Professor Nelson Phillips, Acting Dean of Imperial College Business School, argues that supporting and accelerating SMEs is key to driving economic growth and innovative products and services
Small and medium sized businesses (SMEs) are vital to the UK economy. According to the UK government, in 2015 99.3 per cent of the estimated 5.4 million private sector businesses in the UK were SMEs and they employed 15.6 million people or about 60 per cent of all private sector employment. Their combined annual turnover was £1.8 trillion, 47 per cent of all private sector turnover in the UK.
This success is not an accident. Various levels of government, universities, financial institutions, and many other individuals and organisations have worked hard to support the creation of new ventures. As a society, we have spent considerable time, effort and money developing a more entrepreneurial culture and developing ways to support entrepreneurs as they start new businesses. The resulting entrepreneurial ecosystem is working, and new business are being founded at an impressive rate.
But it is becoming increasingly clear we have only done half the job. Starting a business is a terrific accomplishment, but the business needs to grow if it is going to have the impact on UK society and the UK economy that we want and need. Small businesses need to become medium-sized business, and medium-sized businesses need to grow into big businesses, if they are to provide the innovative products and services consumers want, the jobs people need, and the economic growth required to support the society we want in the UK.
The next big challenge facing the UK is therefore to move beyond creating a system that simply encourages and supports new ventures, and to support and accelerate the scaling of those new ventures once they have been founded. We need to figure out how to help businesses grow as quickly as possible and create a system the supports scaling up that is complimentary to the system we have developed for startups. In other words, in addition to a supportive environment for founding new businesses, we need an equally supportive and well developed environment for scaling up.
While we know a lot about founding new ventures, we know much less about scaling up
At Imperial College Business School, we believe the first step is to better understand the process of scaling up. As a result, we are conducting research to understand how small businesses can grow more quickly, and identifying the pressure points that slow SME growth. While we know a lot about founding new ventures, we know much less about scaling up and our work is intended to contribute practical knowledge to accelerate this important phase of entrepreneurial activity.
For some sectors, of course, it is less about growing a single business and more about the need to replicate a successful business model across a sector. In social enterprises, for example, this is often the case. Scaling up is not about growing a single organisation, but facilitating the creation of many versions of a successful business model. This is another area of focus for business school research, and one that has important synergies with research on more traditional scaling up of single organisations.
At a very practical level, the Business School is putting these ideas to work by actively engaging with small businesses to provide solutions to scaling up by providing tailored executive education programmes, and business coaching. For example, we are collaborating with the London Stock Exchange on an innovative programme for scaling up high-growth companies. The ELITE Programme is an 18-month programme focused on maximising the growth of high potential SMEs. We are now about to accept our fifth cohort of 15 companies on the programme and results to date have been impressive.
All in all, we believe that solving the challenges of scaling up SMEs is key to driving economic growth and innovation in our economy. Through research, and the development of practical solutions for companies, we are working hard at Imperial College Business School to contribute to overcoming this important societal challenge.