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Fostering 'big gorillas'

Updated Tuesday, 25th March 2008

In spite of the enterprise culture, Britain seems unsuccessful in creating major new companies.

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A generation has now passed since Margaret Thatcher swept into power and the term enterprise culture entered the British business vocabulary. As Britain entered a radical phase of economic restructuring and huge redundancies ensued during the 1980s, the need for small businesses to plug the gap as an alternative source of employment became critical. There was also a need to replace the declining manufacturing companies with new technologically innovative firms that thrived in a small business environment.

Under New Labour the enterprise culture was developed further with enterprise now appearing in the curricula of British schools (Young Enterprise) and universities. Popular TV programmes such as Dragons Den and the Apprentice have portrayed enterprise as being sexy and kids leaving school can now choose to be entrepreneurs instead of climbing the traditional corporate ladder.

Gordon Brown, the current Prime Minister, recently endorsed the launch of a national enterprise academy plus the unveiling of an enterprise white paper designed to encourage more women entrepreneurs, cut red tape and allow easier access to finance. In January 2001, Chancellor Brown also announced:

In the budget, our aim is to create the stronger enterprise culture that America enjoys.

Over the years, Britain has shown that it is good at fostering start-up companies in high technology but none of them have grown to become an Apple, Microsoft, Intel, Amazon, Google or Cisco (to name just a few). In fact, few British companies that have been started since 1945 have matched the growth rates of their US counterparts. For example, after the birth of the PC industry in the mid 1970s several British companies entered the market (Acorn, Sinclair and Apricot) before being outmanoeuvred by their US rivals. The painful lesson that these British entrepreneurs learnt from their failures was that competing head-on against powerful competitors was an unwise strategy. The need to provide complementary products or services has since been the recommended approach.

ARM executed this complementary strategy very successfully by entering the microprocessor market for mobile phones but despite the explosive growth of this market ARM has still remained a relatively small operator. Racal, however, were an exception to the rule. Not only was Racal a major player in its own field, it also demerged a world-beating company called Vodafone in 1991 – a truly British-owned “big-gorilla”.

So taking stock of the enterprise culture which spans four prime ministers and nearly four decades of economic growth, why can’t other entrepreneurs repeat the success of Racal/Vodafone (or SAP and Nokia in mainland Europe)? Is British management flawed; do British entrepreneurs lack the capability to run large businesses; is the short-termism of investors to blame; is it a problem of serial entrepreneurialism where the owner-manager “cashes-out” early or are we too soft and risk-averse or do we simply lack ambition? 

SMEs and entrepreneurs have plugged the gap in terms of providing employment to large numbers of displaced employees during the downsizing era of the 1980s and early 1990s. However, their inability to grow into “big-gorillas” is something that should not be taken lightly. Big companies (despite their bad press) are important to an economy because they enhance national productivity and standards of living. The also play a vital role in terms of investment, training and R&D.

In November 2006, Gordon Brown claimed:

Across the country, we are seeing the beginning of an enterprise renaissance.

This statement is undoubtedly true and UK Plc has significantly narrowed the enterprise gap with the US. However, if this is the case how long will we need to wait before we see some UK “big gorillas” competing in global business markets and are these really necessary?

 

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