One of the biggest future growth areas for spin-outs will be in integrated health and social care

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

7.   One of the biggest future growth areas for spin-outs will be in integrated health and social care.

Integration – the organization of resources around the needs of individuals – is probably going to be one of the biggest public policy thrusts of the next few years. The most successful spinouts are well-placed to operate in this space, given the public’s worry about the role of the for-private-profit area in healthcare and the need to build supply-chains that include the voluntary and community sector.    Spin-outs are already advantaged against private competition in this kind of ‘Big Society’ integrated care.  Firstly, they are most trusted.  Which charities, really, want to partner with large international health conglomerates?  Secondly, integration isn’t great business for the shareholder-driven private sector, as Serco, Virgin and others are finding.  All the interdependencies of stringing together a complex local supply-chain makes it harder profit-seeking organizations to weigh commercial risk.  Conversely, spinouts can sell themselves as locally-trusted, value-based organizations able to work well with Councils, the NHS and the VCS.

At their best, spin-outs prove that you can be both commercial and social at the same time

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

6.   At their best, spin-outs prove that you can be both commercial and social at the same time.

The reason the UK needs thousands more spin-outs is that productivity and innovation in the public sector is so poor.  Indeed very soon the country will simply not be able to afford current levels of public services.  We will then have a choice – fewer, lower-quality public services or services done cheaper, better and nicer by somebody else.   It’s then, frankly, about whether the private sector takes an even bigger role or whether we see a widening in the role of public sector spin-outs.    What I really like about spin-outs is that they can be both deeply commercial – investing for growth, attacking costs, innovating, taking risks – and also deeply social – returning enormous additional value to communities and employees.  The private sector struggles to be genuinely social while and the public sector doesn’t excel in commercial terms.   The better spinouts appear to do both.

The achievements of spin-outs exceed the public services that preceded them

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

5.   The achievements of spin-outs exceed the public services that preceded them.

Most spinouts are self-evidently better than what went before.  Staff are happier, there is a sense of optimism,  better management information, a healthier culture and more productivity. Perhaps the greatest single bit of learning (and one lost on the wider public sector, I find) is that a brand-new, freed-up organization tends to have a galvanizing effect on outcomes and VFM.     This is one reason we try to encourage independent social enterprises with a commercial culture rather than local authority trading companies which, somehow, don’t have the same cultural vibrancy and ‘do-or-die’ mentality that translates into better results.  To get the most from a spin-out, you really need to set it free.

Few spinouts understand the role of finance in growing a business

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

4.  Few spinouts understand the role of finance in growing a business.

Virtually every leader of a spin-out I have met wants to grow the business.   Only one or two understand that it is extremely difficult to do this without making very large up-front investments in the right people, structures and skill-sets to accommodate growth.   Hardly any spinouts I am aware of have taken on external finance and many are seriously undercapitalized when you consider their size and ambition.   Some, of course, have managed to grow anyway, armed with generously funded contracts and payment terms.   But, by and large, I have been left wondering what-might-have-been with the right kind of social finance package going in.    Of course, this isn’t wholly down to the spinouts.   Many of the social finance outfits just don’t know how to relate to this market and come across as highly technocratic and not at all cheap.  This is happily now changing a bit but social finance, for me, a lost opportunity for everyone involved.

Spin-outs tend to be slow to make necessary changes

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

3.  Spin-outs tend to be slow to make necessary changes.

While the idea of stepping out of the public sector is to do things differently, transformation can be slow in reality to get underway.   This is often because a lot of energy goes on the final push over the line to get the business out.  But it’s also true that leaderships of spin-outs often are not quite sure how to use their new freedom to best effect.   The result can be unreformed organizations that struggle to compete with the private sector.    Conversely, the best spin-outs quickly reduce the layers of management, simplify pay and reward and rapidly create a culture of accountability.  The truth is there is often plenty of ‘flab’ to take out of former public services in the early years and therefore a real opportunity to build savings to reinvest in growth.    The difficult thing is being brave and doing it.

You have to be good at politics to do this

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

2.  You have to be good at politics to do this.

Even now, I am often taken aback by how easily a spin-out can be killed-off by internal public-sector nonsense that shouldn’t matter.   It’s not enough to have a business-plan that is AK-47-proof!   You also need to keep an unlikely alliance of politicians, managers, unions and users on side too.   Lose one group and the whole enterprise can be lost.   Time and again you see energy wasted on reassuring people in the council about their own long-term interests.  This is often means, paradoxically, that spinouts are less prepared for the real world than they need to be.    Once out, the real business plan has to be written which spells out how the new venture will meet the market, not the internal audience.

Leadership is everything

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So what have I learned after nearly four years of helping people to ‘step out’ of the public sector to set up new social businesses?  A series of 10 blog posts in 10 days…..

1.   Leadership is everything.

Behind nearly all spinouts is an exceptional individual who has made it their mission.    Without this ‘Superhero’, things tend to fizzle out very quickly.    When asked to work on an emergent spinout my first question is ‘Who is going to lead this?’.   Without a determined figurehead, it’s very difficult, as an adviser, to have an impact.   This is because public sector organizations have a gravitational pull towards the status quo.  To counter this you need the electrical charge of a Managing Director-in-waiting.   Timely support and mentoring of this person is, in my experience as important to success in spinouts as it is to any early business.   Leading an early business is like a long hike in a desert. You need a guide in the form of a mentor.   Funding is needed for the mentoring and personal development of the leader, as much, if not more than the technical aspects of their journey such as legal and financial work.

