1) The document summarizes a presentation about how "Black Swan Trigger Events" influence the development of profitable high growth small firms. 2) It discusses key topics like what a Black Swan Trigger Event and high growth small firm are, examples of large trigger events, and myths about high growth small firms. 3) The presentation describes the researcher's methodology which involved case studies of 5 North East firms to analyze how they responded to Black Swan Trigger Events through developing absorptive capacity domains.

1. RTC SCALEUP CONFERENCE
15TH NOVEMBER 2018
PRESENTATION
ROY STANLEY
HOW “BLACK SWAN TRIGGER EVENTS" INFLUENCE THE DEVELOPMENT OF
PROFITABLE HIGH GROWTH SMALL FIRMS
"Finding the Black Swan" (Cygnus atratus)

2. TOPICS WITHIN THE PRESENTATION
• Background in growth.
• The “What” of the research
• What is a Black Swan Trigger Event?
• What is a High Growth Small Firm? and What is their impact?
• The ”Why” of the research:
• The context of the research?
• What is the link between addressing regional disparities and HGSFs?
• The “How” of the research
• Research methodology.
• The Regional Case Studies and the impact of the firms growth upon the region.
• The Findings of the research and actions.
• Time for Questions.

3. RESEARCH QUESTION: “HOW DO BLACK SWAN TRIGGER EVENTS
IMPACT HGSFs?”
(DEALS WITH THE PROCESS OF GROWTH)
Research Definition Combines: Black Swan Event Theory with Trigger Points Theory: to arrive at “Black
Swan Trigger Events”
A Black Swan Event (Taleb, 2007) has three properties:
• Rarity: It is a random outlier event. It lies outside the realm of common experience. The event is a
surprise.
• Extreme Impact: When the black swan strikes it has a relatively massive impact.
• Retrospective predictability: post rationalisation. Rationalised by hindsight!
Trigger Points (Brown & Mawson, 2013)
• Defined as "disequilibrium and disruptive events".
• Can be positive or negative!
• Most important factors are recognising the events and how the transition, post the event, is actioned.
• The significance of these Black Swan Trigger Events indicate the unpredictable nature of the events that can
cause rapid growth for a firm. The events can cause “trundlers” to become “flyers".(Brown & Mawson, 2013),
“Mice” to become “Gazelles” (Birch, 1979)

4. SOME LARGE "BLACK SWAN TRIGGER EVENTS”
• Wright Brothers - the Airplane
• Jobs - the Apple IPod/ IPhone
• Bezos - Amazon
• Zuckerberg - Facebook
• Page and Brin – Google
Consider:
• Development of the Internet
(Newspaper Industry)

5. WHAT IS AN HIGH GROWTH SMALL FIRM?
and WHAT IS THEIR IMPACT?
• High growth small firms (HGSFs) are companies achieving more than 20% average annual growth in
turnover or employment over a three-year period and with an annual turnover between £1 million and
£20 million. (OECD Definition)
• Out of the 5.6 million companies that exist in the UK only 22,074 of them are HGSFs. They make up
less than 1% of UK companies, yet last year created one in every five new jobs in the UK.
• Research definition of HGSFs are profitable companies achieving more than 20% average annual
growth in turnover and employment over a three-year period and with an annual turnover between £1
million and £20 million.
• Between 2015 and 2016, the UK’s GVA grew by over £41 billion – 22% of this growth is estimated to
have come from HGSFs.
• They can be found across all industrial sectors and are present in every region of the UK. 67% are in
the service sector less than 1% in the Technology sector. 600 HGSFs identified in the North East.
• The UK’s HGSFs have the power to drive a regional economic revival.
(Octopus HGSB report 2018)

6. MYTHS OF HGSFs
Myth 1: HGSFs are all young and small
• Average age between 9 and 25 years depending upon sector.
• Small firms average age 17 years
Myth 2: HGSFs are predominantly high tech.
• 65% in service sector,
• 1.7% technology sector
Myth 3: HGSFs are mostly VC-backed
• 4.8% in UK VC backed.
• Access to finance is an issue for all HGSFs?
Myth 4: HGSFs undertake steady linear growth
• High Growth is rarely sustained.
• Linear v Idiosyncratic growth
Myth 5: HGSFs grow organically and from start-ups
• A significant number of HGFs emerge from existing firms that are undertaking a period of organisational change
such as a management buy-out (MBO) and management buy-in (MBI).
Myth 6: High growth leads to high success.
• Growth v Profit
Source: Brown and Mawson 2017

