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Supporting Entrepreneurial Leadership: What works_Autio

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Supporting Entrepreneurial Leadership: What works?

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Supporting Entrepreneurial Leadership: What works_Autio

  1. 1. Supporting Entrepreneurial Leadership: What works? “MANAGEMENT AND LEADERSHIP SKILLS IN HIGH-GROWTH FIRMS” OECD LEED Programme and Poland’s Ministry of Economy Warsaw, May 6, 2013 Erkko Autio, Imperial College Business School and UK Enterprise Research Centre* erkko.autio@imperial.ac.uk * UK ERC is supported by ESRC, BIS, BBA and TSB
  2. 2. Erkko Autio Our work on high-growth firms  High-growth entrepreneurship policy instruments review 2006  Europe Innova ”Gazelles” working group 2006 - 2008  GEM Report on High-Aspiration Entrepreneurship  UK Enterprise Research Centre (BIS, TSB, ESRC): meta-analysis of the effects on and of high-growth aspirations (April 2013) • http://enterpriseresearch.ac.uk/  Evaluations of accelerator programmes in Finland (Vigo, NIY) • NIY: longitudinal analysis since 2008  Global Entrepreneurship and Development Index GEDI • National Systems of Entrepreneurship • Platform for policy analysis and design » Scottish Enterprise: series of policy engagement workshops around GEDI Scotland analysis » Spain: Regional GEDI analysis • EU Regio contract to put together GEDI data for EU NUTS II regions » EU 2014 Cohesion Report
  3. 3. Illustration of Northern Ireland data Ranking against 28 ”Innovation Driven” countries (Note: up to 2011 data used) (Note: blue indicates top quartile, red indicates bottom quartile) Northern Ireland Rank (28 IDCs + N.I.) Market Agglomeration 0.315 Opportunity Perception 0.153 Opportunity Perception 0.075 28 Education PostSec 0.485 Skill Perception 0.417 Start-up Skills 0.353 23 Business Risk 1.000 Nonfear of Failure 0.144 NonFear of Failure 0.547 24 Internet Usage 0.825 Know Entrepreneurs 0.318 Networking 0.413 22 Corruption 0.971 Career Status 0.503 Cultural Support 0.658 11 Economic Freedom 0.931 TEA_Opportunity 0.836 Opportunity Startup 0.656 9 Tech_Absorption 0.724 TEA_Technology 0.539 Tech Sector 0.527 15 Staff Training 0.767 TEA_Education 0.517 Quality of Human Resources 0.441 20 Domestic Market 0.865 TEA_Competition 1.000 Competition 0.725 5 Technology Transfer 0.777 TEA_NewProduct 0.389 Product Innovation 0.473 22 GERD 0.364 TEA_NewTech 0.120 Process Innovation 0.169 27 Business Strategy 0.857 TEA_Gazelle 0.239 High Growth 0.404 16 Globalisation 0.806 TEA_Export 0.590 Internationalisation 0.473 22 Venture Capital 0.908 Informal Investment 0.244 Risk Capital 0.397 18 Aspiration Institutional Variable Individual Variable Pillars AttitudesActivity
  4. 4. Erkko Autio What do we know about leadership  Leadership is about behaviours • Transformative » Proactive, inspirational, motivating, appealing to higher ideals, transforms existing culture • Transactional » Reactive, operates through rewards and sanctions, reinforces existing culture • Instrumental » Goal-oriented, task-specific, team-centric  Context matters for leadership effectiveness • Entrepreneurial contexts are different from corporate contexts • Different stages in firm life cycle are different from one another  Different contexts require different leadership styles
  5. 5. Erkko Autio What do entrepreneurs do and how do they do it? Opportunity Cloud •Technology •Market •Demographics •Regulators Resource Cloud •Financial capital •Human capital •Intellectual capital •Social capital Stakeholder Cloud •Collaborators •Customers •Competitors •Resource providers Observing Discovering Shaping Creating Accessing Mobilising Building Ringfencing Convincing Influencing Visioning Circumventing
  6. 6. Erkko Autio Supporting leadership and management development in HGFs Learning, development Transfer, execution Instrumental Task-oriented Strategic Visionary Networking, peer learning Management participation Board planning and control Board mentoring, visioning, momentum building
