M Institute

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.

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:

   

 

 

 

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. 

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: 

Copenhagen summit on climate change sees greater US engagement

A first-hand account on last week's Climate Change Summit in Copenhagen, from M Institute co-founder Paul Druckman, who is also chair of the Accounting for Sustainability Group led by the Prince of Wales.

My main recollections from the 2009 World Business Summit on Climate Change coalesce around a few key themes: engagement from the great and good; the Copenhagen Call; an immersion in USA-centric Americans;  a lost opportunity to engage with the delegates; but a great initiative that should be applauded and advocated.

The summit opened with Al Gore delivering a performance that we have come to expect, but he did hit the spot, in my view. His perspective is that business can only operate on the rules constructed by the world’s politicians, who need to reward good corporate behaviour by accounting for externalities.  A great quote from his session: “Mother Nature does not do bail outs.”

Throughout the summit the focus was on China and the USA because they have such dominant markets but also because they are the new dimension to these talks compared to Kyoto, with both governments becoming major forces for change.

The aviation session left me cold, I am afraid, mostly because of their goal to have “carbon neutral growth” – notice the word growth in that statement. They just have not got it.

For me, the key speech in the politicians' session was from the Chinese Minister who gave a stern warning to the developed world to maintain the “principle of common but differentiated responsibilities.” His main position was that current negotiations have still not reached substantial progress, because of some countries trying to change this fundamental principle and others setting new processes in train, which the Chinese are very concerned about. EU President Barosso responded later in the conference by saying that climate negotiations for COP15 are tough, but the USA is a really positive contributor this time around.

The Canadian Environmental Minister did make points not raised elsewhere about green protectionism, especially in the USA, but then blotted his copybook in my view with the unequivocal statement that “the challenge before us is all about technology." Harish Hande, of SELCLO-India, a social entrepreneur, really challenged the mindset later in the conference, with his repeated plea to the world business leaders for business to be more focussed on consumer, rather than wants. He created a dimension in the behavioural change aspects that I did not hear at all from others, much less expect in a dinner conversation around the table.

The Business action session was entertained by the contribution from Shai Agassi, once the darling of German software giant SAP and now at the sharp end of technology change with his fledgling electric car company. A great quote from Shai: "the one thing we can’t say to God is that we got the carbon pricing wrong." Shai, though, did bring some more reality to the proceedings by referring to behavioural change in stating that “this is not Google or the iPod which creates a new market. This is changing the economies and the businesses – get the incentives right.”

David Blood from Al Gore’s Generation investment vehicle couldn't understand why investors in the major capital markets continue to invest in high-carbon companies - instead, he points to low carbon businesses as the future.

I was looking forward to the communications session and was poised with my laptop keyboard to gather some words of wisdom. Let me say I was somewhat underwhelmed, only absorbing that new media is important and that perhaps people do not respond to fear but to disgust.

The closing session brought attention to the need to be quick, and on a global scale. Of the developed world, Australia has seen the effects of climate change at first hand and has it as a current imperative. For other developed countries, it is a message of potential problems rather than having to deal to current disaster - getting the right kind of attention is a challenge, as a result. The Copenhagen Call was the finale, important but unfortunately not done with style or any expertise.

Dealing with carbon regulations

While the Obama administration is moving fast to break with eight years of "climate denial" under George Bush, the UK government seems to have lost its early focus on introducing climate change regulations. Jyoti Banerjee investigates.

For a time, a year or so ago, it looked as if UK companies would be required to meet mandatory regulations on carbon emissions. But the focus seems to have been lost, under pressure from business lobby groups that are concerned about the impact such regulations will have on British companies. Instead, UK companies are urged to report their carbon emissions following recommended guidelines, and the soonest we will have a carbon regulatory framework will now be 2010, when only Britain's largest companies will have to meet the forthcoming Carbon Reduction Commitment (CRC) mandatory framework.

The Americans are still debating the merits of carbon trading schemes versus carbon taxes, with carbon trading, based on existing EU schemes, gaining ground among policy-makers. Right now, no one really knows what the Obama administration will seek to put in place but it is quite certain that whatever happens in the US will be felt over here in the UK.

While the Obama administration is moving fast to break with eight years of "climate denial" under George Bush, the UK government seems to have lost its early focus on introducing climate change regulations. Jyoti Banerjee investigates.

