“I think MSBs have the best of both worlds. You have some level of capability because of your size, but you also should have a small business’ speed of action.”
One of the reasons I attend mid size business events is because there are MSB identity problems. I describe my business as small because we only have around 160 staff. My previous experience is with larger PLCs, so that’s why it feels small to me.
MSBs are at a size where lots is expected from them, but they don’t have the resources to give everyone the ability to deliver everything. Their costs are finely tuned, so they don’t spend many resources looking at the latest guidance and legislative requirements. As a result, they often find out about things through happenstance.
Additionally, MSBs are so busy on the day-to-day management and finances of the organisation they don’t have the time that larger businesses have to deal with these issues. Cash is quite complex in an MSB. Their levels of stock, debtors and creditors become difficult – big liabilities which distract from a focus on profit because they’re so busy looking at their cash position.
I once went to a presentation by a professor at the University of Warwick that studied the companies with the highest year-on year-growth rates over a five-year period. He found that the only thing they had in common was that they were in fast-growing markets. When he followed these companies for a further five years, the cohort became average.
When the CBI says MSBs aren’t ambitious, it’s a junk phrase. You can’t treat the whole industry in one broad sweep.
Innovation is all about creating a sustainable business advantage
The building materials industry is one of the most innovative sectors I know. Most people don’t think of us in that way – they look at Google and Amazon as innovators. However, the companies I’ve been involved in are always looking for that sustainable competitive advantage. That’s almost exclusively innovative – doing something cleverly or differently.
My current company has innovated to the extent that we use 80% recycled PVC in our products. This saves over 3,000 tonnes of old PVC windows going to landfill, creating a huge social saving. We compete daily with companies who primarily use virgin PVC. Our customers get this environment benefit at the same prices. As people move forward, they will realise that companies like ours are doing things right. It cost us lots of energy, pain, investment and changes to get to 80%, and it’s worth it.
I think sometimes it’s about incremental improvement, but then you reach a tipping point and your customers see you as innovative.
How do you use data and business intelligence?
A big step for our business was to introduce good-quality business intelligence. This enabled us to see customer data, detailed margins and much more granular information on the business drivers.
Many leaders I speak to are really interested in this but haven’t implemented it within their businesses. They just get the usual reports from outdated systems.
The business intelligence in our company has enabled us to move from paying salespeople on sales targets to gross margin targets. This enables them to focus on maintaining price and improving product and customer mix as well as growing sales. It required training for people to understand, but then they became aligned with the business drivers.
Dealing with legacy as an MSB
You have a lot of legacy in an MSB. If the company has grown over a period of time, you have lots of people who feel very strongly about the business. You also have people who have only ever worked
in one place, so they have no exposure to other experiences.
When I look at our sector, most of our competitors are multinationals. We can change and bring new products to market quicker than they ever could. We can look around the world, tweak products for the UK market, and deliver for our customers. These multinationals struggle to make changes for relatively small markets.
Be bold, don’t be afraid
One thing I would say to MSBs is to look at your competitors, realise your opportunities and leverage your size. Don’t be afraid of multinationals’ deep pockets. If a division makes a loss, huge changes are made – and if they don’t work, they often divest that part of the company.
MSBs have many of the advantages of larger companies’ financial strength and small companies’ agility, and so should be scared of neither.