M Institute

Bruntwood builds value through employees and local communities

As UK property loses its gloss, one business continues to build value in this space. Jyoti Banerjee met up with Chris Oglesby of Bruntwood to learn how its long-term thinking has enabled it to succeed where short-term profit-seekers have lost out. 

Bruntwood was started in 1977 buying out old industrial property. In the 1990s, it decided to move into the provision of office space.  Chris Oglesby took over the running of the company from his father Michael who was the founder. Today, the company employs 450 people, up from twelve in the early 1990s, and has converted an initial investment of £50,000 in 1976 into a net worth of £330 million.

Over the company’s life, it has experienced growth of over 20% per annum. Typically, the funding for this has come from banks as private equity funders have been much more aggressive in their demands. However, there is a new stream of funding entering the market. As Oglesby points out, “The main change in the market is that annuity funds are entering it and they are long-term lenders. The fact that we are a long-term family business gives us a good position in that market.” As a result, Bruntwood has recently agreed a £130 million debt facility from a life fund.

“Family businesses, when they are good, are one of the best forms of ownership,” says Oglesby. However finding equity finance that is matched and aligned to our family values is difficult.”

A different model

What Chris and Michael Oglesby have built is a company that understands its position in the communities in which it operates. It’s found a property model that works for regional cities in the UK, such as Manchester, Leeds, Liverpool and Birmingham. In each of these cities, it is a leading provider of office space. 

But it is more than just understanding the market that serves Bruntwood. The values it brings to each regional community is important as well. “We participate in the Local Enterprise Partnership where we are based. Our people are involved with sixty external civic and charitable organisations in the cities we work in. I sleep very soundly knowing that the contribution the business is making to the broader community is very significant,” points out Oglesby.

The company’s growth was checked by the 2008 downturn, when its revenues dropped 20%. Although the business is back to pre-2008 levels, there were dark moments when Oglesby and his team thought about reining in the commitments the business has made to its local communities. “Each time we chose not to,” says Oglesby. “The way we do business means that we have to be true to our values through the difficult times. If anything, this is even more important.”

Oglesby likens the way the company works to a game: “The way you play it is important. We are in  it for the long-term. What the company stands for is important to us. The team is important to us.” Which may be why Bruntwood does not offers bonuses to its staff, but allows all staff to share in an allocation of shares in the business.  As Oglesby explains, “Research shows that bonuses do not support superior sales performance. If you recruit the right people who buy into the bigger picture of what you are doing, the success of the business works as a motivator.”

Bruntwood has discovered that employing people who come from non-family companies can require a reset in their expectations about work. Bruntwood found that a number of its competitors did not invest in training their staff and responded by increasing its investment in people capital, making it a strategic priority.  As a business that differentiates itself on service, Bruntwood has chosen to look after its people, on the basis that service only works if the staff feel cared for.

This attitude of care at Bruntwood carries through to the local community.  A quarter of the business is owned by the family’s charitable trust which focuses its giving in the local community, strengthening the contribution that Bruntwood makes to society, and creating trust in the business.

This case study is drawn from M Institute's recent report on Sustainable Value Creation, published by the Institute for Family Business. 

Sustainable Value Creation report available for download

M Institute's new report Sustainable Value Creation, published by the Institute for Family Business and the Family Business Network, is now available for download. The report offers four keys to the creation and maintenance of sustainable value plus a discussion on practical steps a company can use to measure and manage its value creation processes.

Our ideas on value creation have changed forever.

No longer can we assume that value creation is only about financial performance. It turns out to be much, much more than that. It took the global financial crisis of 2007-08 to bring home this truth. However, we find that our planet is also fighting a huge battle when it comes to environmental impacts, driven particularly by climate change and resource depletion. Plus, the world’s population continues to grow beyond the point that the planet can sustain, given what we know today. 

How can business respond to these challenges? Not by using the same old ideas and methods that have dominated the way our companies have worked over the last decade, or even the last century.  We need a new model for sustainable value creation. The good thing is that there are already companies engaged in inventing this next phase of capitalism. For this report, we engaged with a number of companies that have started to think in different ways about the wider challenges that they face.