7. CONTEXT OF RESEARCH
ECONOMY OF THE NORTH EAST OF ENGLAND
The North East region has performed worse in relative terms in a number
of aspects to all other regions within the UK. (Adonis 2013). There is a
distinct lack in the number of entrepreneurial businesses with the
potential for achieving high growth (Mason 2014).
86%
29%
69% 81%
50%
100%
36%
73%
100% 100%112%
50%
72%
126%
278%
0%
50%
100%
150%
200%
250%
300%
Productivity People with high
levels of
qualifications (16-
64)
Employment Rate Average Disposable
Income
Average House
Prices
North East Comparative Metrics
North East of England National Average
London

8. REGIONAL POLICY FRAMEWORK AND HGSFS
RegionalDisparitiesand
Policies
Global Context
World Bank and OECD
Papers
Innovation
&
Research & Development
European Context EU Strategy Document 2020 Productivity
UK Context ONS and BIS Papers Internationalization
NE Context LEP Documents Entrepreneurship
HGSFs

9. METHODOLOGY OF RESEARCH INVOLVING 5 NORTH EAST
BASED CASE STUDY FIRMS
Rich Pictures
- participants draw ‘rich
pictures’ in ways they are
comfortable with and is
natural for them.
- allows expression of
complex growth
relationships.
- verbal narrative from RPs
is recorded and analysed
using content analysis
Drawing of
Causal Maps
- a “map” is a network of
ideas and their associated
links related to the growth
of the firm.
- it link the causal network
of relationships inherent in
the growth story
Analysis of
Causal Maps
- generates a visual
representation of the
participants narrative about
particular issues or events.
- creates complete chains of
argument in the map, from
“triggering events” to
outcome

10. FINDING THE CASE STUDIES
Analysis and Conclusions
Case Studies of HGSFs
Phase 3: Empirical analysis of the growth story of case study firms
Unit of Analysis HGSFs using Rich Pictures and Cognitive Mapping.
Analysis of data using Design Explorer
Quantitative and Qualitative review of identified HGSFs
Phase 2: Unit of analysis 3 Year financials and KPIs to identify potential case study firms.
Analysis of data using "Fame"
Quantitative review of 1100 North East LEP HGSFs between 2013 and 2016
(Unit of Analysis Research Definition of HGSF)
Phase 1: Analysis using public information to identify a cohort of HGSFs
Analysis of data using "Fame"

11. ADDITIONAL CRITERIA FOR CHOOSING CASE STUDIES
• Private Business: Incorporated as an equity/share based business. Limited company status.
• Entrepreneurially led Business: founder/founders still involved in the business.
• Management and beneficial ownership are congruent: the strategic management of the business was still in the
hands of the founder. Although the operational management may involve a professional team of people.
• Indigenous to and based in the North East Local Enterprise Partnership Area: the geographical area of the NELEP
is extensive. It covers County Durham, Gateshead, Newcastle, North Tyneside, Northumberland, South Tyneside
and Sunderland.
• The public story: the local and national media coverage represents the growth story of each case study and the
aspiration for growth.
• Ambition for further growth (growth mindset)
• Willingness to participate.
• No conflict with researchers’ business interests.

12. SUMMARY INFORMATION ON CASE STUDIES
Case
Study
Years in
Business
Number of
Directors
% Growth t-
(t-3)
Turnover
PBT Yr t (£000)
Profit Margin
%
Last avail. yr
Liquidity
Ratio (x)
Last avail. yr
Number of
Employees
Last avail. yr
% Growth t-
(t-3)
Employment
A 11 3 400% £479 3.24% 1.60 135 238%
B 66 2 458% £250 1.72% 1.10 42 250%
C 11 6 205% £856 5.61% 1.18 130 211%
D 16 3 196% £518 25.02% 2.22 23 120%
E 6 2 967% £700 5.00% 1.02 43 188%

