London, England - Pembridge Partner Hugh Mason has been invited to share an investor's perspective on the vital ingredients needed for success at the Creative Clusters conference to be held this year in the UK capital. Creative Clusters 2007 takes place between Friday 9th and Wednesday 14th November, in locations across London.
Hugh Mason says: "Pembridge helps Creative Industries Small- and Medium-Sized Enterprises (SMEs) to grow by providing finance and advice on a fully commercial basis. We also make our diagnostic, benchmarking, portfolio-management and mentoring tools available to all who wish to share them. Those tools share an evidence-based approach that generates large new data sets which in turn paint a vivid picture of issues surrounding growth and the qualities it takes in individuals and teams to succeed. Here, we share that emerging picture, and seek to stimulate debate around three key insights that we believe have profound implications for policy makers, delivery organisations and providers of SME finance.
"Our first insight is that new conceptual frameworks are starting to emerge that make sense of the 'Creative Industries', 'Digital Industries' or 'Knowledge Economy'. Side-stepping the fraught challenge of defining what these sector ARE, instead we have found it far more helpful to focus on what SMEs in these sectors DO. Taking that approach, we find a surprisingly small number of business models in operation (often in combination within an individual enterprise), and all readily susceptible to analysis.
"Looking this way, we find it becomes possible to make much more useful objective comparisons between SME peers, regions and sub-sectors, to identify likely winners and losers, and to compare the impact of different kinds of intervention. It is becoming possible for policy makers to specify and evaluate interventions based on numerical evidence, bringing new confidence about what the return on the investment from an intervention is likely to be. It also becomes clear that some business models have fare more potential to scale their economic contribution than others, and also that 'one size won't fit all' in terms of business support.
"Our second insight is that a map is starting to emerge showing where SMEs fit in a landscape of growth potential. The map shows clear phases through which SMEs seem to grow - and also why some never will - however much business development resource is lavished on them. Surprisingly the dominant drivers of success, or the lack of it, appear very different to those that an analyst used to looking at larger businesses might expect, or that a qualitative assessment might lead you to believe.
"In SMEs we find the drivers of success are extremely closely linked to the human dimension of the business and, in particular, the motivation of the management team. Specifically, we find that three factors seem to swamp all others: market focus, commercial structure and entrepreneurial commitment/risk-taking. By measuring these factors in SMEs as objectively as possible, we find that business support resources can be allocated far more effectively, in a way that seems both fair and focussed on their individual needs. Our observation is that, applied rigorously across business support organisations, such an approach could significantly reduce costs and increase the impact of current support structures for the Creative Industries. It raises the bar in terms of best practice for business support, leaving hunches and qualitative consultation behind, and calls into question the rationale behind some current support mechanisms.
"Finally, we explore the practical implications for financial policy makers outside the public sector, such as those who set policy in banks and other providers of debt finance. A better evidence base for SME performance and potential makes a stronger case for providing finance. Yet it also exposes the need for enterprises in this sector to be much more rigorous about whether they are pursuing cultural-, social- or economic-wealth building as their prime purpose. Those that can demonstrate a clear commitment and plan for commercial growth will be the winners: SMEs that can't will be left with a smaller slice of the pie."
Hugh Mason's presentation is available for download in Microsoft Powerpoint format here.
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