Keeping the spirit alive

Small businesses are entrepreneurial by nature. But as they grow they must retain their dynamism and be careful not to stifle the creativity of employees

Enterprise is almost universally associated with small businesses. Research has shown that 95 per cent of all innovations occur in companies with fewer than 100 employees, according to David Hall, a leading consultant on innovation and entrepreneurship. This, he says, is a lot to do with the fact that the culture of such organisations is entrepreneurial.

Small businesses encourage risk-taking, the breaking of rules and opportunism – as opposed to the command-and-control approach typical of many larger organisations.

The problem large businesses have is illustrated by the fact that as many as half of all entrepreneurs are refugees from larger organisations. For example, James Davies, founder of Just Good Data, a start-up seeking to help car manufacturers manage their warranty costs better through using actuarial methods, came up with his idea while working as an actuary in a large insurance company, but realised he would have to go it alone to develop it.

But while many small businesses start with an entrepreneurial spirit, they can easily be dragged in the direction of more established businesses. Hall says: “The real challenge is to stay entrepreneurial but get some discipline.”

One way of doing this is to identify the entrepreneurs in a business – typically they account for only a tenth of any management group, says Hall – and help them to do what they do best. Andrew Newland, chief executive of ANGLE, a company that founds technology businesses by commercialising intellectual property discovered by researchers in universities and elsewhere, takes the approach of using ANGLE to provide a central system providing human resources, payroll, systems and other administrative roles and allowing the teams in the businesses to concentrate on “the key development actions for the business”. That way the entrepreneurial spirit is protected from bureaucracy, he says.

At Teamsolve, an Oracle partner that helps organisations of all sorts install IT systems, chief executive Mark Bateman has installed a management team in recognition that the day-to-day running of the business is not necessarily his strong point. By not being tied down by such matters, he can concentrate on developing the business by managing key clients and selling to new ones.

Another part of a business remaining agile and able to respond to opportunities is communication. When businesses start to grow it is harder for the managers to communicate both with each other and with less senior staff. Entrepreneurs talk of the critical point in this process being either when they no longer know the names of everybody in the business, or when the managers no longer all fit in the same room. The result is that it can be difficult to maintain the sense of purpose or focus that was responsible for the company’s initial success. Hall advocates dealing with this through what he describes as “planned spontaneity”. For example, an advertising agency could create an area of its office where its creative staff would want to meet and so provide a better environment to communicate and trade ideas.

It is all a balancing act, of course. Not enough organisation and opportunities are lost; too much and innovation is stifled.

Doug Richard, the serial entrepreneur behind the investment research company Library House among other businesses, believes being entrepreneurial involves being agile, or able to act quickly; being prepared to work harder than the competition; and having a “tolerance for ambiguity”, or the readiness to live in a chaotic world. The last is perhaps crucial in that it means having a general plan but not being so focused that opportunities are passed by.

Mark Bateman: ‘We deliver. Reputation is all that we’ve got’

Mark Bateman founded Teamsolve in 1996 after working for many years as an IT specialist as a consultant with a large company.

Initially, the business, which helps organisations of all sizes plan and implement IT systems, was just him.

But four years ago he started hiring staff. Since then the Derby-based business, which is an Oracle partner, has grown at about 40 per cent a year so that it has a permanent staff of 40 and additional office in the City of London and is aiming for sales of £5m next year.

Bateman, 38, says he was not born an entrepreneur and “never imagined I’d be in this position”. Starting the business was more a case of seeing an opportunity and deciding it would be a good challenge to see if he could exploit it. “It’s about keeping the passion,” he says.

All of Teamsolve’s growth has been organic, enabling Bateman to avoid taking outside finance and keep total control. Nevertheless, the growth of the business has led him to take on a management team so that he can concentrate on selling the business to key clients.

Indeed, he sees the company’s focus on customer service as the key to its success and to keeping it entrepreneurial. Admitting that the growth of the business has made it more difficult to maintain this ethos because of the resulting reduction in the number of people who have worked directly with him, he says systems and processes have to be put in place to make sure it happens.

A key decision has been appointing a customer services manager whose sole job is to make sure the customer is “deliriously happy”.

Bateman believes this focus has been key in winning the business of some big clients, such as the banking group HBOS and the National Health Service, when competitors have been much bigger organisations.

“We deliver the right solution to the customer on budget,” he says, adding that Teamsolve has to because “our reputation is all that we’ve got”.