Fast track growth; it’s not for manufacturing

Posted on 1 Aug 2011 by The Manufacturer

New research identifying the success factors for the last decade’s shooting stars reveals that rapid growth is not a manufacturer’s game. Jane Gray ponders the findings

Today (Monday, August 1), an interesting piece of research, sponsored by IT provider SAP and compiled by Delta Economics, is has been released.
The report, entitled A fast track decade: Analysing 10 years of high performance taps into the last 10 years of data from the Times Fast Track 100 reports which identify, on an annual basis, small and medium sized businesses which have excelled in the first phase of economic growth.

The findings are a little nail biting for any entrepreneur who believes they are the next big thing. One in five of the businesses featured over the last 10 years in the Fast Track rankings are no longer trading and less than half of those listed in 2000-2001 have survived to function today. Billy Hamilton Stent, MD of Loudhouse, a research company which assisted Delta Economics in collating the findings for this report, says that of those that have disappeared 33% have been acquired but the rest have gone to the wall in one way or another with 44% meeting liquidation.

Interestingly for manufacturers the analysts from Delta Economics, apart from identifying general features among successful companies such; the ability to be innovative and flexible, display strong management, know their niche and time strategic moves well, have also taken the time to do vertical sector investigations of success.

According to Mr Hamilton Stent the standing of manufacturing companies among the Fast Track high fliers of the last decade has followed a predicable decline and lives up “to the forecasting on global economic trends.” While seven manufacturers featured in 2001, by 2008 there were only five and there were none in 2009. Mr Hamilton Stent did however, emphasize that this is misleading in terms if the economic contributions made by manufacturing firms over the last ten years and was quick to express that he did not want to be “critical of the sector”.

Dr Rebecca Harding of CEO of Delta Economics agrees with Hamilton Stent’s feeling. In a conversation with me on Thursday last week she suggested that the indicators for fast growth usually used across sectors are difficult for manufacturing to achieve and not really relevant to a sector characterised by long term thinking.

In particular the requirement for 20-25% year on year growth in order to qualify in the Times publication is usually out of reach for manufacturers.
She went on to suggest that there is an important and often overlooked difference between strong, fast growth and sustainable growth. “Manufacturing is better placed for sustainable growth,” she said. “While the sector is not good for celebrity they will be the real champions of the future economy.”

Hardings optimism that slow and steady growth patterns may not necessarily be uncompetitive in the long run is backed up by a perceived trend in A fast track decade for slower, more measured growth strategies in the second half of the last decade.

This trend is evident even among the high achievers from the Fast Track 100 and particularly in the post recession climate. Whereas in 2001 the average Fast Track company displayed 29% growth, in 2005 this had fallen to 26%.

So what is the purpose of this report? So far it seems simply to be a warning against ambitious entrepreneurialism, especially in manufacturing. But John Antunes, Director of SME and Channels, for SAP UK and Ireland, assured me that this is not so. “There are some good learning opportunities here to help companies identify success characteristics and put them into context,” he said.
Mr Antunes asserted that the ability to break down success factors in a rational way will be more and more important as businesses are forced to diversify into service models and as small businesses defy their apparent limitations in size to compete globally.

And, of course, there is an ulterior motive. Antunes is happy to admit that SAP, who sponsored the report, will be using the data from A fast track decade to develop their IT infrastructure offerings. He says the need for flexibility will be the focus point for them and that it is already propelling changes in the way the IT supplier delivers its business analytics and ‘All in one’ offerings. Mobility is the watchword.