  7. 7. Erkko Autio Finnish accelerator programme Vigo  Launched March 2009  Concept: attract individuals with HGF experience to start accelerator businesses that invest in potential HGFs • Take equity stakes • Accelerate growth and internationalisation • Help attract equity funding (both Finnish and foreign) • Create a network of new venture accelerators  Selection criteria • Private, profit-seeking firms • Investment capability (own funds; also raised funds) • Solid HGF experience • Invest at least €30k per firm
  8. 8. Pre-seed stage - Investment size 20k€ – 200k€ - Used in R&D - Large idea pool should exist - Goal: rapid development of NIY acceptable firms - Gap: demanding to organise funds Seed stage - Funding sources: NIY; VERA; Private equity - Investment sizes +/- 2meur - Sigificant incentive for private equity through NIY and Vera - Works well - No gap here Before round A - Investment size : 2M€– 5M€ - Target: increase in A-round cases - Now: 2-4 firms per year - Future: 10-20 firms per year - Gap: More finance for cases that are not able to develop rapidly enough A Round Financial flow from idea to A round Idea Source: Mikkola (2010)
  9. 9. Erkko Autio Public incentives  Priority processing of funding applications with Tekes, Finnvera • Usual eligibility criteria have to be met • Agencies and not accelerators decide  NIY funding can be used to pay management fees for the accelerator companies • Management fee limited by equity stake size • Greater the stake, smaller the fee that can be charged • Fee payable only up to 2 years
  10. 10. Erkko Autio Vigo ecosystem dynamic
  11. 11. Erkko Autio Governance structure of the Vigo Programme
  12. 12. Erkko Autio Use of management and consulting fees Eur Mean Eur Min Eur Max Eur Sum Management fee + consulting fee (23 firms) 43 600 0 198 000 1 002 000 Management fee + consulting fee (fee paying 12 firms) 83 500 3 000 198 000 1 002 000
  13. 13. Erkko Autio Funding flows catalysed (summer 2012)
  14. 14. Erkko Autio Vigo portfolio: example Liikevaihto Bruttovoitto Liikevoitto Kiihdyttämö/yritys 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 Lifeline Ventures Oy 523 305 468 281 68 26 Oncos Therapeutics Oy 157 360 258 144 310 217 5 -289 -1 011 MediSapiens Oy 11 0 79 12 -136 62 -69 -442 -316 Valkee Oy 15 7 495 1 429 15 -35 342 1 314 -4 -86 -557 -580 ZenRobotics Oy 107 55 59 207 82 66 91 -66 -89 -354 -455 -958 Enevo Oy 2 2 -155 Applifier Oy 0 1 591 -436 Sofanatics Oy 4 7 106 143 -439 -216 Grey Area Oy 29 18 196 44 11 469 4 -56 -873 Thinglink Oy 3 5 -76 91 -234 -496 Playmysong Oy 3 3 -112 Uplause Oy 163 171 139 260 10 -363 NonStop Games Oy 31 31 -38 Tinkercad Oy 0 0 -1 0 -16 -431 Supercell Oy 0 151 -43 521 -315 -1 849 GrandCru Oy Somia Reality Oy 0 0 -6 MakieLab Oy Somia Dynamoid Oy (IRC Galleria) 5 436 4 377 2 207 726 4 411 3 638 2 035 607 263 -359 -1 831 -215 Ductor Oy 0 15 -2 15 -50 -234 Summa 5 558 4 636 3 309 3 280 4 508 3 869 2 776 5 260 170 -859 -4 674 -8 289 Yrityksiä 3 6 12 17 3 6 12 17 3 6 12 17
  15. 15. Erkko Autio Vigo leadership support model Learning, development Transfer, execution Instrumental Task-oriented Strategic Visionary Networking, peer learning Management participation Board planning and control Board mentoring, visioning, momentum building, door opening
  16. 16. Erkko Autio NIY programme in Finland  NIY = Young Innovative Firms  Programme seeking to incentivise and effect growth in YIFs in Finland  Started in 2008  Funded by Tekes
  17. 17. Erkko Autio NIY ongoing evaluation Base population: Tekes funded new ventures Comparison Group 2001 Tekes customers 2004 Tekes customers Applicants (300 ventures) Pre-selected (200 ventures)Early rejects 1st stage (50-100 p.a.)1st stage rejects 2nd stage (10-20 p.a.)1st stage (some 70 p.a.) NIY (NIY) Evaluation 2008- 2010 (follow-up until 2013)
  18. 18. Erkko Autio NIY funnelling Application round - Interview screening - High-potential idea - Growth motivation - Up to 50 k€ - 200 firms per annum Business plan - Panel interview - High-potential plan&team - Team, plan viability - Up to 250 k€ - 50 firms per annum Growth - Panel selection - Promising growth - Market validation - Up to 750 k€ - 10 firms per annum Milestone: Develop viable, credible business plan Milestone: Start execution, meet growth and funding milestons