 

To Grow or Not to Grow – That is the Question

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Every now and again I come across spin-out businesses that don’t want to grow.

The conversation normally runs along the lines of ‘We want to focus on what we are doing and not get pulled out of shape trying to grow’.

On one level, there is some sense as a spinout  in securing your beachhead  before marching your troops into new terrain.   You need time to draw breath.   And, after all, a poorly organised landing leaves you exposed and unready for the next big drive.

But there is danger in getting too comfortable with your new surroundings.   Timing your move from the  beachhead to the next battleground is essential.   Leave it too long and you could give your enemies (the competition) time to regroup and fight you back from what you felt was a secure position.   Often these enemies have superior resources – more capital,  superior commercial experience – and unless you take the fight to them, they will see you coming and take you out incredibly easily.

OK, war-metaphors aside, while I also worry about those spin-outs that are going willy-nilly after every bit of growth  I worry far more about those that sit back and don’t expand.   These are probably  relying on one customer in one place and, for my money, are  not doing quite enough to protect themselves against the competitive onslaught that will, eventually appear.

When I look across the community of spinout organisations, the ones I am most impressed with have taken a maximum of a year to consolidate but have also invested in improving their business and in new products and services that will attract new customers in new places.   This not only keeps these businesses in a state of movement, it also helps to spread their risks away from the single product, single customer scenario that could, unaddresed, bring many the spin out down if a key contract is lost.

So think on  - if you’re newly stepped out – keep driving forward.

 

Guest blog by The Legal Director: 10 Key messages for spin out social enterprises

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1. Carry out your own due diligence – know every detail of your business and organize it.

2. Make it your business to understand where the value is in your organization – weed out the risk issues and revenue sapping functions and negotiate their separation prior to the spin out.

3. Give detailed consideration to the legal entity you will use and how it will be governed.  Give full attention also to the terms on which you leave the public sector so that your spin out is viable and capable of sustaining itself.

4. Seek as many transitional protections as possible to give you some lead-time to build the organization once it becomes independent. 5. Once independent make sure that you organize and document every key aspect of your business. Put in place procedures for contracting, making sure that the right people participate in negotiations and contract sign off.

6. Train your people to understand the commercial and cultural differences of being outside of a Council of Health Trust. There should be no more SLA’s, gentlemen’s agreements or ‘nod for nod’ arrangements.

7. Your spin out business will be totally dependant on its key relationships. These must be set up in the right way, with the right input and monitored closely against service provision or supply. Failure to take this approach will result in financial losses and damage to your organisation.

8. Avoid contractual provisions, which tie you in for longer than necessary, where you cannot control the costs and where your liability is not capped or minimised.

9. Do not make the mistake of thinking that the contractual process is not important. Your staff involved in service delivery or purchase must be involved in the contracting process. Without their knowledge or input you will not get a contract that fulfils your organization’s commercial needs. Eventually this will catch up with you.

10. Make business/legal affairs a priority. Integrate a business minded lawyer into your decision making team to support your directors and senior staff, to protect your organization and make it ready for growth and success.

For more information or help and guidance contact Craig@stepping-out.biz or John Burchill,  CEO of The Legal Director at John.burchill@thelegaldirector.co.uk or tel: 07766 461018

Enterprise IS Social

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I have just come back, bushy-tailed, from Cranfield University’s Business Growth Programme (BGP) which helps entrepreneurs like me to grow their companies.

What have I learned?   Three things come to mind.

Firstly, I have been reminded of the importance of a big, simple vision for your company.   25 years of  BGP at Cranfield has shown, beyond doubt, that defining an end-point, and working back,  is the best way to create business success.

Secondly, it has taught me the importance of focus.   Most businesses grow to success by doing what they do well better, not by trying something completely new – sticking to the knitting.  Sure, you might pivot your business into adjacent markets or develop a new service for current clients – but new products / new markets are, while cute and appealing are, on the puppies we need to drown.

Thirdly, I came to a new appreciation of how socially useful most enterprises actually are.

Growing businesses generate jobs, wealth and taxes, often in parts of the country which badly need them.   Private entrepreneurs, by and large, are also a good lot.   Indeed, I found their lack of bullshit incredibly refreshing.

What can the spin-out sector learn from Cranfield’s BGP, as well as the lessons I outline?   I think the main one is that successful, growing organizations need to focus utterly and completely on their value-proposition to the customer.     Every business I encountered on BGP is obsessed with customers.  Each could explain to me, very quickly, what they did and what differentiated their offer to the paying client.   Staff matter, for sure, but it is customers around whom the business is designed and built.

As we look to reform public services, be this through the integration of health and social care or the re-provision of probation services, we need to bear in mind the lessons of success from mainstream enterprise:  the importance of vision, sticking to the knitting and always-but-always putting your customer first.