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High Growth and High Start Up Rates: Why We Shouldn’t Chase Them

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Colin Bell over at Winning Moves picks over this old chestnut in his latest post.

Should we throw our limited resources at businesses that we believe have high growth potential or should we just go for lots of start-ups knowing that a minority of them will experience high growth anyway?

The plain truth is that both are equally foolish policy goals.
We simply can’t pick winners/high growth businesses.  So how do we know which to resource?
And as Drucker said ‘you can’t have the mountain top without the mountain’ .  High growth businesses emerge from a strong and vibrant enterprise ecology.  An ecology that is diverse, tightly knit and well connected (bridging and bonding, social and cultural capital).
Focus on building the mountain and the top will look after itself.
But please don’t build the mountain by rushing to increase the start up rate.
When we do this we just increase the failure rate too and that undermines aspiration and confidence.  So start fewer businesses, but make sure they are good ones, team starts, well thought through and researched.  Get survival rates into the 90%s after three years.  Not just survival, but successful.  Allow these small but significant success show the way to others.
So set up a broad enterprise ecology – lots of people with ideas and the confidence to act on them (this is not just about business but about social impact, culture, festivals, campaigning and so on) and build social networks, communities, that know how to support their members.
Invest your economic development budget in supporting people, who really are committed to making things better, and building communities.  Smart, confident people in competent communities will not only give you the economic outputs that you require – but they might just give you something much more interesting as well.
I expect these ideas to be dismissed by those who have High Growth and Mass Start Up Programmes to sell, and by those running economic development teams who have for decades been buying these programmes and commissioning evaluations that say ‘much has been achieved but much remains to be done’.

But perhaps some will see that now is as good a time as any to try something new….

A Community Ecology of Enterprise

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Enterprise is not just about ‘entrepreneurial types’ and ‘business ideas’.
It is not just about business and commercial endeavour.
If I want to make something happen to improve things in my community I may start a business, but I may start a campaign, or a festival, or a local action group.  I have worked with many people whose motivation was not to develop a business, but to make a difference, and in some cases setting up a business has been a means to that end.  No more than that.  It is simply a means to an end.
Well managed and run these kinds of community based activity all contribute to a more enterprising community and provide the kind of community ecology and practice ground from which commercial endeavours may spring.  They also help to build the social capital that is essential to building a sustainable and resilient local economy and community.
If LEPs were to think more about the kind of community ecology that supports enterprise and how this can be developed I suspect they would get a much greater ROI than on more traditional approaches of advice, managed workspace (we are awash with these in Leeds, mostly under-used and inappropriate for the communities they were built in) and access to finance.
Yes the web matters.  But it won’t be primarily because either a LEP or the national Business Link site offer generic advice and guidance (which to be frank just replicates what is already out there in most cases) but because local sites and sites of shared interest will provide highly specific and contextual advice – usually in the form of dialogue and conversation rather than factsheet.  The web will provide a platform for conversations that cannot easily take place face to face.
We have to start to think differently.  We have to innovate. We have to be prepared to try new approaches.  I hope LEPs are up to the challenge.
For me this means getting away from thinking about one to one advice for high growth, one to small group for lifestyle and start-up (in deprived areas) and one to many (content led websites) for the rest, and instead seriously building the networks, social capital, self belief and self-reliance that will allow our communities to become much more enterprising.

Sticks, carrots, coercion and coaching

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“What we did establish is that the carrots offered were far less effective than the sticks employed.”

Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts – talking about the ‘limited effect’ of Pathways to Work pilots

Sticks and carrots have a long and noble tradition in the  management of donkeys.  However even with donkeys there are times when the ‘bribe and  punish’ approach to change management fails:

  • When the donkey is not hungry enough
  • When the effort of reaching the carrot is too great (the burden is too heavy)

In these circumstances we may choose to resort to the stick.  But this too will not work if:

  • the pain of the stick is thought to be less than the pain of moving forward
  • the donkey learns to like the stick and the attention that it brings

But I think the real issue here is not about the limitations of sticks and carrots in the management of donkeys and people.

It is about the complete and utter failure to understand the nature of human motivation.  Motivation is that which energises, directs and sustains a person’s efforts.  Sustains efforts.  Sticks and carrots applied to move a donkey from one (expensive) field to another (less expensive field) do NOTHING to sustain efforts.  In fact it is likely to achieve the opposite.  The donkey returns to its passive state until more carrots and sticks appear on the scene.  And the state wants more enterprising communities?

