A BLUEPRINT FOR RECOVERY

Written by Professor Stephen Roper, Director of the Centre for Small and Medium-Sized Enterprises

Following the credit crunch, many businesses are looking toward recovery. For small and medium-sized businesses, this may be a difficult process. Warwick Business School, in partnership with Royal Mail, has created a 'Blueprint for Success', a practical guide to implementing factors needed for recovery and growth.

The credit crunch recession is over and hopefully we can now look forward to a period of renewed economic growth and recovery. The recovery, however slow, creates opportunities for growth and some recent research which WBS has conducted in partnership with Royal Mail provides a ‘Blueprint for Success’ for those firms seeking high growth and profitability through the recovery.

Our starting point in this research was to try and indentify the main strategic attributes of fast growing and highly profitable SMEs (small and medium enterprises). We surveyed 500 SMEs with between 20 and 250 employees from across the UK and did some multivariate statistical modelling to isolate the main strategic factors linked to high growth performance. Six key factors emerged as having a statistically robust link to above average growth and profit performance:

• Growth ambition – our high performing firms were characterised by having a strong growth ambition and often had specific growth objectives.
• Flexibility – firms were adopting a flexible and responsive approach to management and meeting customer needs.
• Business process efficiency – as part of their development firms were making active attempts to evaluate and optimise internal processes to reduce cost and remain lean.
• Marketing – firms were using a variety of marketing methods to make potential customers aware of their products and services. The specific types of marketing methods which are relevant clearly depend on firms’ customer profile but the analysis suggests that media advertising can be particularly powerful where it is relevant.
• Human resources planning – adopting a planned approach to recruitment, staff development and training is important. This is likely to be particularly true over the next year or so as firms seek to grow and develop through the recovery period.
• Research and development – developing a thorough understanding of the markets in which the firm works and the best technologies for meeting customer needs. This element of the Blueprint may not be applicable to all types of firms but in sectors where innovation has a strong technological element – e.g. manufacturing, ICT – research and development remains important.
  

These six factors are what we have called the Blueprint for Success. Our research suggests that it is not necessary, however, for a firm to adopt all of the Blueprint factors. Instead, we found that for a firm to achieve above average growth and profit performance implementing any three of the six Blueprint factors is sufficient. More specifically firms adopting three or more of the Blueprint elements were – on average – growing sales around a third faster than those which did not.

One exciting small firm which we came across when developing the Blueprint is called Malmesbury Syrups, based in Wiltshire. The company produces and retails syrups for flavouring coffee which are sold online and through retailers such as John Lewis, Waitrose and Amazon. Malmesbury are implementing at least four elements of the Blueprint: they have a strong ambition to grow; they have a planned strategy for investing in staff training and development; they are adopting an aggressive marketing strategy and they are conscious of the need to retain flexibility and responsiveness in the business as they grow. James Taylerson, the Director of the company commented: ‘As a small business coming out of the recession we are constantly looking to improve our performance and to grow our customer base. To do this we have invested heavily in our workforce, marketing and research and are constantly reviewing the way we operate so we can be as nimble as possible’.

One other factor which emerges from the Blueprint research as significant in shaping firms growth and profitability is exporting. Indeed, exporting firms were around a third more likely to have above average growth and profitability performance than non-exporters. For UK firms at least, the potential performance gains from exporting seem likely to increase rather than decrease during the recovery period as most European markets are generally forecast to grow more rapidly than that in the UK.

Our Blueprint research suggests that for SMEs strategy matters and does have a significant effect on performance. A practical guide to implementing the Blueprint for Success can be found here.

Prior to joining WBS, Professor Stephen Roper was Professor of Business Innocation at Aston Business School and before that Assistant Director of the Northern Ireland Economic Research Centre, Belfast. Alongside his post at WBS, Prof Roper is a Director of InnovationLab (Ireland) Ltd, an academic spin-out company which focuses on innovation policy and related issues. Prof Roper is also a member of the ESRC Strategic Priorities Board and the UK Committee of the Regional Science Association. He is a consulting editor of the International Journal of Small Business.