UK: Heller on Management - Small fish thrive in the big pond.

UK: Heller on Management - Small fish thrive in the big pond. - The revolution in information technology means that a stay-at-home mentality is now the only barrier to global growth for smaller firms, says Robert Heller.

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Last Updated: 31 Aug 2010

The revolution in information technology means that a stay-at-home mentality is now the only barrier to global growth for smaller firms, says Robert Heller.

The IT company, MAID, is multiplying tenfold by buying into America for £288 million. That makes National Parking Corporation (NCP), looking merely to double through Continental buys, seem positively cautious. But no one is batting an eyelid over either proposition - for middling companies are now going international, even global, as never before.

So has the time come when domestic markets are only springboards? The question may sound intimidating to some smaller companies. But all that global means is selling worldwide on an integrated marketing platform. As for world-class, that means supplying goods and services, and using processes that equal the best standards elsewhere.

High standards are no longer the prerogative of the high and mighty, for several reasons. Segmented, niche markets have developed apace; innovative methods of manufacture and distribution have radically transformed economies of scale. Both these trends have been aided and abetted by the on-rushing revolution in IT.

Of course, hi-tech isn't the only global highway. Some small companies get there through service excellence. Thus, Camborne Fabrics, once a suffering Huddersfield manufacturer, re-invented itself brilliantly as a 'customer service business'. By concentrating on making fabrics for office furniture, a £200,000 company grew to £25 million nine years on.

The self-imposed service standards included next-day delivery and perfect quality.

A courageous approach to globalism meant that by the mid-'90s Camborne was getting half its business overseas. Thanks to the rapid response service, markets as far away as Hong Kong, Singapore and Thailand became its strongest.

The whole experience highlights two other factors in small-to-middling globalisation: finance; and intelligent, well-qualified management ambition.

At a critical juncture, the company was braced by support from Lloyds Bank's venture capital arm. A young team, led by Nigel Roberts, had the imagination to be unorthodox (the service rests on carrying abnormally large stocks), the ability to read its market correctly, the expertise to invest wisely, and the courage to plunge into reinventive management.

Thus, to the IT and service revolutions add that of management mind-set. The IT prodigies in particular have spawned a new, looser management approach that has spread worldwide alongside the Silicon Valley upstarts. More generally, though, the young and ambitious now often shun security in large, established corporations. They happily lift the latter's techniques, combine state-of-the-art know-how with their own entrepreneurial zest.

Willett International provides further convincing evidence that such globally-minded entrepreneurs can soar from small start to world status.

It took three decades before the company hit £71 million of sales, having grown turnover by 31% compound since 1984, operating profit by 29%, and net profit before tax by 24% to reach the latest total of £3.2 million.

It now sells successfully in 75 countries worldwide.

Today's cornucopia consists of products and services for printing information on all manner of goods. Alan Willett had started from scratch in a different line of business which came to grief. Fortunately, he was negotiating a deal with a US company involved in labelling. The American boss suggested that Willett take on the licence himself and so the seeds of success were sown.

For finance, Willett made use of government development aid at home.

Overseas, he created 25 overseas subsidiaries by selling enough machines through agents to build a sufficient customer base. Next he hired executives from local competitors and provided seedcorn capital for a new company selling the consumables, raising the working capital from local banks.

These foreign bankers helped the international expansion, but IT again was the major driving force. For instance, Willett was planning to set up regional headquarters in Asia. The plan was aborted when he discovered that video conferencing could accomplish the same purposes at a fraction of the cost. A lack of physical presence certainly hasn't hurt the business: since 1990, Willett's sales have more than doubled and profits have risen over sevenfold before tax.

Let no one think that world-class global expansion is easy. Thinking big isn't hard; acting big is another matter, as MAID and NPC could yet discover. But they have posed the right question and found the right answer.

The factors that restricted middling firms to the domestic market have withered away. Lack of money, inadequate management and inferior means of conducting business need no longer bar global growth.

That leaves the highest barrier: the stay-at-home mentality. To stay-at-homes, using domestic markets as global springboards may seem like diving perilously into the deep end. But in adopting a cautious attitude they may be condemning themselves to paddling, or even drowning, in the shallows.

Robert Heller was founding editor of Management Today.

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