Some of these companies are well-known corporate organisations with large footprints, such as Puma, SAP and Unilever. The problem with looking at well-known companies like that is the view that many have that these companies can do what they do because they are large international companies with (relatively speaking) limitless resources.

However, we have chosen to do detailed case studies on a variety of mid-sized businesses that are doing things that can actually be done by anybody at all. At the heart of every example is a management team that is committed to finding new ways to build sustainable value. It is examples such as these that encourage us to keep pressing the case of medium enterprises around the globe.

The M Institute report focuses on ‘four keys’ that, if introduced into the management of an organisation, can give it a structure for creating and sustaining long-term value.

Operating efficiency is a sustainable virtue
Rather than evaluating a business on just financial or physical assets, widen the operational lens to include use of sustainable and natural capital. Indeed, as companies deal with depletion of resources, materials security and environmental impacts they are seeking new and improved ways of operating. Over 40% of second and fourth generation companies have introduced clean-tech technologies in their business and 65% acknowledge a competitive advantage in product and service quality.

Sustainability attracts and retains the best people
The best employees want to work for companies they believe in. Forty per cent of family businesses cite their sustainable strategy as giving them a competitive advantage in attracting and retaining employees.

Public forums and government actions are driving sustainability
Becoming more active in engaging in public initiatives, cross industry bodies and with government to further the cause of responsible business are critical for sustainable, thriving family businesses. Thirty per cent of family businesses cite a positive impact on local community relations when they engage in this process.

Sustainability requires balancing short and long term objectives
With a tradition on focusing on the long term, family businesses have a natural advantage when it comes to being an environmental, social and governance-based business. Combining performance in the short-term and shifting long-term objectives in line with society at large can combine to bring further benefit to a business that has a wider range of values. 

M Institute is pleased to collaborate with the Institute for Family Business (IFB) and the Family Business Network (FBN) in putting together this report. We have authored it and they have published it.  The best examples of family businesses are ones that are really good at balancing short-term performance with long-term objectives. This is exactly the sort of thinking needed to build sustainable value.

We hope you find the lessons from this report to be useful in your context and look forward to your feedback.

Download the Sustainable Value Creation report here.

Family businesses focus on sustainability to drive competitive edge

Today, M institute's Jyoti Banerjee will be speaking at the Family Business Network Summit in London to launch our new report Sustainable Value Creation, which is published by the Institute for Family Business. Could it be that one day all businesses will think of value creation in this way?

IFB research shows that family firms generate £1.1 trillion annually in UK revenues, 72% of family businesses have a sustainable strategy in place, and 79% of family businesses have implemented sustainable business practices. Clearly, family businesses are important for the British economy but are also increasingly moving towards a sustainability agenda to give them a competitive advantage. 

A new report entitled Sustainable Value Creation, authored by M Institute, published by IFB and launched at the Family Business Network Global Summit in London this week, provides practical advice for family firms on how to create long-term value in a company through sustainable business practices. 

On average, family businesses pay the greatest attention to issues related to the environment. A recent report by Credit Suisse revealed that seventy two per cent of businesses led by a second or a higher generation report having a strategy in place related to environmental, social and governance issues.  Over the past three years, 79% had taken some action inside their company in terms of implementing a sustainable business such as introducing clean-tech technologies.

The M Institute report focuses on ‘four keys’ that, if introduced into the management of an organisation, can give it a structure for creating and sustaining long-term value.

Operating efficiency is a sustainable virtue

Rather than evaluating a business on just financial or physical assets, widen the operational lens to include use of sustainable and natural capital.  Indeed, as companies deal with depletion of resources, materials security and environmental impacts they are seeking new and improved ways of operating.  Over 40% of second and fourth generation companies have introduced clean-tech technologies in their business and 65% acknowledge a competitive advantage in product and service quality.

Sustainability attracts and retains the best people

The best employees want to work for companies they believe in.  Forty per cent of family businesses cite their sustainable strategy as giving them a competitive advantage in attracting and retaining employees.

Public forums and government actions are driving sustainability

Becoming more active in engaging in public initiatives, cross industry bodies and with government to further the cause of responsible business are critical for sustainable, thriving family businesses.  Thirty per cent of family businesses cite a positive impact on local community relations when they engage in this process.

