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Dynamic content on all matters to do with growing businesses from Keith Willey

“For many it’s not about the money. They have a passion for it, to take care of people.”

The headline quote comes from a front-page article this week on CNNMoney news website relating how doctors in the US are quitting medicine because of money woes.   Meanwhile here in the UK we see headlines that doctors in Primary Care here are overpaid.  Having spent some time recently with a bunch of enterprising ophthalmic surgeons and practice managers I was struck by the tensions between care for the patient and commercial success – tensions that every health service around the world is trying to deal with.  Looking at the eye surgeon example there seem to be several moving parts to these stories, ones which would yield to some entrepreneurial business thinking.

k0310310Firstly, a surgeon has to ask his/her self whether they can do their work more efficiently.  Here I mean at the level of the core work – fixing a cataract say.  The answer seems to be a resounding yes – procedures that take 15 minutes for one person can be done in half the time, maybe 10% of the time with skill and dedication to continuous improvement.   I discovered lots of great examples of process innovation by surgeons.  This innovation extended to other processes within the ‘total solution’ they are providing such as how things are managed pre and post op.  I got the feeling that if every surgeon could move closer to some benchmark performance on all aspects then there is a huge latent capacity that could be freed up.  Not only that but dedication to the tenets of process improvement and quality could assuage surgeons’ worries that they were taking risks with patient health.  Of course many doctors work within perverse incentive systems that penalise continuous improvement….. exactly the thing that politicians are trying to tackle within the bureaucracies that are today’s modern health systems.

Meanwhile there are some real parallels with entrepreneurs – the biggest being that you’ve actually got to want to grow in either expertise or activity level.  Once you’ve really committed to growth and accepted the personal risk it entails then a whole raft of possibilities open up.  Maybe our health systems should be looking for those surgeons who really want to go for it, much like governments try to identify fast growth businesses?

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End of an era for Venture Capital

Seeing the news last night about John Moulton quitting Alchemy made me reflect on the passing of another of the old guard out of the mainstream.  Of course we’ll still hear about John and likely he’ll still do deals but Alchemy was in many ways a tangible expression of his philosophy and style for venture capital.  Can we forget him trying to do the Rover deal – promising to revive the British sports car – when everyone else thought it too hard (though of course he was thwarted).  Similarly Ronald Cohen at Apax (another house that has morphed from VC to PE).  We will forever associate them with a buccaneering era for the industry – when it was being formed and shaped.  Am I allowed to use the term buccaneer?  Hope the FSA aren’t listening.  Another figure from that era is Michael Stoddart whose Electra was one of the pioneers – he’s still involved at FFP of course.  I ought to mention that Michael was so generous in his help in moving entrepreneurship forward at London Business School – he like Moulton and Cohen had great instincts for seeing opportunities.  So many of the generation they nurtured grew up alongside each other on the BVCA courses or at 3i during its now-abandoned VC phase (another strategic cock-up).  Now who replaces these and other figures from that era?  There seem to be a lot of ‘professionals’ – by which I really mean ‘company men’  who have followed career tracks in banking and accounting.  These were always breeding grounds for VCs but of course banks and accounting practices have developed more homogeneous standards, become machines that feed anonymous executives who can navigate the internal politics.  Gone is the camaraderie of being a young ‘Investment Exec’ at 3i or sitting in those BVCA courses.  I guess you’d expect all this in a maturing industry that is growing out of its cottage-industry roots.  Am I alone though in wondering whether we’ve lost something along the way?  Some flair, a real nose for a deal, an entrepreneurial creativity that sees beyond all that expensive due diligence?  I don’t know the team that John leaves behind at Alchemy but his resignation letter is pretty clear in saying they are unproven.  How can people become so senior in the industry and not be incredibly well-known?  I’m sure the VC industry is bigger and more professional than it used to be but where are the new personalities to inspire us and to figure out where to go next in these desperate times?

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Banks for entrepreneurs – no more Mr Nice Guy?

There’s a steady flow of chatter amongst the business owners I meet about the behaviour of the major banks towards their SME clients.  Maybe this is going to lead to much better buying by the entrepreneurs and much fiercer competition between banks.  Here’s why this could happen…. but first please take the poll if you’re a business owner.

