Companies that grow into bigger companies and lead to wealth creation in the economy begin in very different ways from those that do not.
One difference is that they rely on team effort. A study in the US of the youngest of the INC. 500 companies found that almost two-thirds had been started by teams. A separate study of 1,709 businesses revealed that only 6 per cent of the so-called 'hyper growth' ventures were founded by a single person - the other 94 per cent were founded by two or more people. Conversely, 42 per cent of low-growth companies were started by individuals.
These studies add weight to the argument that the emphasis on individual enterprise - the hallmark of government policy for two decades - as the only model of business start-up is flawed.
So why are team-based ventures likely to grow when one-man start-ups do not? The answer may lie in the skills that are at the heart of a successful business. To succeed in expanding a business, entrepreneurs need a variety of competencies: technical (are they good at what they do?), financial (can they make the numbers add up?) and marketing (can they find and keep customers?). Add to that self-awareness (do they know why they are in business?) and personal skills (can they present themselves effectively?), and it is not surprising that few entrepreneurs meet perfectly all of these requirements.
In the absence of a superman or wonderwoman, team-based ventures have an advantage. The team can be assembled from the outset to provide the right balance of skills needed to ensure growth. What is more, as a business grows, the balance of those skills changes. It is at this point that the growth of ventures by individual entrepreneurs is often blocked. A team, however, has the flexibility to change with the growing business, bringing in the right people when they are needed.
There has already been some investigation into how team-based ventures start. In the first model, an individual has an inspiration for a market need; this 'lead entrepreneur' begins to develop the idea through the feasibility stage, assembling a team in the process.
Alternatively, the team may be born before the idea: a group decides to work together and the specific business idea is developed afterwards. This is not dissimilar to what often occurs with management buyouts.
In either case, team formation is a central issue - it can also be the most difficult one. Turning the team into a viable medium or large business involves a series of complex and crucial decisions.
The groups that will be most effective at solving the problems are the ones that take time to consider thoroughly the alternatives, include the participation of all members, avoid polarisation and carefully develop action plans.
Unlike most small business start-ups, team-based ventures are geared for growth from the outset and are more likely to make the transition to big business. To ensure their chance of success, however, they must be able to benefit from the same level of support that has been given to small business start-ups.
There are three crucial questions that any support framework must address: is the business idea viable in its own right, will the team function in any sort of enterprise and, most important, will it be able to function in its chosen business?
Randomly formed teams are not unusual in business; through venture capital management buyouts people are coming together all the time to develop ventures. But if team-based start-ups are to be used as a structured process for economic development and wealth creation, a more formalised approach is required. The challenge for policymakers is clear: to start supporting businesses which will grow if they want to create a real enterprise economy. It is time to think big.
The author is lecturer in enterprise at Cranfield School of Management. His research into team-based enterprise has been carried out with Robin Jacobs of Transitions.Reuse content