Sustainability requires balancing short and long term objectives

With a tradition on focusing on the long term, family businesses have a natural advantage when it comes to being an environmental, social and governance-based business.  Combining performance in the short-term and shifting long-term objectives in line with society at large can combine to bring further benefit to a business that has a wider range of values.

Mark Hastings, Director General for the Institute for Family Business, said, “Family businesses are already ahead of their competitors in understanding the benefits that a sustainable strategy can bring to their business.  By publishing the new report, we want to provide a useful and practical framework for how companies can increase their commitment to a sustainable business. Companies have to find ways to make sustainability real in the context of their strategies, their operations and their relationships.”

Jyoti Banerjee, co-founder of medium enterprise think tank M Institute and author of this report said, “Many companies are trapped in an outdated approach to value creation that has focused on short-term financial performance. It is great to see that there are some businesses out there, such as the family businesses in the report, prepared to act on the understanding that sustainable value creation requires action in multiple financial and non-financial dimensions in the short and long-term.”

Ross Warburton, chairman of the IFB, called upon the Government to boost the economy by making family business its key strategic partner and helping family firms to secure jobs across the country. 
He said, “Despite the challenges, family firms continue to thrive and grow and are in many cases outperforming other businesses – a testament to the strength and resilience of the family business model.  But it goes beyond the balance sheet.  In an age where the shock of the economic meltdown has raised questions in many quarters about corporate practice and the role of private enterprise in society, the deep rooted culture of family firms has much to offer the broader business community - built on a bedrock of strong and enduring values, a vision for and commitment to the long-term and a genuine part of and contributor to local communities.  In sum, an example of what responsible and sustainable capitalism can look like.”

The report features case studies covering family and non-family businesses, including Adnams, Bruntwood, Donaldson Timber, Puma, SAP, Soneva and Wates.

Download the Sustainable Value Creation report here. 

Adnams brews long-term value through modern thinking

In preparation for our forthcoming report on Sustainable Value Creation, M Institute co-founder Jyoti Banerjee met Andy Wood, ceo at Adnams, a modern brewing company built around a heritage brand. The Adnams story is an excellent example of a mid-sized business willing to explore how to create and sustain value from a long-term perspective.

Adnams is a family business that has been brewing beer in the south-east of England for over  125 years. At the turn of the millennium, the company felt that the competitive landscape was shifting and it needed to change its approach. "We were a small, slow-moving, top-down autocracy," recalls Andy Wood, CEO at Adnams.

The review of the business environment pointed to some massive changes:

• There was a lot of consolidation taking place at the top-end of the market, while the specialist end of the market was fragmenting.
• The big international brewers put their ale brands to one side and focused on lager, while a host of new micro-brewers came into the market, focusing on local production. Adnams sat right in the middle of this, being about thirty times the size of the largest micro-brewer but a long way from the scale of the multi-national beer companies.
• Fossil fuels were going up in price. The company modelled a number of alternative scenarios pointing to an urgent need to re-engineer how the company used energy in its operations.

While preparing for the long-term changes they could see coming, the company sought to introduce a cultural values programme. "We wanted our values to be real and tangible," said Wood. "We challenged ourselves to move the business forward. We looked at how carbon pricing would impact our business model, the ways in which we managed people, the level of customer service we provide, and our brand positioning."

The outcome of the long-term thinking work continues to drive the business forward today. The company sought to improve its operational efficiency through focus on carbon emissions, which helped uncover inefficiencies, but also opportunities to do things in a new way. "We encouraged our architect firm to push sustainability ideas into the new distribution centre they were designing for us. The innovation in the new centre created a raft of interest for us in the market," Wood recalls.

Adnams learned how to apply sustainable thinking to its product lines when it co-created East Green, a low-carbon beer, alongside retailer Tesco.  A raft of efficiency changes were introduced by careful examination of carbon emissions in the company’s supply chain.