13. RICH PICTURE: CASE STUDY D

14. CAUSAL MAP: CASE STUDY D

15. RICH PICTURE: CASE STUDY C

16. CAUSAL MAP: CASE STUDY C

17. EXAMPLES AND IMPACT OF CASE STUDY BSTEs
Case Study Year BSTE
Nature of
Unpredictability
Absorptive
Capacity Domain
Action Outcome
Additional
Turnover
Growth
Additional
Employment
Growth
A 2013
Recruit Sales
Team
Serendipity People/ Market Sales growth
Increased
Business
Credibility
£5 million 40
B 2008
Customer
conversation re
consumable
supply
Luck Strategy/Market
New Direction for
Growth
Increased
Technical
Capability and
Sales
£10 million 25
C 2005
Developed new
product
Random innovation
Business Model
Developed
Start of the
business
£25 million 70
D 2006
Son joins business
skill set in IT
Luck Operations
Distribution and
Sales efficiency
Customer
Response
Increased
£3 million 10
E 2011
Recruited
Business
Development
Director
Serendipity People
Background in
Sales
Increase in Sales £14 million 10

18. WHAT HAPPENED AFTER THE BSTEs?
• Firms underwent a process of developing the capabilities to deal with the unpredictable occurrences
and the opportunities these BSTEs presented.
• recruiting appropriate people.
• exploring and developing markets.
• identifying strategic opportunities.
• putting apposite systems in place.
• innovating.
• networking and mentoring.
• The actions and decisions post the BSTEs identified from this evidencewere categorised into six
distinguishable absorptive capacity domains (ACDs).

19. ABSORPTIVE CAPACITY DOMAIN FRAMEWORK
BSTE
Opportunity
Awareness
Opportunity
Awareness
Opportunity
Awareness
Opportunity
Awareness
Develop
Knowledge
Develop
Knowledge
Develop
Knowledge
Develop
Knowledge
Implementation
Implementation
Implementation
Implementation
ACD4
Operations and
Formal System
ACD1
People
Recruitment
and
Development
ACD5
Innovation
Product and
Process
ACD6
Networks and
Mentoring
ACD3
Strategy and
Entrepreneurial
Orientation
ACD2
Markets
Customers and
Sales

20. MODEL OF GROWTH MINDSET
SOURCE: BGS MINDSET OF GROWTH REPORT

21. SIGNS OF A GROWTH MINDSET IN THE CASE
STUDIES
• The general categories of their growth mindset fell into four perspectives (Schofield et al., 2015).
• evidence that there was a strong growth intention
• a predilection to action
• a willingness to learn
• a desire and ability to innovate
• Market expertise involves expertise and enjoyment in selling products and services combined with the ability to effectively
negotiate and exploit the market.
• Business vision involves an ability to visualise what the business will look like, possession of a clear strategy, belief in
one’s own ability to deliver and recognition that delivery depends on getting the right people in place.
• Active decision making involves self-awareness about thinking strategies and the ability to select how decisions are
made without losing the ability to act and follow through on new ideas.
• Growth drive involves a strong desire to grow the business to its full potential.
• Sales drive involves a perception that the future of the business depends on future sales combined with current
development of plans to increase future sales.
• Innovation drive involves a strong drive to generate new business combined with the ability to ‘join the dots’.
• Adability:continuously test their vision against reality,

22. FROM STATIC FIRM TO BEING A HIGH GROWTH FIRM
- ACTIONS
1.Develop a Growth Mindset; A Commitment to growth (this is a fundamental prerequisite for high growth).
• Action 1: commit to ambitious growth targets. Talk the targets.
2. Develop Absorptive Capacity (Build Broad Management Capabilities) (ACD1).
• Action 1: expand the decision-making team (replacing people not fit for purpose) with skills and
capabilities to grow the firm.
• Action 2: formulate a people development plan synchronised to growth opportunities.
• Action 3: establish Board of Directors with Non-executives with necessary experience and
connections.
3. Identify and Communicate what the firm is good at and why it is better than its competitors. (ACD2)
• Action 1: develop a way of communicating the firms unique selling points (competitive strengths)
to customers. Align this to systems and processes and absorptive capacity
• Action 2: get buy-in from people within the firm for these competitive strengths and ensure vision
alignment.

