If you want to grow your business, get out of the province!
This was a key message delivered by Dr. Simon Raby at a policy breakfast recently hosted by the JR Shaw School of Business at NAIT in Edmonton. Dr. Raby's talk delivered findings from his recent provincial study on the drivers of growth for Alberta Small and Medium-sized Enterprises (SMEs). The audience included senior representatives of the Alberta government, Alberta business support agencies and post-secondary institutions.
Dr. Raby's study identified SMEs to be an essential part of the province's economic engine; accounting for 99.9% of all Alberta businesses, and employing 91.2% of the province's private sector workforce. The study sought to better understand how SMEs are achieving growth and identify how best to support these types of organizations and to inform government on where best to allocate scarce tax dollars.
Dr. Raby's presentation was followed by a panel discussion moderated by Professor Geoff Gregson (JR Shaw Chair in New Venture and Entrepreneurship, NAIT) with Lori Schmidt (CEO, GO Productivity), Alex Umnikov (Senior Director, Innovation Policy and Strategy, Economic Development and Trade) and Dr. Tony Briggs (Executive Professor, University of Alberta School of Business). The panel discussion prompted a lively and engaged discussion and debate amongst the audience.
Dr. Raby's comprehensive report makes a number of key findings and recommendations. The debate in the room focused on three particular aspects:
1. Support SME leaders to develop a growth mindset - Dr. Raby's research focuses on "high impact" SMEs, organizations that are achieving growth and are more innovative and diversified in the markets they serve. Less than one in ten businesses in Dr. Raby's sample was found to be "high impact". The study identifies the critical role played by the mindset of the senior leaders of these businesses, and the need to foster growth mindsets amongst other SME leaders. This necessitates a strategic approach to human capital development, which includes identifying those leaders with unfulfilled aspirations for growth.
"I have started a few companies and I really live in the world of entrepreneurs. Dr. Raby's research findings were bang on."
Cam Macmillan, President at Headhunters Group
2. Support SMEs to compete beyond the province - Dr. Raby's research reveals that those SMEs competing in national and international markets achieve higher levels of growth. Indeed, those SMEs "locked in" to provincial and local markets are more likely to experience plateaued and declining growth trajectories. This finding highlights the need to help prepare those organizations with a potential for national and international expansion. It was also argued that such schemes should include those organizations supporting the supply chains of other organizations that have, or are looking to expand beyond the province.
3. Focus less on financial performance, and more on impact - Dr. Raby's research focused on SMEs not only achieving growth in revenues, profits and employees, but also those that were more innovative and diversified. One key recommendation is the need to move beyond financial metrics when identifying firms and assessing their performance. Dr. Raby highlighted how financial metrics are lagging indicators of performance, focusing on outputs of the growth process. Findings suggest that it is essential that the process of growth itself is captured, to understand how firms become more innovative and diversified and achieve growth. This understanding can then be translated into knowledge to support SMEs to achieve great impact through their business models, which will in turn lead to better overall economic performance.
"It is crucial that we move beyond traditional measures when assessing firm performance. Our current way of thinking and use of metrics makes it difficult to identify the likelihood of a firm experiencing a growth episode or the reasons for such episodes"
Professor Geoff Gregson, JR Shaw School of Business, NAIT
For comments or questions relating to this article, please do not hesitate to reach out to Dr. Simon Raby (sraby@mtroyal.ca) or Professor Geoff Gregson (geoffg@nait.ca)