Paul Knight, partner and innovation champion at national law firm Mills & Reeve, says medium-sized businesses should not fear disruption caused by Britain's recent economic turmoil if they use their flexibility to adapt to changing market conditions.
Businesses in the UK have had to deal with turbulent times over the past decade. But this doesn’t mean that they are always ready to face yet more disruption within their respective industries.
However, for medium-sized businesses they should find themselves in a uniquely strong position to adapt to disruptions. Often, they have successfully navigated upheaval before, putting them a step ahead of smaller businesses. Equally, they don’t have the strict operational structures of corporates, giving them greater room for manoeuvre.
So, what is holding back the mid-market and potentially stopping them from innovating and capitalising on their experience and flexibility?
When it comes to innovation there tends to be two camps in which every firm sits. The disruption-ready, and the disruption-discouraged. In fact, these groups are fairly balanced.
The latest Defying Gravity report states that 52% of mid-market leaders believe their company has the knowledge to react successfully and keep pace with disruptive innovation; 48% believe they don’t. When using this differentiator, it is clear that there are differences in approaches and beliefs towards the future of their business particularly regarding growth, environment and finance.
The idea of growing and scaling up can be exciting for some, while daunting and somewhat unachievable for others. The disruption-ready mid-market leaders are confident they have the skills, experience and leadership to achieve growth and navigate their business through the turbulent market environment.
To put this into perspective, they are twice as likely as disruption-discouraged leaders to believe they will meet growth expectations, and nearly three times more likely to believe their leadership team have the capabilities to supercharge growth.
Having a strong leadership team that is supported by a breadth of talent within the larger organisation stands any company in good stead for a successful future. It helps businesses to feel more able and more confident, nudging them into the disruption-ready category.
The onus is on the leadership team to correctly enable each employee to produce their best work and support the business with their intelligence. It is often the employees in the wider team that come up with the best, yet unexpected ideas.
Disruption-ready leaders are better positioned to put this into practice as they tend to have more confidence within their current team. Three quarters of them think that their business has the talent and skills to supercharge growth. In contrast, the same amount of disruption-discouraged business leaders believe that they lack these competencies.
In addition to growth worries, the ever-changing environment is also a cause for concern. Two of the key factors currently impacting the wider environment include the ongoing political uncertainty around Brexit, and technological advancements that are moving at an increasingly fast rate.
In preparation for Brexit, seven in ten disruption-discouraged leaders are reducing their growth targets, three in five are reducing their investments, and two thirds are postponing acquisition plans. For the disruption-ready businesses, it’s a much more positive outlook as they suggest that Brexit isn’t holding them back in terms of implementing new plans.
There are steps, however, that business leaders can take to prepare in advance of a downturn. It is paramount to look after your cash flow, as being financially prepared will better your chances of coming out on top. This is closely followed by focusing on the workforce, investing in innovation, cutting costs, and re-evaluating your business model to take advantage of new conditions.
Finance has a strong role to play in the disruption equation. It has been shown that businesses that are ready for disruption are not scared to invest, but are equally not reliant on it for growth.
There is however a fear of not being able to find finance, particularly with the disruption-discouraged businesses. They are more than twice as likely to have experienced difficulties in raising long term finance compared to the disruption-ready. So perhaps it is no surprise that they tend to be far less confident in their ability to find the finance to support their growth.
In order to avoid problems later down the line, business leaders need to be wary of trying to copy competitors. Some leaders may look at how fast other companies are innovating and start injecting cash into operations, but without any real plan for what to do with it.
The key is to be imaginative and flexible about the finance options that are available, and keep a close eye on cash flow to prevent any future troubles.
Additionally, leaders should be encouraged to look for finance now to make sure they don’t miss their window of opportunity. Three quarters of disruption-discouraged businesses believe they would have grown their business faster if they had invested in growth, taken out loans or considered private equity investment.
There is no right or wrong when it comes to disruption readiness. New challenges and opportunities will be faced no matter which camp the business leader typically sits in. However, there are certain steps to follow to ensure the wave of change doesn’t drown the business.
Feedback is a necessity when driving businesses forward, and this can be received from internal sources as well as external. The responses could help you look at products and processes differently to innovate and reinvent the wheel where required, enabling you to be one step ahead of the competition.
Take care of the workforce and enable them to innovate and collaborate as they will fuel the ideas and move the business towards new opportunities. Always keep in mind that people may be sensitive to change, particularly in this uncertain economic time. Acknowledge the pressures and work as a team to push past them – this will also benefit customers in the long run.
Whether business leaders are disruption-ready or disruption-discouraged, the future is uncertain and unfortunately there isn’t a one-size-fits-all approach. Make smart business decisions and the future will be bright.