I have heard plenty of reports about the bank manager who says ‘off the record we’ve all been told not to….’ followed by phrases such as ‘…lend anything’, ‘…renew overdrafts’ etc.  In other words whatever discretion used to be available to the lending manager has been pulled.  The blanket policies cited – if real – seem pretty dumb too, often affecting growing businesses who have yet to feel recession hitting their finances.  One such story even got the banks mentioned on Twitter!  There has been positive PR in reaction of course – the banks occasionally quote lending statistics that would have you believe the complaints are in a minority.  Time will tell what the real picture  has been but I wonder how this episode might change the relationship people have with their business banks? 

For years it has been said that people overpay their banks because they don’t shop around and change to take advantage of the choices that exist.  Some people don’t realise what better terms they can get whilst others think switching is too difficult (it’s much much easier than you think).  The last recession was the one when the banks realised how unprofessional their internal systems were, allowing for example overdrafts to be used as permanent finance.  This recession they are up to speed and putting the screws on customers but maybe they don’t yet realise what the consequences could be.  Perhaps now business owners will say ‘no more Mr Nice Guy’ because they feel that is exactly what the banks are saying to them.  Someone once said ‘there’s more to a banking relationship than time’ and this is coming true for so many businesses – just when they really need their bank relationship of ten years standing to show some understanding they get a slap in the face.  Relationship? Fact is they always found a reason to put off a visit from their ‘relationship manager’ and anyway the bank doesn’t take it seriously either. 

Personally I think changing the bank-business deal would be an excellent development.  One freshly laid-off banker I know is offering his services to businesses as an independent advisor on how to get the best banking deals – I would really like to see him succeed and help lots of business owners improve their profits by keeping the banks honest!

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Accidental Entrepreneurs

FT: Accidental entrepreneurs

Accidental entrepreneurs

By Emma Jacobs

Published: March 31 2009 22:31 | Last updated: March 31 2009 22:31

Success by design: but it was a chance meeting that brought Greta Corke, Jon Sawdon Smith and Richard Woods (right) together as entrepreneurs

James Dunning may have started a business – Geotrupes Energy, set up to sell power from small wind farms to a large utility – but he claims to find the entrepreneur label “a bit repellent”. He tries to explain why he had never harboured ambitions to start a business: as well as distaste for the “entrepreneur” label, he says, there was also the lack of innate entrepreneurial traits (he describes himself as “risk-averse” and “an ideas desert”).

He had no desire to leave the security of his job as a corporate lawyer in 2003. “If you’d asked me 10 years ago to outline my future, ‘Not an entrepreneur’ would have been pretty high up there. If you cut me down the middle even now it would still say ‘suit’.”

Yet in 2003, he was made redundant from a failed division of utility company TXU, in a sector Mr Dunning had hoped would be immune to a downturn. His impulse was to update his CV and try to find another employer. But the prospect of a daily commute gnawed away at him. “I kept thinking if I get another City job I’m not going to see my four children grow up.”

So with an idea developed from “some work that had been going on [at TXU]…coupled with the input of the chap I ultimately teamed up with”, Mr Dunning became, in his own words, an “accidental entrepreneur”, setting up Geotrupes Energy in 2004.

While the stereotype of an entrepreneur is of someone born with a bullish zeal for business, the reality for many can be a confluence of chance. As Gordon Moore, the co-founder of Intel, said: “There is such a thing as a natural-born entrepreneur…But the accidental entrepreneur like me has to fall into the opportunity or be pushed into it.”

Chance meetings and luck – but lack of experience too

Chance can play a big role for entrepreneurs. For DIY Kyoto, the three founders’ biggest financial opportunity came about by luck: “It was accidental. A journalist wrote a profile on us for Blueprint [a design magazine] and then placed it in [the British Airways in-flight magazine]. We had tremendous interest from investors even though we were not investor-ready,” says Greta Corke, co-founder of DIY Kyoto, set up to market their home energy monitor, Wattson 01. Then followed a six-figure investment by bankers “who had made money and wanted to do something with it”.

But their lack of a business background also led to mistakes. “We did not invest in building a sales team early enough to capitalise on the opportunities…It can be hard to move away from being a designer and letting someone else execute the product,” says Ms Corke.

For Mark Greenhalgh, the transition from a caring profession as a family doctor to business also created problems: “I can be naive, I trust human nature. I’m not hard-nosed. I once believed I had sealed a big contract with a handshake – it came back to bite me.”

Keith Willey, professor of entrepreneurship at London Business School, says: “There is a lot of mythology around entrepreneurship. In reality, entrepreneurs are all types. Richard Branson is so un­typical. Most entrepreneurs don’t trade in the school yard. A lot of businesses are started by accidental entrepreneurs.”

Prof Willey says Mr Dunning is typical of entrepreneurs who get their ideas from ex­perience. “I see many people who have worked for a company – they may have proposed an idea that the boss turns down so decide to do it themselves. Entrepreneurial opportunities [can] coalesce when employees get stuck in their career or [are made] redundant.”

It was a combination of feeling stuck in his medical career as a general practitioner at the same time as gaining technical skills working in healthcare projects that pushed Mark Greenhalgh to set up a marketing agency, Flutter + Wow. “I felt a bit like a rat on a wheel…I needed to break free,” he says. Most of his clients are from the healthcare and pharmaceuticals sectors (“if you talk about something you know about, it helps”). Gradually, he is picking up contracts from consumer brands.

For some “accidental entrepreneurs”, the decision to set up in bus­iness may be down to chance meetings with certain people. Richard Woods, who graduated from the Royal College of Art in 2003 with an MA in industrial design, harboured no ambitions to become an entrepreneur, believing he would “work in a secure environment, possibly for Dyson”. But “it was meeting the other two [fellow RCA graduates Jon Sawdon Smith and Greta Corke] that made me think I could go into business.”

The three designers worked on a project start­ed at the RCA and developed a home energy monitor, Wattson 01. But it was not until they applied for a business development programme run by Nesta (the National Endowment for Science, Technology and the Arts) that the reality of being an entrepreneur sank in for Mr Woods. “I could see the potential of the product but it was going through the process of applying that I realised I wanted to commit to it. It made [me] realise we needed the motivation to see through the business.” The result was DIY Kyoto, set up by the three.

Sir Martin Sweeting went into business because it was the only way he could stay in the UK and work in the space industry.

“I’ve always been inventive and interested in practical things. When I was younger it was amateur radio, then Arthur C Clark and the moon land­ings happened and the two worlds came together. I developed a passion for small satellites, born out of tech and a practical interest.” But just as his interest was piqued in the 1980s, public funding for research in this area was wound down. “The only option was to get commercial contracts. The decision to go into business was a means to an end. I wanted to get money to do things that I wanted to do rather than money for its own sake.” An academic at Surrey university, he set up Surrey Satellite Technology (SSTL).

He says that money not being his principle motivation has, perversely, helped him become profitable – last year the company was sold to EADS for £50m. “If I had been focused on just business and making money, we might not have developed as we did. I wanted to make the UK the world leader in satellite technology. It took a long time to become profitable – 10 years. If I had been motivated by shareholder returns or profit we might not have made it. We had a couple of competitors whose focus was on profits. They went bust.”

While some may become entrepreneurs by accident, success takes commitment: “You have to work really hard,” says Dr Greenhalgh. “You can’t do it if you’re not strongly committed. You can’t be half-hearted.”

Mr Dunning agrees: “I worked hard and kept going with it.” He argues his tenacity was critical: “I have an ability to get whacked and still get up and keep going.” Prof Sweeting feels one trait has been key: “I was never frightened by financial insecurity. That gives you freedom – I wasn’t afraid of failing. Lots of people have ideas and want to set up businesses but fear failing.”

For an entrepreneur, there is no going back. After selling Geotrupes Energy (now operating under another name) in 2007, making a 30 per cent return for his investors and enabling him to take a break, Mr Dunning considered a return to corporate law. “I spent two months at a utility earlier this year and I really struggled. It suddenly seemed like a henhouse.” He is now working as a legal consultant. “I love the fact that I think about my business the whole time; in the shower, brushing my teeth…It’s a real buzz.”

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