The adoption of management control systems (MCSs) plays an important role in the development of early-stage technology companies. They can be seen as growth accelerators. In a previ-ous article, we noted that the Stanford Entrepreneurial Management Systems (Semas) project identified 46 manage-ment systems, which can be system-atically clustered around eight distinct categories – financial planning, financial evaluation, human resource planning, human resources evaluation, strategic planning, product development, sales and marketing, and partnerships (see first table overleaf).
The Semas project found a striking pattern – start-ups with a higher adoption intensity of MCSs grew their headcount an average three times big-ger by year five compared with their counterparts (see graph overleaf).
Every company embarking on a high-growth path will encounter the 16 so-called growth accel-erators and their counterpart growth inhibitors and should analyse them regularly and act on them.
- Top management
- Human resources/people/organisation culture
- Strategy/planning
- Company liquidity and financing
- Research and development (R&D)/new product development
- Products/services/after-sales
- Operations management/systems
- Customers/market opportunity
- Marketing/branding
- Sales/distribution
- Partnership/inter-company leveraging
- Capital markets/financial reporting
- Acquisitions/mergers
- Regulatory/government/taxation
- Economic/corporate environment
- Legal/lawsuits
To illustrate some typical examples and highlight the value of such a growth analysis, the following table is a good guideline.
It goes without saying that MCSs are useful analytical proxies for underlying routines, but that the effort of routine development entails more than the purchase of an information system-based MCS. Corporate venturing and venture capital are often considered as pure capital, especially in emerging markets. From this study it can be concluded they could be regarded more as venture creation, where more education and coaching for organisational learning within a new venture company is as worthwhile as provid-ing the financial resources for economic growth. This is where venturers should focus their time and effort, hence the above listed tool and example, as well as the summary of the reasons for MCS adoption and its outcomes (see last table overleaf).
The Stanford research team concluded: “Research confirms the argument that the adoption of management systems is associated with growth. While this may be counter-intuitive – why would a fast-moving company need tools that appear to constrain creativity and slow growth? – it can be seen through the following metaphor. Think about a car. The faster it goes, the more sophisticated the technology required to keep it under control. At the very elite auto-racing level, Formula 1 teams have highly complex and extensive sys-tems infrastructure both on and off the track. The same logic applies to growth with start-ups. The faster they need to go, the more man-agement systems infrastruc-ture they need.”
References
Davila A, Foster G, Ning J (2010) Building sustainable high-growth startup companies: management systems as an accelerator. California Management Review 52(3): 79-105.
Strehle F, Katzy B, Davila T (2010) Learning capabilities and the growth of technology-based new ventures. International Journal of Technology Management 52(1/2): 26-45.
Boris Battistini is a sen-ior research fellow at ETH Zurich and a project leader of the Corporate Ventur-ing Research Initiative with Bain & Co (e-mail: bbattis-tini@ethz.ch)
Martin Haemmig is an adjunct professor at Cetim at UniBW Munich and Lei-den University (email: mar-tinhaemmig@cetim.org)
EXAMPLE OF GROWTH ACCELERATORS
Top management related
Top management team agrees on what it takes to win and can identify key actions required to win.
R&D/new product development related
Investments in R&D are creating a rapidly evolving and competitively unique offering.
Market opportunity related
Growth expectations in end markets are driving growth in demand for our services.
EXAMPLE OF GROWTH INHIBITORS
Top management related Part of executive team lack capabilities, resist change, and are not dynamic enough in a rapidly evolving business.
Company financing related
Lack of funding to support product development and implementation. We have zero marketing budget and we cannot drive any development of differentiated devices that would complement our offering.
Operations systems related
Lack of reliability of systems has become a key inhibitor.
VALUE OF GROWTH ANALYSIS
1 Facilitates focused effort on pivotal accelerators
2 Highlights lower priority accelerators that may be consuming excessive resources/mind share
3 Facilitates early efforts to reduce or eliminate impact of major inhibitors
4 Promotes executive team/organisation awareness of growth culture and priorities in promoting culture
5 Facilitates resource allocation and alignment design to promote company objectives better