One of the problems of being asked for advice is that the recipients don’t always like what they are told. This was memorably illustrated by one of the first ever reality TV shows, Troubleshooter, featuring former ICI chairman Sir John Harvey Jones. Never afraid to give blunt advice, Harvey-Jones’ solutions to struggling businesses ranged from developing turn around plans to closing them down as quickly as possible.
Recently Dexter Johnson (AKA The Nanoclast) at IEEE Spectrum asked me for an opinion on the recently deceased NanoInk, which kicked up quite a comment storm, with various ex employees airing some long simmering grievances. But whether or not they liked my observation that NanoInk should have been closed or broken up years ago, the fact remains that the return on an investment of $150 million over ten years is, so far, zero. Unlike companies such as Amazon which balanced early losses with a compelling vision, it remains a mystery how so much money could be invested for so long without any evidence that a billion dollar nanotech behemoth was emerging.
As I spend an increasing amount of time troubleshooting – advising companies on turn around strategies or investors on buy outs, I can confirm that you don’t have to have a PhD in the technology to recognise a business that is, or soon will be in trouble.
Typical warning signs I have seen over the past few years have included
- The entire company being focussed on the technology with no one looking at the user interface – the black box was brilliant but no one apart from the company’s engineers cared about anything other than what appeared on the screen;
- Companies with far more managers and executive directors than employees – as a general rule I want to see the CEO of any start up running the equipment and making the tea as well as negotiating deals and raising capital;
- A bunch of scientists and engineers spending all their time of developing production methods for things which they had no idea who would want to buy or why (most nanomaterials companies fall into this category), and probably the most common error
- A lack of entrepreneurial vision about where the company is going and how to get there. A successful business is all about taking a calculated risk, and any strategy that always minimises risk is bound to fail, just like any sports team that plays only defensively.
I always liked this Harvey-Jones quote which neatly sums up the attitude of many people to this kind of job:
“Everyone thinks I’m a smart arse who can solve any bloody problem, I’m not. I’m just a very old businessman and a very experienced businessman who made every mistake in the book and can recognise one when I see one.”
So how does an emerging tech business avoid winding up having the likes of Harvey-Jones or Tim Harper advising them to get out while they still have the shirt on their backs? Here’s my check list for any business, or indeed any new internal project. If you start with number two or three rather than at the beginning I’m afraid you’ll be wasting your time.
- The Need: Who wants whatever you are proposing to make? Do you have any evidence for this need? Is the market big enough? Do you have ways of accessing the market, and if so where will you be on the value chain?
- The Technology: Can your technology meet this need? Can you meet it alone or do you have to buy, licence or partner with businesses with access to other technologies?
- The Business Case: Is there a decent chance of it making money? Is it a high value, low turnover business, or a low value, large turnover one? Can the technology be protected and for how long?
- The Team: Can you assemble a team with the right skills to get the business off the ground? At this stage it’s all about vision, determination and hard work.
Only if you can tick those four boxes is it worth considering writing a business plan or developing a new product or service. But those are just rules for minimising the chance of failure – equally important is a bit of luck, pitching to an investor in a receptive mood, an unexpected technical breakthrough, or fulfilling that order that no one else was interested in. Just ask Richard Branson or Alan Sugar!