For a time, a year or so ago, it looked as if UK companies would be required to meet mandatory regulations on carbon emissions. But the focus seems to have been lost, under pressure from business lobby groups that are concerned about the impact such regulations will have on British companies. Instead, UK companies are urged to report their carbon emissions following recommended guidelines, and the soonest we will have a carbon regulatory framework will now be 2010, when only Britain's largest companies will have to meet the forthcoming Carbon Reduction Commitment (CRC) mandatory framework.

The Americans are still debating the merits of carbon trading schemes versus carbon taxes, with carbon trading, based on existing EU schemes, gaining ground among policy-makers. Right now, no one really knows what the Obama administration will seek to put in place but it is quite certain that whatever happens in the US will be felt over here in the UK.

CSR needs new focus on medium enterprise

M Institute co-founder Paul Druckman is attending the European Multi-stakeholder Forum on CSR (corporate social responsibility) in Brussels from where he sends this note outlining a couple of things that CSR groups could do to help medium enterprises engage with the concept. 

I send this note while attending the European Multi-stakeholder Forum on CSR in Brussels on 10th February 2009. The Forum brings together about 250 people from key stakeholder groups, including employers and business representatives, trade unions, investors, academics, civil society organisations and public authorities. The aims of this meeting are to review progress on CSR in Europe and globally, and to discuss possibilities for future joint initiatives.

From the perspective of the medium enterprise, there was an unexpected focus on medium enterprise during the morning session. Some of the issues raised and proposed included: 

• CSR uses the term “corporate” and this can be a problem in medium enterprise where that term implies large corporates
• The link between CSR and public procurement is essential when thinking about medium enterprises
• SMEs need tools and instruments to implement CSR, this cannot be simply downgraded large corporate tools. 

UEAPME, the European employers' organisation focusing on SMEs, has a CSR focus which seems to be on diversity. Check out  http://www.csr-for-smes.eu. 

The multi--stakeholder forum concept, such as this one, is fascinating as each stakeholder brings such different perspectives, but with the tendency being to focus on society, rather than business issues. This may be unfair, but it is certainly my impression so far today.

Medium enterprise and the low-carbon economy

Climate change, whether you believe in it or not, is going to change every business on the planet, either by force of regulation, or by a competitive drive towards low-carbon business models. Medium enterprises have a great opportunity to be the next generation of big winners in a future low-carbon economy. Or big losers. M Institute co-founder Jyoti Banerjee investigates the balance of probability.

Last week BBC Radio 4 featured an interview with a Canadian academic who has developed a prosthetic knee that generates electricity every time the knee flexes. It’s a great idea for helping provide power to disabled people but it turns out that there are other applications as well. The military could generate electricity for their communications devices while walking. And the rest of us could walk around to power up our iPods, mobiles and GPS units.

Walking to generate electricity is not going to turn back the tide on climate change but it is just one more example of the way clean-technology approaches are gaining traction in the market.

Medium enterprises are probably as concerned as everybody else about climate change but many executives of such organisations that I have met wonder what they can do to really make a difference. After all, the industries that have to make the biggest changes to their carbon productivity, such as energy, transport and heavy industry, are usually not populated with medium enterprises. Executives in medium enterprises agonise over installing efficient heating, or motion sensors to switch lighting in less-used locations like toilets because they know that these things make good business sense anyway, but surely none of these are going to tackle the problem of climate change.

Green issues climb medium corporate agenda

As large enterprises jump on the sustainability bandwagon, is it time for medium companies to engage on green issues? M Institute correspondent Joe Lickens looks at some corporate announcements to see how much is for real, and how much is flim-flam.

For those who were unsure of the need for decisive action against climate change, last year’s Stern Review was pivotal. At last, the potential ramifications of climate change were spelled out in business terms – as “the greatest and widest-ranging market failure ever seen”. Public pressure on businesses mounted accordingly. But, while some companies are adopting green strategies that are genuinely impressive, others are still dragging their heels.

Since the issue of climate change was finally admitted to the corporate agenda, the pace with which it has risen up the priority list is remarkable. In the most recent Ipsos Mori poll, eighty percent of respondents said that a company’s environmental reputation would affect their purchasing decisions. As M Institute co-founder and chairman, Paul Druckman points out, “You can take competitive advantage by showing that you are becoming a greener company.” Druckman is involved in a number of initatives exploring how organisations will account for sustainability issues.