But the major problem is not treating people like donkeys, and further dulling their enterprising souls.  It is that the state believes that this is the most effective, fair and just way of changing behaviour.  That this is such a common default setting when trying to manipulate the behaviours and choices of its citizens.

And we wonder why ‘community engagement’ is so difficult.  When you have beaten and bribed your donkeys into submission don’t expect them to engage with you, without the use of ever more sticks and carrots.

Perhaps instead of resorting to a coercive approach to change, we might try instead a coaching approach?

Helping people to recognise their long term self interest and how it may be pursued.  Helping  them to develop the power they need to make progress in their lives.  Helping them to recognise that it is possible and that they don’t need to be pushed around by a bureaucratic system of sticks and carrots.  That THEY have choices and agency in their own lives.  Vegetable wielding bureaucrats do not have to be the architects of their future.

And what if someone decides that their long-term self interest is served by staying exactly where they are?

Well, we could just leave them alone and put our time, energy and investment into those that want to explore pastures new.  Why should the squeaky wheel get all the grease?

Because perhaps people are more like sheep than donkeys.  When they see some of the flock moving forward others are sure to follow.

Aren’t they?

Dad, I Want to be an Entrepreneur! Will You Help?

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These are not words I am expecting to hear anytime soon – but who knows?

If David Cameron gets his way and he finds an army of entrepreneurs to go into local schools to promote the ‘joy’ of entrepreneurship and the job market continues to go west – it could well happen.

How would I respond?

Well, if they say they want to be an entrepreneur and ask for my help, then I will refuse it, and do all I can to persuade them away from the idea.

If they say they have to be an entrepreneur – because it is the only way they can do the work that they feel they have to do then I will roll up my sleeves and help with enthusiasm.

Why the distinction?

Because however you wrap it up, in spite of what people like Cameron say, entrepreneurship is hard.  Especially if you do not have a large bank account to bale you out when things go wrong.  I don’t think I have met a single entrepreneur in my work who would describe the experience as joyful.  Dramatic, yes.  Full of highs and lows, yes.  Scary, yes.  But joyful…not so much.

So why promote the lie?  Why continue the enterprise fairytale?

It doesn’t even help to build an enterprise culture as with increased start-ups come increased failures and more bad experiences of entrepreneurship.

It couldn’t be to do with an obsession with outputs over social impact could it?

I will leave the last word to Noel Coward:

Some years ago when I was returning from the Far East on a very large ship, I was pursued around the decks every day by a very large lady. She showed me some photographs of her daughter – a repellant-looking girl and seemed convinced that she was destined for a great stage career. Finally, in sheer self-preservation, I locked myself in my cabin and wrote this song – “Don’t Put Your Daughter On The Stage, Mrs. Worthington”.)

Don’t put your daughter on the stage, Mrs. Worthington

Don’t put your daughter on the stage

The profession is overcrowded

The struggle’s pretty tough

And admitting the fact she’s burning to act

That isn’t quite enough

She’s a nice girl and though her teeth are fairly good

She’s not the type I ever would be eager to engage

I repeat, Mrs. Worthington, sweet Mrs. Worthington

Don’t put your daughter on the stage

So Em amd Meg – unless it is something that you have to do, ignore Messrs Cameron, Brown (remember him – architect of much enterprise policy) and their army of enterprise evangelists and give entrepreneurship a miss – at least until you have some real knowhow under your belt.

On the other hand if this is the only way that yo can do good work, and you are prepared for the journey that lies ahead, then, and only then, let’s go for it…

Entrepreneurship – Obama’s Foreign Policy?

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These quotes of Barack Obama are taken from the recent Presidential Summit on Entrepreneurship:

Why Entrepreneurship?

“A sustained effort to listen to each other, to learn from each other, to respect for one another”… “By listening to each other we have been able to partner with each other, we have expanded educational exchanges, because knowledge is the currency of the twenty-first century.”

“Entrepreneurship because you told us that this was an area where we can learn from each other. Where America can share our experience as a society that empowers the inventor and the innovator. Where men and women can take a chance on a dream. Taking an idea that starts around a kitchen table or in a garage, and turning it into a new business or industry that can change the world. Entrepreneurship because throughout history the market has been the most powerful force for creating opportunity for lifting people out of poverty. Entrepreneurship because it is in our mutual interest…”

“And social entrepreneurship because as I learned as a community organiser in Chicago, real change comes from the bottom up, the grass roots, starting with the dreams and passions of individuals serving their communities.”

“we are forging new partnerships in which high-tech leaders from Silicon Valley will share their expertise in venture capital, mentorships, technology incubators, with partners in the Middle East, in Turkey and Southeast Asia”