• Adnams picked the twelve farms closest to the brewery (out of 40 farm suppliers) to supply the hops in order to lower carbon miles
• It used a bottle that was a third lighter than the normal Adnams bottle
• The beer was lightly malted in order to save energy
• The brewhouse is energy efficient, and the storage facility has a natural roof that takes 100 tonnes of carbon out of the atmosphere annually, and needs no artificial heating or cooling to maintain temperature to within 2 degrees centigrade

It was not just carbon and energy savings that came into focus through the initiative. Adnams found that gray water recycling enables the company to deliver a water consumption ratio per pint of beer produced of 3.1, versus an industry average of 8.

The current efficiency journey in Adnams is focused on waste streams. The company produces a waste/moisture/yeast waste stream, known as ullage, which used to be thrown away, and the company had to pay a third party to do it. Instead, it built an anaerobic digester that turns the nutrient-rich waste stream into energy.  The ullage waste stream at Adnams amounts to 5000 tonnes a year, but the anaerobic digester can consume 12,000 tonnes annually. So Adnams now works with local pubs, hotels, retailers and factories to put their food waste into the digester in order to generate bio methane.

The learnings from East Green beer were deeply impactful on the working of Adnams. Today, every beer the company makes benefits from the lessons learned in creating a low-carbon beer.  Plus, the company has a new-found confidence in what it can and cannot do. In 2009, 4% of its beer volume came from new products. In 2012, new products contribute nearly a quarter of company volumes. In the context of a dynamic market where the consumer seeks out products that are new and different, Adnams has a new-found ability to offer innovative products that are differentiated from its core brands.

"We put a big focus on local sourcing," says Wood. "This has given us reputational enhancement in the local community."

The company needed a way to tie together its various long-term programmes, and decided to define a brand that could tell the story of the company. As Wood points out, "We are a heritage brand but we are a modern company." The company’s products reflect that. It has core products that have been in place for decades, while a host of new products reflect the changing trends in the market. "The consumer has become interested in the new and different. Our new and different products showcase what we can do. We are, undoubtedly, in the fashion business," says Wood.

Andy Wood is absolutely clear that the new-look Adnams fits the aspirations of its stakeholders: its customers, suppliers, staff, shareholders and local communities. As he points out, "Trust has been eroded greatly in business. People are very cynical about business. But they are not cynical about businesses where there is provenance and a story to match." The last point resonates with Adnams as a company today.

IFB and M Institute to carry out joint study on sustainable value creation

Family businesses represent a significant chunk of the UK business landscape, accounting for nearly a quarter of GDP as well as a significant proportion of mid-sized businesses. How can these firms build long-term sustainable value? A new study from IFB and M Institute seeks to answer exactly that question.

The Institute for Family Business (IFB) and M Institute have announced a joint study exploring how companies can create sustainable long-term value. The study, to be conducted over the next six months, will seek to capture how family businesses should act in a way that sustains long-term value creation, featuring examples of companies that have found reliable ways of generating lasting performance.

Jyoti Banerjee, co-founder of M Institute, the UK think tank on medium enterprise, points out, "Many companies are trapped in an outdated approach to value creation that has focused on short-term financial performance. The financial crisis that has enveloped the globe over the last few years carries proof that such an approach does not always build long-term value."

Family businesses are often different from their non-family counterparts, in terms of their long-term perspective, the way that they manage capital, and their relationships with stakeholders. Yet, managing for the long-term is complicated in the light of the trajectory of the global economy, impacted as it is by the divergence in growth between old and new world, climate change, unprecedented resource constraints and the planet’s population growth.

"We are keen to understand the value creation dynamics facing family businesses today," says Grant Gordon, director-general of IFB, the UK member organisation representing family businesses. "It will be helpful to delineate what sustainable value creation looks like from a family business perspective, in order to share best practice and to help boost growth."

Find out more about IFB and family businesses here.

 

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:

Climate war: The economics of clean fuel will beat fossil fuel

The war over climate policy is being lost to the fossil fuel lobby and its PR army, first on scientific grounds and then in the economic sphere. Jyoti Banerjee listens to an interview with Eric Pooley of Business Week, who argues that the new clean-fuel economics will see off the old fossil fuel economy - if given a chance. A very big if...  Medium enterprises, take note.

In the week where the Republican party in the US has won back the House of Representatives, its rhetoric on climate change is getting more intense, with plans being discussed to counter the climate change "lie."

