Why the wrong culture can stop growth
Peter Drucker was right, "Culture eats strategy for breakfast."
Don't get me wrong, strategy is critical, but without having an understanding of people, their likes, dislikes and fears, a business is going to struggle to realise its potential or even fail.
Earlier this week, I read a great post by Gerard Grech, where he presented some data that highlighted the challenges the UK and Europe face compared to the US when it comes to growing enterprise-sized technology companies.
The UK and Europe has over 50% of the world's top 20 science and technology clusters, yet, compared to the US, we are not maximising the opportunities that we create, yet!
While we are playing catch-up, change is happening and a new environment is being created that can help us better compete and grow companies that can scale and secure value and returns. To achieve this though the whole issue needs to be looked at strategically, wit ha key focus on establishing a culture that helps deliver growth.
Of course, before all this we need to look at the differences that exist between the UK / Europe and the US.
The Differences
Investment Climate:
UK/Europe: The UK and Europe have a strong network of investors, including venture capitalists (VCs), corporate venture capital (CVCs) from enterprise-size companies, angel investors, and government funding schemes. London is a leading global tech hub, attracting a diverse range of investors. However, the total amount of venture capital available is generally smaller compared to the US.
US: The US, particularly Silicon Valley, has a larger pool of VCs and CVCs and a long-standing tradition of investing in tech startups. The investment sums are equally often larger, and there's a greater willingness to fund early-stage companies where risk is higher.
Risk Tolerance:
UK: There's a perception of lower risk tolerance in the UK. Failure is often viewed more critically, and there can be a greater fear of failure among entrepreneurs. And not that I say perception and the impact that this has amongst peers in the investment or policy-making community. The perception of failure can impact the types of ventures that receive funding, especially from the UK and European VCs and CVCs, a reason why American venture capitalists move in to fund and secure equity in so many start-ups on this side of the Atlantic. Equally, a reason why no many start-ups look to the US for investment, especially when looking for an exit or IPO.
US: American culture traditionally celebrates risk-taking and is more forgiving of failure. This attitude can lead to a higher risk appetite among investors and entrepreneurs, fostering a more dynamic startup environment. Failure is seen as a learning exercise, and the investment model takes this into account when supporting start-ups through different funding rounds.
Business Culture:
UK: The business culture in the UK is often described as more reserved and formal. Networking and relationship-building can be more subtle, and there is a strong emphasis on established business practices and protocols. Technologies and processes that are disrupted are questioned rather than supported so that they generate new market and revenue channels. Equally, how the media report failure and risk taking is quite different to that in the US.
US: American business culture is generally more direct, with a focus on quick decision-making. There's a stronger emphasis on innovation and disruption, and networking tends to be more open and aggressive. Media focus on the positive and the learnings from failure. Worth noting that it was Samuel Beckett who said, "Try Again. Fail Again. Fail Better", an ethos adopted more in the US.
Regulatory Environment:
UK: The UK is in a state of regulatory transition. However, our strong legal frameworks and consumer protections can sometimes be more stringent than in the US.
US: The regulatory environment in the US can vary greatly from state to state, but overall, there is often a more laissez-faire approach to regulation in the tech sector. However, this can vary with changing political climates. The ability to engage and lobby can be costly, ensuring that it is either the enterprise technology companies or their investors who have access and influence. Equally, the ability to take risks, while regulated, it is not capped down.
Talent Pool:
UK: The UK has a strong talent pool, particularly in areas like fintech and AI, with a good mix of local and international talent due to our world-renowned universities. These universities also create incubators that help fund innovation that can be scaled
US: The US, particularly in tech hubs like Silicon Valley, has a massive, diverse talent pool, drawing experts from around the world. However, competition for top talent is intense.
The solutions
So, how do we fix the issues that are currently preventing us from generating growth from the tech that we develop?
There are many, far too many to go through here, but one thing that cuts across is, in my opinion, culture and the perception of risk.
Let's look at some:
Redeveloping the Investment Ecosystems:
We need to continue to encourage the development of VC, CVC and angel investor networks. Wit regards to CVCs, for example, UK companies do not as yet have as many corporate venturing arms that invest in innovation or solutions from which they can secure a return. Why is that? And what can be done to resolve this? Let's remember that start-ups don't just need cash. They also need insight, knowledge and experience and, equally, access to a network of prospective users of their products. Are corporates fearful of investment in risky ventures, even through CVCs? Is this is the case, then this needs to be challeneged and incentives need to be designed to ensure so they can be part of the innovation solution.
Encouraging a Culture of Innovation:
Promoting a culture that values innovation and risk-taking. This can be achieved through public campaigns, educational reforms, and support of entrepreneurial education. Focus on the insights gained from failures that have helped businesses succeed. Changing the narrative and cultural attitudes to failure is an objective that needs to be done across many touchpoints, including education and established attitudes in work. This is very much a medium to long-term objective.
Improving Access to Talent:
Raising awareness not just of STEM education, but also financial management to ensure that businesses have access to the necessary skilled workforce that can help them grow and scale. Additionally, focusing on creating opportunities to switch jobs and move skill sets into new areas.
Research and Development Support:
Our academic community is world-leading. The knowledge and research they invest in developing and sharing with alumni need rewards, which is why their own VC units need to incentivise them to work more collaboratively.
Providing support for research and development through subsidies, partnerships with universities, and creating innovation hubs or clusters where start-ups can collaborate with researchers and established companies.
There are specific audiences who need to understand the strategy, the journey and the outcome. But they need to be influenced and incentivised to ensure that individually they support the growth of the technology and innovation ecosystem in the UK and Europe. This is no mean task, but equally, it is not impossible.
Changes are starting to take place. Specific communities are talking openly more about what they need.
Let's move at pace and learn while we deliver.
*This blog was originally posted on my LinkedIn newsletter: Reputation Matters - Why the wrong culture can stop growth. Subscribe.
