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Chapter 1
Change and Opportunity
Most entrepreneurial opportunity is triggered by change. External change unfreezes existing industries and the context in which they operate, making new things possible. Changes in society in the broadest sense, embracing technical change, new legislation and regulation, changed political priorities, changes in the needs of business and personal customers, new forces impacting on these processes, even changes in social integration – all this may have an effect on existing industries and create opportunities for new or adapted ones.
The joke that change is the worst of all six letter words has some relevance in business, notwithstanding its creative potential that is the theme of this chapter. Everyone in business recognises disruptive change, that is to say, change which undermines a company’s operations, dislocates its business model, raises its costs or thins its profit margins.
There is also a tactical advantage to starting with disruptive change, which is that one can trace its effect on existing companies, as a prelude to more creative consequences.
Before introducing an example of disruptive change and showing its repercussions for one particular organisation, it may be helpful to say something about the provenance of the business cases cited in this book.
I mean to develop the ideas in this book with reference to real life examples. I have built up a research sample of getting on for 100 owner-managed companies or SMEs (small and medium sized enterprises) that I know something about, have visited, and have talked with their founders or present owners. That is to say, what I know of these companies comes from face-to-face contact not from the remote interrogation of databases.
Most of these companies are British, located in the UK, but I also make use of some company examples taken from other European countries – Holland, Scandinavia, and so on. And I am also drawing on a group of American companies, variously drawn from Chicago, Nashville, Dallas and west Texas, and North and South Dakota, particularly this last, again all of which I have visited.
Among the companies in the UK there is a subset of 30 SMEs that have appeared on the annual lists published by the Sunday Times of the fastest growing one hundred companies in any given year. A particular interest attaches to these companies since they have been externally validated by a credible criterion of success. These companies are of course still in the hands of their founders, who are generally keen to talk about the early days as well as present successes.
This group of Sunday Times companies are referred to throughout as Fast Track companies, and I almost always name them. It might be helpful to add that it is common for these Fast Track companies to be bought, or to merge, with a resulting loss of the original name (I have not so far found any that have disappeared for negative reasons). Unless there is a footnote to the contrary, companies mentioned will be given the name by which I first encountered them.
I have done two other things in choosing other (non-Fast Track) companies to visit and to learn about. First, in some cases I have chosen to include several companies in the same industry to try to get a better feel for the dynamics of the industries as well as an appreciation of the experiences of particular firms. Second, I have also sought out a few family firms that have survived, indeed prospered, across several generations, to try to understand some of the reasons for their longevity.
Against this background let us consider as an instance of the creative possibilities of disruptive change an organisation taken from the private education sector in the UK.
School days
Marlborough Hills School1 is a fee paying preparatory school in the west of England. Its origins go back to 1870 (as they should); it has occupied several different sites over the years, but has been securely established at its present location since 1925.
A preparatory school takes pupils from seven to 14, preparing them for the Common Entrance exam after which they go on to the nation’s public schools, which just to confuse foreigners, are private and fee paying. Both preparatory schools and public schools are traditionally boarding schools and, of course, single sex.
Everything was fine for Marlborough Hills School until the emergence of two countervailing trends in the 1980s. The first of these was a growth in the popularity of private education. This has sometimes been explained as a consequence of growing income inequality during the premiership of Margaret Thatcher (1979–1990) resulting in a larger number of people being able to pay for private education for their children. So far so good for private schools. It is the second trend that, rather paradoxically, is disruptive. This trend is a decline in parental enthusiasm for boarding as such. It is not easy to account for this. But it is probably about a higher proportion of those who can afford private education for their children beginning to realise that parenting is best done by parents rather than by housemasters (and these parents are also less likely to have been to boarding school themselves). This is bad news for Marlborough Hills and indeed for many other preparatory schools. A decline in the number of boarders is a serious threat to school income.
While this parental disenchantment with boarding is working its way through the system, the incumbent headmaster retires. He was, of course, male and single; he had devoted his life to the school and reigned for over 30 years. His successor is a younger man, hired in part as a change agent. The school now has day boys!
This simple fact, however, redefines Marlborough Hills. As a boarding school its catchment area was national, at least in principle. After all, most of the boarders arrived by train – how long they spent getting there on the train was secondary, and they only had to make this journey three times a year. After the switch to day boys most of the pupils arrive by car or on foot. The catchment area is now regional and indeed local.
This same change also impacts on the relationship between school and the parents. In the old days, the headmaster and his staff might only come into contact with the parents once a year, say at a traditional and carefully orchestrated speech day. Now most of the parents are at the school gate in their SUVs at 8.30 every morning. And these are the fussy parents, the ones who never did buy into the traditional boarding school values. And as believers in their right and duty ‘to parent’ they are less accepting and more demanding. Managing parents, giving them quasi involvement, PR in effect, now becomes an issue. The headmaster is the public face of the school, rather than the quiet embodiment of its traditional values. He now needs to be able to present, to convince, to charismatise.
There is another first to the evolving story. While one day boy may equal one boarder in the eyes of God, they are not equal in the revenue they generate. So you need more day boys, but then the supply is limited by the new local catchment area. One has to think of something else. And yes, you have probably seen it coming; the answer is to take girls as well! Marlborough Hills becomes co-ed – a development that is now quite taken for granted; one that has affected many preparatory schools and public schools alike.
Still there is more to come. Now the typical parent is not primarily buying into a set of traditional values epitomised by the single sex private boarding school. Instead they are paying for a better education. While the notion of a better education may be difficult to define, there are, of course, some indicators. Quite simply, does your child do well at prep school, does he or she shine in the Common Entrance exam, gain a place at a better public school, one likely to be more effective at getting your offspring into a decent college at Oxford or Cambridge from which they will be more readily recruited into desirable and rewarding occupations? The educational ideal might be a bit elusive, but the worldly success is easy to recognise.
This parental state of mind and the accompanying insecurities cry out to be assuaged. The answer: create a pre-prep department (three to seven), get your child on the right track at an earlier stage, perhaps even give them a choice of prep school, because Marlborough Hills is not the only school to have thought of this. Other prep schools have opened pre-prep departments and indeed some free-standing pre-prep schools have been opened, not heading into any particular prep school. These free-standing pre-preps can, of course, be courted. There is nothing like the ability of a pre-prep to feed into a well-established prep school to enhance its desirability in the market place.
Is this not an intriguing tale? What starts it all – a change in the way that the boarding experience is viewed – is something quite intangible, yet demonstrably powerful. This is not a creation of science or technology nor a regulatory change or legal enactment, but something in the minds of people, and we can speculate as to how it came about. The moral is that the intangible is usually more difficult to spot and at the same time more consequential. Just consider the scope of the change produced in Marlborough Hills School and others like it, namely:
| Before | After |
| Boarding only | Mostly day pupils |
| National catchment area | Regional/local catchment area |
| Single sex | Co-ed |
| Headmaster embodying traditional values | Headmaster as a change agent |
| Little direct contact with parents | Daily contact with parents | ...