Earlier, Eric Pooley, a business editor at Business Week, wrote The Climate War, a thriller about the failure of climate legislation to be enacted in the US. His book blames the fossil fuel lobby and its PR entourage for holding back legislation through a doubt and dissension campaign. He also blames President Obama. 

Recently, Pooley was interviewed by Francesca Rheannon of Writer's Voice and the resulting podcast is well worth a listen, especially for medium enterprises interested in leading the charge in the emerging lo-carbon economy. Here are three points I appreciated from it:

1) The fossil fuel lobby is fighting the climate war on two fronts at the same time: climate science and old-fashioned economics. By casting doubts on the science of climate change, the public is confused, and legislation is held up, watered down or stopped. The economics argument is all about jobs, growth and prosperity - can we risk these for the sake of an esoteric idea such as climate change? Of course, to us tech folks, this sort of debating position has a familiar feel: we call it FUD, for fear, uncertainty and doubt. It's the basis of the defence employed by a large incumbent player about to lose a deal to a young fleet-of-foot pretender.

2) Pooley is clear that the Big Lie needs to be dealt with: that somehow doing stuff for the environment is bad for the economy. Fossil fuel drove the economic engine of the last hundred years, but it cannot do so any longer. It will have to give way to  a clean fuel engine which can drive growth for hundreds of years going forward. Clean fuel will spawn new industries, new firms and new jobs which we currently cannot even imagine. Just as buggy whip companies will never have been able to envisage today's global automotive industry, or print media companies the digital opportunities that enable a single writer on the Internet to be read by billions of people. Economists have a phrase for this sort of Schumpeterian innovation: they call it creative destruction.

3) Pooley's solution is based on sound economics as well: take away the subsidy that fossil fuel enjoys by putting a price on carbon. Once, the externalities related to carbon consumption are incorporated into our day-today economic thinking and analysis, the opportunity for clean fuel will be unfettered. 

Recommended.

Does green beer work?

The amber liquid is turning green - just check out Stella and Adnams. But does green beer make sense? M Institute co-founder Jyoti Banerjee investigates the inside story and discovers how one medium enterprise company is reaping business benefits from green beer. 

Less glass. Less CO2 emissions. 

The latest advertisement hoarding from Stella Artois features the beer company’s new lightweight bottle. As the Stella ad claims, “every one of our 250 million lightweight bottles contains less glass to help reduce CO2 emissions.”   

I think it’s great when household names like Stella believe in sustainability to such an extent that they can focus an entire ad campaign on just this one message of lightweight bottles. Customers today like to know that their supplier has done what is possible to reduce the environmental impacts related to their purchases. 

So well done, Stella, for taking the trouble to lower the weight of your highest selling bottle by 7%. Apart from the citizenship aspect, this sort of environmental initiative makes great business sense too. A lighter bottle is cheaper to transport and needs less energy to make. 

When I saw the Stella ad, I was reminded of another beer company that had made some serious inroads into improving its environmental performance: Adnams. Now Adnams is a much smaller business than Stella – in fact, it’s clearly in the medium enterprise camp with revenues around £50m annually. Adnams was the first to bring out carbon-neutral beer, an altogether deeper initiative than making lighter glass bottles. Every aspect of the company’s processes had to be re-assessed to make East Green, the world’s first carbon-neutral beer. 

Here’s what I learned about the business end of sustainable beer production, listening to Andy Wood, managing director of Adnams, talk about East Green: 

A hung Parliament?

Should we care that next week we may have a hung parliament in the UK? M Institute co-founder Jyoti Banerjee investigates the options.

I see that a recent study of growing businesses by the British Chambers of Commerce finds that two-thirds are concerned or very concerned about the impact of not having a majority party, while only one in seven respondents feel that it would be a good thing.

Let’s try and place the hung parliament discussion in context. The one thing that medium enterprises crave from their politicians is a stable economy so that business decisions within the firm are not constantly upset by changes without. But it is not just a stable economy that they need. Medium businesses also need top-flight transport and communications infrastructure, access to finance, and a well-educated workforce.

So ask yourself this question? Will a hung parliament actually deliver any of these hopes? Or will it stand in the way of achieving these objectives?