  19. 19. Erkko Autio NIY cohort evolution 2006 2007 2008 2009 2010 N 33 33 33 33 33 Missing 0 0 0 0 0 Mean 316 644 922 1530 1880 Mean, annual change 104 % 43 % 66 % 23 % Mean, change 06-10 495 % Median 170 271 423 732 1079 Median, annual change 59 % 56 % 73 % 47 % Median, change 06-10 535 % Std dev 481 876 1085 2262 2484 Min 5 5 4 12 1 Max 2346 3780 4377 10838 10766 Cohort 10422 21260 30438 50477 62028 Cohort, annual change 104 % 43 % 66 % 23 % Cohort, change 06-10 495 %
  20. 20. Erkko Autio Comparison group evolution 2006 2007 2008 2009 2010 N 93 93 93 93 93 Missing 0 0 0 0 0 Mean 436 588 983 932 912 Mean, annual change 35 % 67 % -5 % -2 % Mean, change 06-10 109 % Median 256 314 400 405 415 Median, annual change 23 % 27 % 1 % 2 % Median, change 06-10 62 % Std dev 512 667 1752 1736 1827 Min 2 2 4 3 1 Max 2358 3204 11505 13674 15942 Cohort 40516 54729 91425 86707 84844 Cohort, annual change 35 % 67 % -5 % -2 % Cohort, change 06-10 109 %
  21. 21. Erkko Autio Outcomes: NIY effect controlling for selection
  22. 22. Erkko Autio NIY leadership support model Learning, development Transfer, execution Instrumental Task-oriented Strategic Visionary Networking, peer learning Management participation Board planning and control Board mentoring, visioning, momentum building, door opening
  23. 23. Erkko Autio NIY and Vigo combined outcome 2011 sales: €150k
  24. 24. Erkko Autio Targeted (hands-on) technology programmes  ”ProMuovi”, ”Kenno”, and ”Pigmentti”  Concept • Bottom-up need identification • Seek to address and rectify a specific need or a gap in a given industry’s value chain • Hands-on active supervision and coordination with active industry participation » Participant selection » Creation of linkages between participants » Networking services » Participant monitoring • Foster a community of practitioners and peer learning through hands-on facilitation
  25. 25. Erkko Autio Programme concept
  26. 26. Erkko Autio Example ProMuovi (injection molded plastic parts)
  27. 27. Erkko Autio Effects on community identity
  28. 28. Erkko Autio Mediating learning effects (Autio et al, 2008)
  29. 29. Erkko Autio Networking leadership support model Learning, development Transfer, execution Instrumental Task-oriented Strategic Visionary Networking, peer learning Management participation Board planning and control Board mentoring, visioning, momentum building, door opening
  30. 30. Erkko Autio Mentoring programmes (several)  Idea: support the participation of senior managers in the boards of directors of willing SMEs  Managers provide their experience and mentor strategic planning and decisions  (Several programmes)
  31. 31. Erkko Autio Mentoring leadership support model Learning, development Transfer, execution Instrumental Task-oriented Strategic Visionary Networking, peer learning Management participation Board planning and control Board mentoring, visioning, momentum building, door opening
  32. 32. Erkko Autio Impact (anecdotal) ”Board professionals, go to work” ”Regular work is dull...” ”Much more fun to tell others what to do...” ”Teflon suits...”
  33. 33. Erkko Autio Lessons  Leadership and managerial support requires active hands-on involvement over a prolonged period  Selectiveness pays  Dealing with the ’Picking Winners’ problem • Progressive selection based on milestone achievement • Require participation in upside potential and downside risk • Avoid the ’living dead’ and ’milking and harvesting’ problems  Small numbers game: few successes pay for the rest • Supercell: ”We will not engage in tax planning” • (read: there will be no holding company in Switzerland)  As for mentoring, type of experience matters. • Transfer of knowledge from large corporate contexts does not always work
  34. 34. Erkko Autio Questions?
  35. 35. Erkko Autio About growth breakthroughs... (%) We have already achieved a growth breakthrough 12 We expect a breakthrough during the next 1-2 years 66 It will take at least 3 years or longer to achieve a breakthrough 11 Talking about a breakthrough is not meaningful in our case 3 N=90 NIY companies, Fall 2012 (%) A realistic prospect of a breakthrough stands between 0-50 % 26 % A realistic prospect of a breakthrough stands between 50-75 % 39 % A realistic prospect of a breakthrough stands between 75 -100 % 35 % (%) Breakthrough size less than 5 M€ 23 % Breakthrough size between 5 M€ - 20 M€ 47 % Breakthrough size between 20 M€ - 100 M€ 20 % Breakthrough size more than 100 M€ 10 %

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