Article:

Accelerating Growth in the Era of Collaboration

05 July 2017

Growth is certainly on their agenda with the latest figures showing that 88% of businesses are planning for positive growth in the next year. Yet, relatively few are choosing a step-change in their growth pathway to achieve scale and drive breakthrough growth needed to make it in today’s highly competitive global market.

GROWTH APPETITE

New Zealand is a nation of microbusinesses, abundant in innovative enterprises that have the potential to compete on a global stage - yet very often lacking the commercial skills and mind-set to leverage it.

Growth is certainly on their agenda with the latest figures showing that 88% of businesses are planning for positive growth in the next year. Yet, relatively few are choosing a step-change in their growth pathway to achieve scale and drive breakthrough growth needed to make it in today’s highly competitive global market.

Part of the reluctance to take a more aggressive growth pathway stems from New Zealand’s size and distant location which has bred a business culture of self-doubt and commercial naiveté - as identified by MBIE in 2003 and NZTE in 2009 and corroborated in more recent research by growth accelerator company Spring .

There are concerns around the need to accelerate business growth in New Zealand to reduce our reliance on commodities and encouraging breakthroughs globally in our innovation economy.

Running a business has become increasingly complex in today’s digitalised and highly competitive globalised economy. Consumer behaviour

and expectations have changed and businesses need to develop new capabilities alongside management and leadership, bringing expertise in innovation and design and tapping into external resources to achieve scale.

But, for most businesses, the growth curve tends to be organic and slow. Businesses following an organic growth journey will focus on building strong internal capability, a pathway which can take 20+ years. If they are in business for the long-term then organic and sustainable growth may be comfortable.

GROWTH JOURNEYS

However, for small businesses with big goals, organic growth has significant limitations. With small staff bases, these businesses tend to be reliant on the business owner and structure, and may not be confident about pushing the boundaries without the external expertise and resource that can come from partnerships or mergers and will find it difficult to get significant funding.

Over the past ten years, the venture growth journey which is common to the technology sector has emerged in New Zealand. Focused on securing several rounds of investment capital to enable a business to quickly build scale and then provide liquidity to the investors through either a trade sale or Initial Public Offering. Some New Zealand success stories include Xero and TradeMe.

Quantum Growth is a new alternative growth journey for businesses looking to accelerate their growth. Its foundation is a market insight-led strategic approach to scaling a business actively encouraging local and global transactions and partnerships to accelerate a business’s growth on a global scale. As the following comparison demonstrates, the internal/ external dynamic is what makes the difference.

Scale can be achieved quickly through collaborating, or more formally, by merging with others or by the outright acquisition of a complementary or competitor business. However such pathways are not a strong focus for most businesses. Only 15% of businesses are looking at acquisitions or mergers to drive performance and 11% at partnerships and joint ventures.

That said, even these small percentages of businesses choosing to take Quantum Growth pathways focused on market insight strategy and deal- making can still result in fantastic outcomes/returns and have a significant impact on the economy.

While Quantum Growth may be seen as high-risk, with the right support and advice it’s an important consideration for the abundance of New Zealand businesses that have such huge potential to leverage the opportunities presented. Technology has increased access to markets and expertise beyond region, beyond nation and into a global landscape with an era of collaboration.

Growth pathways aside, ultimately success in business depends on many things. Most of all, it depends on ability to recognise and grasp

opportunities, anticipate issues before they become problems, distinguish the important from the urgent and motivate teams to share vision. Indeed one of the cornerstones of growing a business is vision, goal-setting and planning.

Sadly, this tends to be another weak link for most New Zealand businesses.While 80% do have a goal that really motivates them, only 57% have written it down and only 23% involve their staff in this goal-setting process not conducive to team motivation and engagement.

Very often it comes down to risk and reward, what motivates business owners and whether or not they have the energy for the ‘quantum’ growth journey. If they are looking to build value and scale and to exit their business with significant returns, then they should consider the Quantum Growth journey.

Ultimately, New Zealand’s small-to-medium enterprise economy needs to wake up to alternative growth paths other than the organic model. There is a strong movement to change this consciousness and drive businesses to scale the economy.

To make the next steps in identifying a Quantum Growth strategy for accelerated growth, talk to your local BDO advisory partner

CAPITAL RAISING EVENT

Innovest is a one-day event being held at University of Auckland Business School on the 9th September this year. This event has two parts:

Conference - raising awareness of key growth activities such as alliances, distribution and investment by listening to a range of successful global speakers.

Match-making - a match-making forum between companies seeking

capital to be invested into their businesses and investors seeking to invest in SME’s.

At last year’s event, there was 59 businesses matched with over 120 investors. In attendance were fund managers, migrants, expats and a range of high-net worth individuals. 76% of investors attending rated the Innovest matching programme as Very Good or Excellent and eager to attend this year. Tickets for the 2014 event are available through BDO.

    1. ANZ Privately-Owned Business Barometer

    2. Spring – www.springdom.com