It is reasonable to expect the main political parties to be different from each other, and given the opportunity to exercise their policies, the UK could look very different in a Labour regime of Big Government, compared to a Tory government of Small Government / Big Society, or even Nick Clegg’s Open Government.

But reality is likely to be very different. While each of them could lead Britain into completely different economic territory, that is going to take rather a long time. I suspect Britain’s appetite for a hung parliament may not last long enough to see change on that scale. In fact, a split leadership may not even last the course of a single parliament.

Should we care that next week we may have a hung parliament in the UK? M Institute co-founder Jyoti Banerjee investigates the options.

I see that a recent study of growing businesses by the British Chambers of Commerce finds that two-thirds are concerned or very concerned about the impact of not having a majority party, while only one in seven respondents feel that it would be a good thing.

Let’s try and place the hung parliament discussion in context. The one thing that medium enterprises crave from their politicians is a stable economy so that business decisions within the firm are not constantly upset by changes without. But it is not just a stable economy that they need. Medium businesses also need top-flight transport and communications infrastructure, access to finance, and a well-educated workforce.

So ask yourself this question? Will a hung parliament actually deliver any of these hopes? Or will it stand in the way of achieving these objectives?

It is reasonable to expect the main political parties to be different from each other, and given the opportunity to exercise their policies, the UK could look very different in a Labour regime of Big Government, compared to a Tory government of Small Government / Big Society, or even Nick Clegg’s Open Government.

But reality is likely to be very different. While each of them could lead Britain into completely different economic territory, that is going to take rather a long time. I suspect Britain’s appetite for a hung parliament may not last long enough to see change on that scale. In fact, a split leadership may not even last the course of a single parliament.

Trepidation and quiet confidence

Medium-sized businesses’ ability to deploy game-changing IT will help them withstand the recession, as delegates at Information Age’s IT for the M Business conference discovered. M Institute co-hosted the conference and listened in on the discussion.

Information Age's Pete Swabey reports that the current economic crisis will hit medium businesses the hardest. He came to this view listening to the proceedings at the recent IT for the M Business conference. Swabey says, "They have neither the agility of small businesses, which can change tack at the drop of a hat, nor the economies of scale of corporations, many of whom have the cash to sit tight and weather the storm."

As M Institute has often noted, medium businesses (unlike their smaller brethren) are prepared to invest in sophisticated IT, and have a real appreciation of what IT can do to enable the business to scale efficiently. But unlike large organisations, Swabey notes that "mid-sized business don’t have the luxury of getting it wrong or experimenting: IT projects need to be 100% tied to the achievement of business goals, with an intense focus on payback and benefits."

Do we need the RDAs?

The Taxpayers' Alliance would like the regional development agencies abolished. M Institute co-founder Jyoti Banerjee studies their report - he likes their data but disagrees with their recommendation.

This month a report from the TaxPayers’ Alliance claims that the £15 billion spent on the Regional Development Agencies since their creation in 1999 has been a total waste as the RDAs have contributed absolutely nothing to the economic performance of the regions in the UK. The TPA report has three main planks of evidence: 1) The RDAs were created to improve the performance of the regions, particularly those outside London and the south-east. In 1992, London and the south-east contributed 36% of the UK economy, a figure that has grown (in the wrong direction) to 48% in 2006. 2) Employment across the country grew by 9.5% between 1995 and 2000, while it only grew by 3% between 2000 and 2005. 3) Regional inequality worsened: apart from London and the south-east, England’s regions grew faster before the RDAs were around, compared to the seven years after. To add to this lack of performance is a long account of RDA waste. For example, 39 RDA bureaucrats earn over £100,000 a year, one part-time RDA chairman had a travel expense bill of over £50,000 in a single year, and one RDA managed to spend £20,000 sending some of their team to a film festival in Dubai.

Modernising business processes

Formalising what may previously have been ad-hoc business processes is a key issue when differentiating medium-sized organisations from small ones. Yet figuring out which processes need to be formalised or modernised, and in what priority, is a difficult task for leaders of medium organisations. M Institute co-founder Jyoti Banerjee checks out the options.

