Entrepreneurship - the pursuit of opportunity

http://www.ifb.org.uk/ I’m looking forward to hearing the opening address by Professor John Mullins, of the London Business School, at the IFB’s Next Generation International Convention 2011 in January. The convention’s theme is Entrepreneurship – the pursuit of opportunity and as associate professor of management practice in marketing and entrepreneurship, Mullins is an acknowledged expert in the field.

Professor Mullins will be developing some themes from his latest book Getting to Plan B, where he debunks the form-filling, spreadsheet-driven mentality popular in business planning. Mullins believes that entrepreneurs should adopt a series of ‘stress tests’ to their initial ideas so that any weaknesses can be corrected. He suggests that the real success of companies such as Google, PayPal, Starbucks and others was that they were prepared to rip up Plan A and make radical changes to their business model.

Cover via AmazonHe has also identified two other key criteria for any successful enterprise to assess. First many business people see fast-growing markets as a good area to explore, but Professor Mullins wants people to realise that the more important side of the equation is to ask whether customers will actually buy your product. Secondly if you’ve satisfied yourself on that question then you have to ask if you can build a sustainable competitive advantage in that industry – otherwise you might find a bigger player comes along and wins the day.

We feel sure that insights such as these will inspire and enthuse the next generation family members who attend the Convention 28-29 January 2011. It will be a great occasion for delegates to hear from a line-up of international speakers about entrepreneurship in all its forms - whether its starting a business, looking to set up a social enterprise, or just learning more about entrepreneurship.

You can hear more from Professor Mullins about these ideas on this video.

Family ownership and the life cycle of firms

http://www.ifb.org.uk/ Why are there significantly more large family-owned businesses, as a percentage of all companies in Continental Europe, compared to the UK? A study by Professor Julian Franks, of London Business School, has come up with some fascinating findings.

Professor Franks’ analysis of the top 1000 firms in France, Germany, Italy and the UK showed that 12% of large British firms are family owned compared with 40-45% in the major European economies. Analysing the life cycle of family firms from 1996-2006 showed that only 50% of firms in the UK that were in family ownership at the beginning of the period remained so a decade later, whereas in Germany the figure is 75%.

Image via WikipediaFranks explains that the cause of the UK exception is an ‘outsider’ system where the private benefits of family ownership are smaller, the opportunities for risk diversification are greater, raising equity is more expensive and the market for corporate control is more active. The study also observed that in the UK family ownership was likely to be concentrated in industries with less need for external capital.

The study implies that in the UK owners of large family businesses lean towards the shareholder value model, whereas on the Continent the family business stewardship remains more entrenched and is more favourably dealt with by the markets. The study concludes that family business does bring diversity to a modern economy, and providing owners generally are prevented from abusing their position for private benefit that we should promote a debate in the UK on how to encourage more owners of large family firms to retain control.

I believe that if we are to see lower attrition rates for large family firms we may need new approaches to policy, for example in relation to the protection of minority shareholders. But our culture may also be a significant factor and there needs to be more understanding of the real benefits of the family business stewardship model to the UK economy. This is the topic of new work being conducted at the IFB and a key theme of our national conference next year..watch this space.