The five habits of highly effective companies
To understand what was driving success in these businesses, we commissioned research among some of the UK’s most successful companies.
Five key themes emerged which I think are highly relevant to tech companies.
Download the full report
1. Have a clear road map, but stay flexible
Knowing your direction of travel is clearly important for highly effective businesses. Among the high-growth company leaders questioned, 64% said they had a clear, up to date road map and a further 7% had a plan even if it was not up to date.
However, while a road map was felt to be a fundamentally useful tool, more than 80% of respondents who had a plan stated the need to be flexible with it.
Agility is key in a fast changing world, and by considering multiple scenarios in advance, companies can consider the consequences, sensitivity and volatility in the organisation.
With the advent of cloud based reporting, businesses can also see and react much quicker to warning signals in their underlying performance, and having considered outcomes, they are better able to anticipate the consequences of their decisions.
The key point, which we wholeheartedly support, is that there needs to be a structure in place for where the business is going, but owners should not be frightened to change and to adapt. The road map is a guide and a framework to work within. It is not a cast-iron arrangement.
2. Invest in productivity and innovation
There are many ways to grow profits in a business. For example, you can develop national or international markets, acquire other businesses, divest non-profitable areas or outsource non-core functions.
The fast-growing businesses we surveyed did all these things, to a greater or lesser extent. But the one habit that emerged above all others was a focus on productivity and innovation. Over 67% of our respondents, when asked ‘where do you see your profit growth coming from?’, focused on driving productivity and innovation in some fashion. This is roughly three times higher than the next-best profit-boosting measure: developing UK markets, which scored 19%.
OECD data indicates that between 30% and 60% of successful SMEs are doing well because of their innovative traits. Unsurprisingly, companies surveyed in the technology sectors displayed a notably higher need to focus on productivity and innovation.
Looking wider at the mechanisms being employed to drive productivity and innovation, survey respondents highlight the value of keeping one eye on wider trends, with one CEO noting one tool working well is “taking and tailoring ideas from other sectors and niches”.
3. Learn from peers and advisers
Effective business leaders are made, not born. And one of the factors that helps in the making is having access to sound business advice.
An overwhelming majority of high growth businesses stated that they looked to peers to get business advice. Interestingly, the only sector in which peers were not the most esteemed source of business advice appeared to be technology. Of the companies interviewed in this sector, 42% preferred to rely on professional advisers, versus just 25% for peers.
Business leaders had a clear view of the type of adviser they reached out to. Accountants were the first port of professional advice by far, cited by about half of the sample. Relying on external accountants makes sense as accountancy teams are able to provide independent viewpoints and consultancy capabilities.
One of the common themes accountants see when first meeting owner-managers is the drive and ambition behind their ideas. But what most people don’t realise is how hard and lonely it can be at the top. Peer mentoring can alleviate this issue, while also offering external points of reference and providing a helpful sounding board.
4. Focus on sales growth
Knowing where to focus your immediate efforts is a tricky business, even for very effective businesses.
It is not surprising, then, that our sample provided a wide range of answers to the question: ‘what will your business focus on over the next year?’ Building new markets, improving profitability and recruiting the right team were all important goals, cited by 13%, 11% and 10% of the sample, respectively.
But if there was one aim that stood out above all others, quoted by almost a quarter of those interviewed, it was driving sales growth.
It isn’t surprising that driving sales growth is a key focus for many of the ambitious companies we interviewed, but while strategies to help you increase your customer base and boost revenue are a good thing, growth alone isn’t enough to support and sustain a company if the right conditions aren’t met.
We asked some of our sample what they felt were the biggest problems they faced when growing and 50% all encountered one key failing: not being prepared for the growth they experienced.
It is therefore important to have the infrastructure in place before you grow. To avoid over-trading, it is critical to have clear visibility of funding requirements, headroom and working capital requirements.
Tips from business leaders:
- Analyse your position to understand where you are exposed
- Take time to consider your investment in infrastructure and don’t be afraid to change tack as times progress
- Don’t put all your eggs in one basket. When expanding, don’t just focus on driving existing products into new markets, but also use the time to focus on building new products
5. Recruit the right team
Businesses may be created by just one or two founders, but to become highly effective they need a robust team. One of the key themes to emerge from the report was the need to be surrounded by the right people.
Of the 150 respondents surveyed, 21% wished they had more wisdom relating to human talent. Talent is a big concern to growing businesses, especially in the technology sector that relies on people with advanced skills sets.
While recruitment is crucial at every level, nowhere is it more important to have the right team than at the top, with a balanced, holistic set of skills. This reinforces the need to understand your core skill sets and choose individuals who complement you and fit your team.
Finding and keeping the right people in the right positions, doing the right activities, is a core task that business leaders need to own. The ability to build a pipeline of potential leaders who can develop the future strategy of the business is a core capability that all leaders need to have and retain control over.
Also worth noting is that approaches to retaining talent are changing. Money is important, but passion and the opportunity to create and drive your own ambitions are more necessary than ever.
People are looking at work in a different light, and looking for a more balanced, rewarding career. They want companies that offer more than a job and options such as flexible working, creative breakout sessions and ways to invest in the business are common place for new and growing businesses.
Download the full report