Processes new and old
Companies that want to exercise a competitive edge in the market, whether by launching an e-commerce channel or being first to market with a new product, have found that they are dependent on the state of their business processes if they want to succeed. Typically, their business processes are a mix of new and old, with only brand-new well-financed companies having the luxury of fully modern processes. Good processes do not guarantee success, though bad processes will certainly guarantee failure.

Modernising business processes research paper

Formalising what may previously have been ad-hoc business processes is a key issue when differentiating medium-sized organisations from small ones. Yet figuring out which processes need to be formalised or modernised, and in what priority, is a difficult task for leaders of medium organisations.

Modernising business processes is a new white paper from M Institute that seeks to provide some fresh thinking on the business process challenges that medium organisations face so that they are better equipped to make the judgements on how to develop and grow in a way that takes advantage of their growing maturity in the exploitation of technology, innovation and new opportunities in the business landscape.

To grow or not to grow - that's an IT question

Durham Business School and Microsoft (both partners of M Institute) have collaborated on a piece of research that has an important finding: growing companies make greater use of IT to meet their key business challenges compared to companies that are declining. M Institute co-founder Jyoti Banerjee investigates.

The research, carried out among 401 businesses with up to 100 employees, does not attempt to distinguish cause from effect. But it does claim that growing companies are more likely to invest in IT in order to better manage customer data, better manage business processes, comply with regulation, and access business information when out of the office.

Although much of the report is focused on analysing the different size cohorts, its writers, Bill Snaith and Ian Stone of Durham, have done an interesting thing in maintaining a constant thread in the report which analyses the research findings by growth performance. Compared to declining companies, growing companies are more likely to:
* Use more diversified sources for IT advice
* Have more software and arguably more sophisticated systems 
* Have more appreciation that IT can (and has) delivered benefits to their business and how it might help them overcome challenges
* Talk about IT in terms of what it can do for employees, and so have a people-centric attitude to IT
* Display greater willingness to spend more on IT in future to generate competitive advantage and growth

Banks have better things to do with their money...

... than to invest in the growth plans of medium organisations. M Institute co-founder Jyoti Banerjee asks if the investment preferences shown by banks are really the results of market imperfections that need to be dealt with by policy-makers.

A few months ago, I took part in a meeting at HM Treasury organised by M Institute where a few leaders of medium organisations were invited to present their stories: how their companies became medium-sized, and the challenges they had to overcome and still have to deal with. A recurring theme for these business leaders was the way in which problems relating to access to capital impair their growth performance.

Should government be doing something about it? Clearly, the Treasury officials we spoke to did not think so as there is no evidence in their eyes of market failure. Without evidence-based market failure, how can the government generate its favoured route of evidence-based policies? (One wag recently commented that it is not evidence-based policy-making at work here – simply, policy-based evidence-making).

There is urgent need for a formal research study that can show if the evidence exists that access to finance is slowing down the growth of medium companies. This is particularly apposite in the context of a Brown government that has shifted attention from start-up enterprises to existing companies that demonstrate growth – an arena of business where medium companies are very successful. M Institute may not claim credit for engendering this shift in policy, but it certainly fits our policy recommendations. In this context, please see an earlier blog item commenting on Margaret Hodge’s enterprise policy.

Flat world vibrations: A study of Audio Partnership

When asked to identify good quality hi-fi brands, most Britishers are likely to pick mass-market Japanese brands such as Sony or Panasonic. It would be news to them that British hi-fi brands are at the top of the tree when it comes to audiophile cognoscenti around the world. One company that has taken advantage of the high standing of British brands in international markets is Audio Partnership, a medium-sized British electronics firm that is attempting to exploit globalisation’s opportunities in its march for growth. M Institute co-founder Jyoti Banerjee investigates.

It was in the 1990s that Audio Partnership realised that although British hi-fi companies were being beaten by the Far East when it came to low-cost manufacture, their reputation was built largely on good design and excellent sound quality. The company took over struggling British brands such as Cambridge Audio and Mordaunt-Short, strengthened their design prowess but outsourced all manufacturing to China – possibly the first Western audio company to do so. Plus, they built strong marketing campaigns that enabled them to sell these British-designed products across the world.

