Building A Culture That Drives Innovation And Creates Enterprise Value

Equity Investment at an All Time High

The world of equity investment has never been more exciting. Macroeconomic events have created a volatility not seen for a while. The first half of this year has produced some record numbers, with cash still flowing but reports suggesting that valuations have lowered and terms of investment are more aggressively geared towards the investor.

In the UK, according to Beauhurst's UK Equity Investment Market Update H1 2022, a record 1,456 deals were completed in the first 6 months of 2022, 10% up on the prior 6 months and nearly a staggering 40% up on the same period in 2021. £14.9 bn of equity has been raised in funding rounds since January, which has seen the UK confirm its status as a global hub for both Startups and Scaleups.

With the ecosystem maturing, over 90 deals were worth in excess of a staggering £50 Million and with the top 3 performing sectors being fintech, AI and cleantech, not only is the market place getting crowded from an investment and customer perspective, the acquisition and retention of the Tech Talent needed to drive innovation and create enterprise value, has become increasingly competitive too.  

Shifting from Pirate to Navy

There has been huge amounts written about what should be prioritized at each stage of maturity, some based on conjecture and much on hard fought lessons, learnt on the front line of a scaling enterprise. An interesting stage of development, is the transition period of a Startup becoming a Scaleup. Where a business starts to unpick the skills and behaviours of its early days and adjust its focus from product-market fit and customer segmentation, to the infrastructure it needs to hold and create value.

There are some great analogies for this stage out there, none better than Reid Hoffman’s interview found in Dara Khosrowshahi on Masters of Scale with Reid Hoffman, with the then incoming CEO of Uber, Dara Khosrowshahi, at a time when Uber was in the midst of multiple lawsuits, government investigations and a deeply troubled culture. Reid likened the shift Uber needed to make from a blitzscaled Startup to a more mature global player, to the shift from “Pirate” to “Navy”. It’s been much recounted that tech entrepreneurs have long identified with the piracy analogy, including the late Steve Jobs with his famous mantra “It’s better to be a pirate than to join the navy”.

More recently though, Thought Leaders have come to identify the power of piracy WITHIN the navy, where innovators can lead transformation and affect big market shifts from within more established infrastructure, as documented in Tendayi Viki’s highly rated book ‘Pirates in the Navy’.  

So how do you retain the behaviours and innovation that made Startup to Scaleup possible for you?

People as a Priority

Anecdotally it’s thought that first time founders and CEO’s are far less likely to prioritise the people agenda early on, than second or third time founder or CEO. Favoring finance and operational leadership hires and fractionalizing the people agenda across multiple people and/or functions within the business.

With Investor and Leadership emphasis firmly on holding and creating enterprise value, we must consider the people agenda as a series of interlinked commercial levers that when engaged, can have a measurable impact on the bottom line. Often to achieve the next round of funding, not only must you fail fast, respond quickly and agilely to the market; but (amongst a myriad of other people levers) you must:

• Attract the right leadership talent
• Achieve headcount targets
• Form operating models to sustain growth
• Develop immature management styles into effective leadership
• Future proof skills & capabilities from jack of all trades, to masters of one evolving specialism
• Prevent talent attrition through an authentic employee experience

With obvious correlations to the people agenda, all this must be under pinned by a common purpose, shared values, and a culture that attracts and retains the right talent.

In startups and small enterprises, the Leadership is often the custodian of purpose, values and culture, able to define all three. As the enterprise grows culture starts to take on a heartbeat of it’s own, transforming from (effectively) an input, something that can be managed and manipulated, to an output. A product of all of the component parts of the employee experience. Influencing the culture becomes more than just a leadership narrative, it becomes the employee experience itself; the way people work and how they behave.

Culture as a Competitive Advantage

The impact of getting culture right is huge, signified in Culture: 4 keys to why it matters (McKinsey & Company). According to research, healthy cultures enable organisations to adapt, they cited that 70% of transformations fail and 70% of those that fail do so as a result of culturally related issues.  *Apply this to the transformational journey from start up to scale up..

McKinsey evidenced that culture correlates with performance, companies with top quartile cultures (measured by their organizational health index) post returns to shareholders 60% higher than median companies and 200% higher than those in the lower quartile.  *Now apply this to attracting investment at your next funding round..

They also established Culture as a competitive advantage. Culture is difficult to copy – The quickening pace of innovation means products and business models face constant threat of being replicated. In this environment the ultimate competitive advantage is a healthy culture that adapts to changing conditions and finds new ways to succeed.  *Never more applicable than the world of Startups and Scaleups..

Create Your People Playbook

The People Playbook will start to explore the impact of culture and key commercial people levers in a series of blogs, networking events and interviews over the coming months. If you would like to learn more, get involved or simply stay abreast of upcoming events, please do reach out to me.

As Caraffi’s Head of People Search & Solutions and with a decade in the HR Search space, I have seen some of the most innovative people strategies and forward thinking people leaders, first hand.

At The People Playbook, we are constantly blown away by the inventive and forward thinking ways that CEO’s, founders and people leaders, engage to impact and inspire the scaling businesses they lead. This unique insight enables us to keep refreshing our thinking on what is at the frontier of scale up People Strategies and how the fastest scaling businesses achieve their growth targets and strategies through people.