Collaboration and the Challenge of Scaling Businesses
Take a look at the business stock in the UK economy overall and we see that over 99% of all businesses are small to medium sized enterprises (SME). This means they employ less than 250 employees. Out of the total number of businesses in the UK economy, 95% are micro businesses, employing between 1 and 9 people. As anyone involved in running an SME all tell you, they are the backbone of the economy. Many business owners are happy to run their micro-businesses meeting personal and family needs. However there are persistent challenges in providing for the support and survival needs of business start-ups and, in particular business scaling. In this brief article we raise what seem to be fundamental questions for scaling businesses in challenging times.
The Relationship Assumption and Business Growth
At Innovation People we make a distinction between two assumptions that are made in business development. One is based upon our recent inheritance, that a business might seek to grow by “conquest”, in other words by advancing out in to a market, building its share and perhaps through a combination of acquisition or dominance of its competition. We call this the Conquest Assumption. Another approach we call the Relationship Assumption, by which we mean that there are times when development is more the product of the way a business builds relationships in context than it is having a killer and distinctive proposition that can lead to it overrunning a particular market. We argue that strategic development for the micro-business benefits from the deliberate and purposeful application of the Relationship Assumption.
We should stress, we are not arguing for business owners to frequent business networking groups, as valuable as they might be. No. Our argument is that, business development in the micro-business sector is as much a product of strategic alliances as anything else and that businesses are well advised to navigate the course of their development through effective relationships with a community of partners and collaborators, whether these be within their supply chain, operational context generally, their customers or even competitors.
Relationship Development in Challenging Times
As a research-based consultancy working with clients and in universities, we have become very aware of a term coined by the military in the USA during the mid-1990s. Ultimately it is a collective term for a collection of phenomena identified as posing a particular challenges to way in which the world seemed to be changing - or at the very least peoples. nations and, of course, businesses were relating. This collective term is VUCA.
For those unfamiliar with VUCA, it is an acronym for Volatility, Uncertainty, Complexity and Ambiguity. Without dwelling too much on each of the four words within the acronym, the thinking behind it is that in our post-global world, it has become much more difficult to predict, plan and anticipate development through some kind of rational process.
Perhaps one of the key references for thinking about VUCA is summed up in the words of the former US Secretary of State for Defense, Donald Rumsfeld who referenced Luft and Ingham’s (1955) model of the Johari Window to refer to the idea of the “unknown unknowns”. The context in which Rumsfeld used the phrase was in the run up to the second Gulf War and in addressing the whole question regarding whether Iraq had Weapons of Mass Destruction. The origins of the phrase in the Johari Window are more to do with what I do or don’t know about myself. Be that as it may, the idea of “unknown unknowns” has come to be associated with Rumsfeld and famously to apply to the potential for decisions involving a high degree of uncertainty and ambiguity. In the end such a decision will be the product of a judgment call, however accurate or otherwise.
In business, the challenges and decisions will not be of the same magnitude as those faced in times of war. Nonetheless the point holds that if you dial up the degree of uncertainty and ambiguity then you also dial up the difficulty in accurately predicting outcomes. If you also increase the level of complexity in terms of the various influences and impacts and stakeholders in an action, the challenges are compounded. Having used the words, complexity, ambiguity and uncertainty, what of volatility. It is our view that in some ways taking account of volatility is almost the most important and most challenging element of VUCA. For we can seek to understand, control and minimise complexity and we can to some degree anticipate ambiguity and uncertainty, but volatility implies an unpredictability that is more difficult to anticipate.
Reading this article, perhaps it would be useful to take a moment to consider how within your own business, you take account of the four elements of VUCA in your decision-making and your risk management? Maybe one way to do this would be to say, if your taking account of VUCA had a value of 100 divided across the four elements, to what degree are you taking account of each one in your decision-making?
Spreading Risk and Managing VUCA through the Relationship Assumption
In the research and development we have undertaken at Innovation People, there has been an increasing awareness of the limitations and often the disabling of rational process and reason in decision-making. We would never argue that decisions should not be reasoned and justified. It is simply that there are a wider range of factors involved in the decision-making process. In anticipating the scaling of a micro-business into a larger business in a way that anticipates the challenge of VUCA, we would share with you two constants in a business seeking to scale:
On-going Innovation in Context - It is essential to keep listening and responding and to keep innovating in context.
Develop Partnerships & Collaboration - Building effective partnerships and collaboration is critical in scaling
Considering these two constants, are led to think about the need to constantly calibrate development through relationships we might have in context. Referring back to our thinking about VUCA, the greater the uncertainty and the complexity, then the less relevant and appropriate are the presumptions of what we call the Conquest Assumption in which barriers to development are anticipated. Instead it becomes more relevant and appropriate to anticipate development based on relationships and collaboration. In fact it is our argument that effective relationship management, in context is a primary means of both spreading and managing risk in development. Indeed, we would observe that it is precisely this that has actually been at the heart of much human development for millennia.
Three Principles for Development through the Relationship Assumption
Consider the fundamentals of development for humanity as a species out of the plains of Africa and throughout our history. Let’s go right back and consider three factors in the dominance of Homo Sapien over Neanderthal man and as our species came out of Africa and spread across the globe.
Group Management and Social Networking - As a species, we are great at managing and leading large groups and connecting large groups through collaboration around specific objectives
Information Management and Communication - As a species, we are great at using language and other forms of communication to share complex and often abstract ideas
Speed and Frequency of Innovation - As a species, we succeed through our capacity to innovate in context and to refine our innovations.
Scaling and the Micro-Business
It seems very clear that if a micro-business seeks to scale, especially in times of heightened Volatility, Uncertainty, Complexity and Ambiguity then they need to take account of fundamentals that have informed human development for millennia in:
- Building effective networks and collaborations
- Efficient information management and communications
- Their effectiveness in promoting innovation in context
At the heart of this is in essence the development of quality relationships against which to calibrate development and the constant and on-going commitment to innovation.
Developing Your Strategy for Development through the Relationship Assumption
We would be delighted to develop a relationship with you and your business to see how we might contribute to your development. It would be great to hear from you. Why not contact us at:
44 (0) 1977 611251
We now have games based software to help you assess your own potential for development. We would love to show you and to share it with you so that your business and ours might together develop.