pick of the challenges and opportunities that I believe will be poignant in the forthcoming year.

UK Budget cuts – this will be significant for British business as the public sector has been a growing market as a customer over the last decade. I believe we’ll see many companies refocus on the private sector.

A changing workplace – I’m not just referring to remote working here. Workplaces are changing. This is being catalysed by the arrival of disruptive technologies, particularly social networking tools. In fact, ‘social business’ is the future - it’s about collaboration, connectedness and lateral management. We’re moving away from people being told what to do, towards self-service, and seeking out the 'best' workplace environments. The related trend here is that people are moving on to working for themselves. Here’s to the rise and success of the micro business.

Sustainability – a recognition of the twin issues of finite resources and climate change will receive increased emphasis in business circles. This will be based around the potential of increasing revenues and managing costs. For example, GE in the USA is basing its strategy on a low carbon future.

Cloud computing and technology advances – that word ‘connected’ raises its head here as well. That’s what technology is all about. Cloud computing is becoming more popular in specific areas of the business. Just this month, leading software companies such as Sage and Access Accounts are introducing their own on-line solutions - the cloud is not just about start-ups. 

This blog article is based on an interview by Access Accounts for its newsletter. 

Medium enterprises no longer have it so good?

Analyst Gartner brought out yet another of its Magic Quadrant reports just before Christmas, this time on ERP software for "product-centric midmarket companies." The report points to the leading software companies in this space. But instead of celebrating the achievement of the winners, the report compelled me to ask a question that has bothered me for some time. Have medium enterprises lost their edge over small business when it comes to IT? Jyoti Banerjee, co-founder of M Institute, thinks the answer has got to be yes.

Let's face it. It's been a long time since Gartner's MQ reports have had any juice in them. These days the best writers on software sit outside the large analyst companies, of which Gartner is easily the largest. The report explores fourteen software products, and picks two as leaders (Microsoft Dynamics AX and SAP Business All-in-One), and reserves the visionary slot for Epicor 9. What was interesting was what the report does not say. Here are some issues that medium enterprises looking at this market will get little help on from the report: