Explore the ScaleUp Annual Review 2020

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Leadership

Leadership

Leadership remains central to scaleup growth

The skills to build and lead a fast-growing business on its scaleup journey are fundamental to growth. Leaders of scaleups consistently highlight the value of peer-to-peer networks, high quality mentors and non-executive directors on the importance of leadership development.

The issue of leadership is now seen to be less of a barrier to growth than in previous years. This is following a long-term trend falling from 65% in 2017, to 55% in 2018, and 47% in 2019, with just 39% ranking leadership as very important or vital to their growth in 2020. 

We see this as directly proportional to clear evidence of the ecosystem responding to scaleup demand for high quality leadership programmes. Through our three education programmes on Driving Economic Growth through Scaleup Ecosystems (DEG) we have directly engaged with local areas across the whole of the UK to provide them a grounding in how to build programmes that respond to business need. We continue to convene our DEG alumni and work to ensure the free flow of best practice across the group.

In addition, private sector programmes such as London Stock Exchange ELITE and Goldman Sachs 10,000 Small Businesses UK and peer networks such as Vistage – each of which we have endorsed in previous years – continue to deliver high quality programmes. This year we have also endorsed Tech Nation’s Upscale programme and Strathclyde University’s Growth Advantage Programme which each provided detailed evidence over many years of how their programmes are helping scaling businesses increase turnover, create employment and raise finance. We were also impressed by the way the Royal Academy of Engineering is using its Fellows to inspire business-minded engineers into building growth businesses.  We highlight its SME Leaders Programme as one to watch.

There is also renewed focus upon the value of leadership training from Government and we are pleased that the Government has acted upon our previous recommendations to use the Small Business Charter as a route for the delivery of funding to boost leadership1 with the announced Small Business Leadership Programme. We believe that in the longer term this should be built upon, to provide tailored offerings delivered specifically to scaleup businesses.

However, whilst leadership is now seen as less of a barrier to growth by scaleups, building the right capacity within top teams is still an essential part of the scaleup journey and demand for schemes that are on offer remains high. This year 63% of scaleups list ‘developing the senior team’ in the top three leadership factors and 33% rank it as the number one factor.

We know that of the 200-plus programmes which we have mapped nationally, more than half (118) provide support for leadership development and capacity building, with 84 including access to peer-to-peer networks. Many of these have been started or developed over the last five years, and it is very positive to see the impact that can be made when the UK ecosystem responds to a clear need identified by scaleup businesses.

An important part of the ScaleUp Institute’s mission has been to map the programmes that are on offer. This is something that we continue to evolve and we have developed an online ScaleUp Support Finder which helps scaleup to find programmes that may be able to support them either national or locally.

However, we must remain mindful that quantity does not mean quality. Part of our ongoing work is to assess as many of these programmes as possible, and where we have done so we provide an ‘endorsed’ mark on our Support Finder Tool, as well as providing a detailed breakdown of the programme and its impact, as set out each year in Chapter 2 of our Annual Report.

We have previously highlighted the role of European Structural Funds – particularly ERDF – in the funding structure of many locally rooted leadership programmes, and some national programmes. An example is the British Library’s leadership programme, which we endorsed in 2017. In recognition of the value that it is adding, it was provided with further funding by the Chancellor in the March 2020 budget to scale to other locations. It is important for programmes with impact to be able to continue to support scaleup businesses.

As the UK has now left the European Union it is essential for the role of EU money to be fully recognised as part of forward Spending Review discussions and the shape of the Shared Prosperity Fund. Leadership programmes with clear impact must be able to continue to provide much-needed support for scaleup and high potential growth businesses if we are to embed the positive changes that we are observing. Money allocated as a replacement for ERDF funding must not precipitate programme closures or unnecessary changes that undermine recognition with businesses, or – most importantly – alter the ability of initiatives to deliver real impact for scaleups.

Whilst it is true that accessing leadership development is seen as less of a barrier than in the past, it remains a fundamental part of enabling growth. Moreover, it is often a key part of overcoming wider growth challenges such as accessing new markets, recruiting and retaining the right talent or finding the right funding. If we are to ensure that a growth-focused recovery is possible, leadership development must remain a priority for Government and local areas.

A trusted, reliable ecosystem must also be based upon a coherent and sustainable funding framework. Whilst there are many private sector programmes with impact for scaleups, and as the Government continues its Business Support review, particular attention must be given to ensuring that programmes with a proven track record are maintained.

PEER TO PEER NETWORKS, MENTORING AND NON-EXECUTIVE DIRECTORS

Access to high quality mentoring and peer-to-peer learning are consistently recognised as vital sources of help for scaling entrepreneurs, with 60% of scaling businesses reporting having a mentor and valuing their input. Directly recruiting leaders with experience of growing a business is the second biggest leadership factor (41%), followed by access to non-executive directors (37%). 

Each of these are often highly personal, and must be bespoke to individual business circumstances including the stage and sector of a business as well as making sure that there is the right fit with the existing team. This means that quality of schemes in this area is very important, both in relation to the calibre of individuals involved (NEDs, Mentors and Peer Group Chairs) but also the process that surrounds them. Good quality processes should look to effectively match mentors with business leaders, NEDs with businesses and ensure that peer-to-peer networks are well curated to avoid competitors, but also build a comfortable group dynamic.

Peer-to-peer support is not simply networking with peers but rather a structured, trusted intervention with a small cohort of businesses with similar growth trajectories where issues, challenges, concerns, opportunities – and even financials – are shared, ideas exchanged and guidance sought from a trusted group. Guiding principles should be:

  • Participants should always drive the agenda for discussion;
  • It must have effective, trained, independent curation;
  • Discussions must be kept confidential;
  • Each member should be accountable to each other and the group;
  • Any outside experts should be invited in by agreement of the participants – and to impart knowledge, not sales;
  • Keep it local and focussed on businesses on similar growth paths.

We have highlighted the work of organisations such as The Supper Club and Vistage and the Platinum Group run by the Black Country Chamber of Commerce. Much can be learnt from their models and we are actively looking at how the ScaleUp Institute can work directly with partners to increase the capacity available for the UKs most innovative businesses.

Peer networks need to be driven by the scaleup business members and be built around genuine peer connections which have been well matched to build trust. Getting this right can have a self-reinforcing effect. There is also a growing demand to build peer to peer network capacity, not just for CEOs and founders but for the wider management executive team.

However, knowledge asymmetries remain with one in three scaleups noting that they do not have a mentor, and 27% of those stating that they would like one but don’t know how.

Overcoming this knowledge gap is symptomatic of wider challenges that scaleup leaders face in navigating programmes that are right for them. It is here that local leadership from LEPs, Growth Hubs and local growth champions such as Mayors can be transformational.

  • Funding Peer-to-Peer Opportunities

Faced with current economic challenges it is imperative that swift action is taken to build peer-to-peer capacity. The Government has now begun to deploy the £20 million in funding to boost peer networks that had been announced in the 2018 budget3. We hope that whilst much of this has been catalysed by Covid-19 and is geared towards shorter term ‘peer learning environments’ rather than true peer-to-peer networks, the foundations laid by this scheme and its funding route can be built upon to deliver greater peer network capacity in the longer term. This should be done through credible and existing peer-to-peer networks with proven impact, rather than seeking to create something new. It is right that local areas are being used to act as a delivery mechanism, and the right guidelines should be embedded to this kind of funding structure for any longer term delivery to ensure efficacy.

THE IMPORTANCE OF SEGMENTATION AND EFFECTIVE ACCOUNT MANAGEMENT

UK SMEs are not homogenous. It is essential for programmes to be targeted toward businesses at particular stages of growth. The effective use of data to segment and identify UK scaleups must therefore be a central pillar within our business support ecosystem. 

This year, scaleup leaders again overwhelmingly indicate that they want to be pro-actively account managed with 61% wanting a single point of contact to act as a relationship manager, 54% want proactive contact about new initiatives and a further 54% want a specific scaleup business portal for these schemes.

The challenge facing the ecosystem is that – from a business perspective – access to programmes can be fragmented, and high-quality local programmes are not available in every location for every entrepreneurial leader. Whilst it is increasingly the case that support is being matched to the growth cycle of the businesses (and we have been tracking the development of the inclusion of this) it is not the case in every area and terminology across government departments can become confusing. Very positive steps have been taken by the British Business Bank, which uses the simple and effective ‘Start-up/Scale-up/Stay Ahead’ segmentation for their services, and Innovate UK which has tailored Scaleup programmes. We are also hopeful that through the implementation of the DIT Export Strategy and rollout of Enhanced ITA4 services this will become more aligned to this segmentation model. Other departments also need to adopt this terminology to simplify the services on offer.

We have long championed the importance of a clear segmentation of service offerings that recognises the different needs of businesses, and how to effectively implement this for scaleups. In the Scaleup Taskforce, that fed into the government’s Industrial Strategy in 2017, we specifically highlighted the following breakdown.

As the Industrial Strategy is refreshed, the Business Support review is concluded and a comprehensive Economic Recovery Plan is developed, this kind of segmentation must be fully embedded both nationally and at a local level. We also continue to emphasise the need for such a relationship management approach to be backed by a the use of Government data (HMRC and Companies House in particular), and for the managers themselves to have nationally defined job descriptions and KPIs so that these services are delivered to a common standard, even when locally rooted. Further, a nationally connected CRM system must be established – this will enable more timely engagement from both public and private sector programmes, and create a new source of information for local areas in determining both resource allocation and future growth plans.

SCALEUP CHAMPIONS, ENABLERS AND THE ROLE OF MAYORS

Local leaders are key to the delivery and awareness of scaleup services. We have seen very positive results from enablers that are already in place, such as in the West of England. Mayors can also play a powerful role in catalysing the creation of effective scaleup programmes, as seen both in London’s and Manchester’s scaleup export programmes.

Encouraging the creation of these local champions is a vital part of the process and should be undertaken alongside the development of a comprehensive suite of scaleup oriented programmes as noted above. These champions also have a further role in making sure that local scaleups are on the map. Scaleup businesses want to be known and to make sure that they have the right connections to local collaboration opportunities, as well as the best talent on offer to help them as they grow.

EDUCATION HAS A CENTRAL ROLE

Education institutions are integral to local ecosystems, and we know that scaleups are looking for more collaboration opportunities with them, with only 3 in 10 saying that they are currently doing so. This engagement should be multifaceted: a role in unlocking talent for scaleups through school leavers and engagement with graduates, a role in supporting innovation with ‘Entrepreneur In Residence’ programmes, encouraging faculties to directly engage with local businesses and also acting as a trusted bedrock to effective leadership programmes. Many of the leadership programmes that we have endorsed have a strong relationship with a university or a business school. We are now seeing positive movement with a greater franchising of successful programmes, such as Cranfield’s Business Growth Programme, to bring this level of excellence to other areas of the country.

Education institutions can also work alongside local growth champions to act as convenors of businesses and connectors. This should not just be reserved for university alumni or spin-out businesses but spread more broadly.

With this in mind we were delighted to be able to congratulate Imperial College London on the launch of Scale Space5 in August this year. This is a fantastic example of how to leverage the expertise, brand and convening power of an institution of excellence like Imperial and harness it towards the needs of growing businesses through a curated hub environment. We hope that other institutions will follow suit.

SUMMARY

Scaleup businesses are now less concerned about a lack of leadership development hindering their growth. This is a hugely positive step, and one that the ecosystem deserves congratulations for achieving. But this does not mean that leadership is no longer fundamental to the ability of a company to grow. Demand for effective programmes remains high, and the delivery of programmes with impact for scaleup businesses has to be one of the core pillars of the UK business support ecosystem both nationally and at a local level.

To maintain excellence and ensure that whole economy growth is unfettered, it is essential for programmes that work to be built upon, and secure funding streams maintained. One in three growth-focused programmes are in receipt of some form of ERDF money. As this is replaced/continued, those programmes that have been delivering effectively must also be continued to avoid unnecessary stress on local growth businesses in the current challenging period.

We are also seeing the implementation of greater levels of segmentation in the way that programmes are locally delivered. This is also positive, and effective account management of UK scaling businesses will further enable them to engage with the right programmes at the right time for their growth.

We are entering a new decade filled with uncertainty. As we have said elsewhere, the fundamentals of growth are also the fundamentals of recovery and we must build upon the success we have witnessed – and is evidenced – in relation to leadership as part of a comprehensive recovery plan.

We therefore recommend:

2. ENHANCE SCALEUP OPPORTUNITIES TO ENGAGE IN PEER TO PEER NETWORKS

The public, private and education sector should continue to work together to close the gap on provision of high-quality flexible scaleup leadership programmes, including mentoring, peer networks and matchmaking of non-executive directors who have scaled businesses before. Better connections should also continue to be made between national programmes and local ecosystem leaders.

4. ALIGN FUNDING TO LOCAL SCALEUP INITIATIVES AND CREATE SCALEUP HUBS IN EVERY LOCALITY / STRATEGIC SECTOR TO INCREASE THE SCALEUP DENSITY AND TRENDS OVER TIME

Funding for local communities should continue to be tied to the effective deployment of initiatives that close the scaleup gap as well as the results and impacts that they have on the number of scaleup businesses in their area. Every local area should have a scaleup strategy, tackling the key scaleup challenges and creating a local ‘ecosystem hub’ of scaleup excellence. A scaleup cluster map should be developed based on currently available datasets, dovetailing with the National Data Strategy.

5. DEPLOY LOCAL SCALEUP CHAMPIONS

All local communities should appoint a Scaleup Champion and develop a relationship management structure for scaleup businesses. These emerging networks should use Government data as a foundational part of proactive outreach account management to scaleup companies to provide access to wider programmes and services that will benefit them on their growth journey.

6. SEGMENT SCALEUPS LOCALLY & NATIONALLY

The Government’s initiatives – including the forthcoming Industrial Strategy Refresh, Business Support Review and Comprehensive Spending Review (expected 2021) – should ensure that there is distinct segmentation of scaleups as a ‘sector’ and that funding for impactful business support (whether it be mentors, leadership or networks) has a significant focus and segmentation towards our scaleup businesses who are generators of wealth, exports and productivity to the UK economy. No gap in scaleup support provision should be allowed to arise in light of the UK’s changing relationship with the EU.

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