23. ACTIONS
4. Identify what the business does and what it delivers to customers (core competence). (ACD3)
• Action 1: identify and communicate to stakeholders “what business you are in”.
• Action 2: create a clear strategy for growth. Knowing “what business you are in” is a fundamental
aspect of enabling the firm to develop a clear strategy that people can buy into.
5.Internationalise the business. (ACD3).
• Action 1: explore and investigate potential foreign markets. Understanding the selling and buying
processes within these markets.
• Action 2: visit the market through trade shows or contacts and establish informal networks.
• Action 3: develop and implement a plan for international growth.
6. Establish formal processes and systems and Information Technology Strategy (ACD4).
• Action 1: identify processes to be standardised and invest in support technology including IT and
train personnel accordingly. Company growth will mean constant monitoring and co-ordination of
formal systems and processes.
• Action 2: put formal systems in place, delegate responsibility and accountability for monitoring
and refinement.

24. ACTIONS
7. Identify innovation opportunities (ACD5).
• Action1: Review existing products and processes for potential innovations.
• Action 2: Create internal (external if necessary) innovation team.
8. Create or join Networks and build customer and supplier collaborations (ACD6).
• Action 1: seek out networks, talk to peers about networks. Go to events. Don’t be bashful.
• Action 2: create strategic responsibility for customer and supplier collaborations

25. HGSFS RESEARCH POLICY CONSEQUENCES
• The assumption of linear growth has led to the more general assumption that the rapid growth of
a firm will automatically lead to success and sustainability. (Brown & Mawson 2010)
• Policy-makers prioritising growth has led to a research and policy focus on high growth as
opposed to profitable high growth. (Brannback et al, 2014)
• The focus on the life-cycle of HGSFs has been identified as a weakness and led to policies
dealing with primarily start ups. (Levie and Lichtenstein, 2010).
• Difficulty in predicting HGSFs: industry, sector, size, age, etc. has led to policy shotgun approach.
(Coad, 2009)

26. GENERAL COMMENTS
• High Growth Firms can have endogenous and exogenous impact.
• Generation of jobs.
• Dyads: Teams of two and Importance of first recruit
• Linear growth v Bounded Chaos
• Growth is messy
• Signs of Growth Mindset
• Importance of Sales

27. DOUBLING THE NUMBER OF HGSFS IN THE NE
WOULD ADD £1 BILLION TO THE REGIONAL
ECONOMY AND AN ADDITIONAL 16,000 JOBS
(OCTOPUS,2015)
"Finding the Silver bullet from the Black Swan"

28. REFERENCES
• Adonis: North East Independent Economic Review Report April 2013: Commissioned by the North East Local
Enterprise Partnership.
• Bessant, Phelps and Adams (2005) “A review of the literature addressing the role of external knowledge and
expertise at key stages of business growth and development”
• Birch,D. Job creation in America: How our smallest companies put the most people to work . New York: Free
Press.1987
• Brannback, Carsrud and Kiviluoto,: The Myth of High Growth Firms; The Theory of the Greater Fool, 2014
• Brown, Ross and Mawson,Susan: Trigger points and high-growth firms: A conceptualisation and review of public
policy implications. 2013.
• Coghlan, D., & Brannick, T. (2001). Doing action research in your own organization. London: Sage Publications.
• Delmas and WIklund: The effect of small business Managers Growth Motivation on Firm Growth: A Longitudinal
Study: Entrepreneurship Theory and Practice Vol 32 2008
• Krogstie, B. (2010). a Model of Retrospective Reflection in Project Based Learning. Learning in the Synergy of
Multiple Disciplines Computer Science, Volume 5794, 418-432.
• Levie and Lichtenstein; A terminal Assessment of Stages Theory: Introducing a Dynamic States Approach to
Entrepreneurship: Journal Entrepreneurship Theory and Practice, Vol 34 2010
• Littunen and Niittykangas: The rapid growth of young firms during various stages of entrepreneurship: 2010
• McKelvie and Wiklund: Advancing Firm Growth Research: A Focus on Growth Mode Instead of Growth Rate :
Entrepreneurship Theory and Practice, Vol. 34, Issue 2, pp. 261-288, March 2010
• Penrose, Edith; The Theory of the Growth of the Firm, New York, John Wiley and Sons, 1959
• Robson, C. (2002). Real World Research. A Resource for Social Scientists and Practitioner Researchers. Malden.
Blackwell.
• Schumpeter, J. A. (1942): Capitalism, socialism and democracy ;. New York: Harper & Brothers. Reprinted 2000
• Trochim, M.K: Research Methods Knowledge Base; Web Centre for Social Research Methods, 2014
• Yin, R. (2014). Case study research (5th ed.). Thousand Oaks, Calif.: Sage Publications.