Today the company reports annual revenues in the region of £25 million with 60 employees in the UK and a number of strong relationships with Chinese electronics manufacturers. Although the audio market world-wide is in steady-state mode – it is flat screen TVs and iPods that are the growth engines in consumer electronics – Audio Partnership is still able to grow at a consistent rate because of market concentration in traditional audio markets where its combination of British design and Chinese manufacture is proving to be a winner, and because of entry into new international markets, where traditional British audio companies never trod.

UK slips against global competition

The Institute of Chartered Accountants finds that 77% of all British businesses are engaged in international activities. M Institute co-founder Jyoti Banerjee explores this finding in the light of UK plc's competitiveness in the global marketplace.

The tenth annual Enterprise study from the Institute of Chartered Accountants in England and Wales (ICAEW) has found that 77% of all UK businesses are currently engaged in globalisation to some extent. Filtering this finding to companies with less than 1,000 employees, the research indicates that as many as 44% are engaged internationally, either through having customers overseas, outsourcing, or running operations abroad. |Its higher than I would expect

Of the 1100 companies taking part in the study, 42% view globalisation positively, and 18% are concerned about it. Possibly unsurprising is the fact that it is the financial services sector that is most positive about globalisation, and manufacturing the fastest to recognise the risks, reflecting the relative strengths of these industries in the global marketplace. London continues to be a powerful global finance centre, while Britain's manufacturing is sliding away, except in certain specialist sectors such as racing cars, boats, and defence.

Empowering medium enterprise - a guide for policy-makers

A new research study, from M Institute, sets out challenges facing medium organisations and asks policy-makers to respond.

The UK government wants to see Britain as the best place in the world to start and grow a business. Yet most of its attention is on policies and measures aimed at starting businesses. A new research study from M Institute, Empowering Medium Enterprise: A guide for policy-makers, seeks to focus government attention on the challenges facing medium businesses, and the actions government can take to support their continued economic growth performance.

The research, released October 2006, was carried out by M Institute, and received support from Microsoft and the Institute of Chartered Accountants in England & Wales (ICAEW).

Key themes emerging from the research study:
• Medium business is very different from large or small business
• Medium enterprise growth is held back by certain economic factors

 

Outsourcing business processes for M enterprises

Nobody can be a specialist in everything: hence the growth in outsourcing of standard business processes. So far business process outsourcing (BPO) has been dominated by large enterprises. Now M enterprises are moving to exploit its benefits.

Growing maturity of the BPO market is enabling medium enterprises to take advantage of new opportunities. I asked Phil Fersht, a former colleague of mine, to define BPO and explain its workings for M organizations. Phil is vice president of the BPO Group at Everest Research Institute, and is well-regarded around the world for his expertise in the matter. Over to you, Phil.

Growth in the regions

Three-fourths of British medium-sized organisations are not aware of their regional development agency, or RDA. Who cares, asks M Institute co-founder Jyoti Banerjee? Well, the RDAs should, and the government should, and - surprisingly - so should mid-sized companies.

We think of the Chinese as growing unbelievably fast. India is no slouch either. Nor is Ireland. But looking at growth stats for a country as a whole is misleading. It's not countries that grow fast - it is individual regions that grow.

All over the world, we see certain regions performing so spectacularly that the entire country seems to be glowing green with growth. But other regions in the same country lag behind. China is a case in point. In China's coastal regions, such as Dalian, Beijing, Shanghai and Zhejiang, per capita income is around $5000 per year, a figure already surpassed by Guangzhou. But in the hinterland, incomes fall away to between $2000 and $1000, and lower. If we treat regions as countries, then nine of the top fifteen Asian countries are actually Chinese regions.

Growth and finance: an imperfect relationship

Growth needs money, and money looks for growth. But the two often don't find each other in the M segment of the market. Jyoti Banerjee gives credit where credit's due...

There seems to be this special bond between growth and mid-sized organisations, or M organisations as I like to call them. Talk to most leaders of M businesses and they will tell you that they expect to grow at around 20% per annum for the next three years or so. What’s so remarkable about that anyway? After all, most small and start-up businesses probably expect to grow at around 200% per annum. Why should we care about the twenty percenters?

We should, for a number of reasons.