growing business, business growth

Turning dreams into reality is the essence of being a successful entrepreneur. But how do you actually go about the conversion? First, the dreamer must start from the right place with the right question: What is the problem? That is, what really is the dream, and what needs to be solved before it can be realised?

Once the answer is known, the next two stages follow with perfect logic. What solutions are possible? And which solution is the best? The three-stage process sounds like, and is, simple common sense. Yet Smith System Engineering has created a high-tech growth business from applying the process to the problems of very large organisations, public and private - some of which don't think either before or after dreaming.

The NASA space agency, for instance, spent a fortune on developing a ballpoint that would work in zero-gravity. The Russians used pencils....NASA is where Bruce Smith, one of many Britons on the Apollo moon programme first got his idea of using bright young scientists, who knew how to solve problems, to work as independent consultants. The object wasn't to supply final designs, but to work with the client to produce the right specification.

Anybody who has commissioned building work should know the principle: don't tell the architect what to design, tell him what you want - and what you're prepared to spend. Smith came back to Britain to put common sense into practice, starting in 1971 with one man (himself) above a solicitor's. Five years later, he hired his first two Cambridge Ph.Ds, and the business (finding its main customers in defence) 'took off', says one of the pair, managing director Chris Elliott.

In the early 1990s, it passed the customary threshold for a 'small' business, 100 employees. There are still only 130, based on Guildford, but turnover is far from small: £11 million. That total has been reached by remarkably steady expansion which carries its own lesson: growth of 15% per annum may not sound very exciting, but doubles a business every five years. 'It wasn't planned', says Elliott, 'but that's the way it worked out.'

There's a very significant explanation. 'We do everything from within', including developing the 'new, bright, but a bit nutty' young, scientists. It takes about five years for these to mature fully. That sets the limits to growth, which at that steady clip generates enough cash to finance the next year's expansion. Any business has its own growth limits - and trying to exceed them is an excellent recipe for failure.

Smith found another such recipe about ten years ago. The top management began to worry about whether the market for independent technological advice was big enough. 'Chaps', says Elliott, 'have to make products.' Being so bright, why shouldn't they develop high-tech wonders themselves and earn huge profits from licensing the results to manufacturers? They started the venture - and it taught them 'a very big lesson.'

First, they risked committing commercial suicide by going into business for themselves: 'being neutral is a winner for us every time.' Second, 'the culture of a service company like Smith is fundamentally different.' You can justify 'bending over backwards to please the customer', even at some economic cost: but that's a 'disaster if you try to do something for yourselves.' The obvious question stared them in the face: 'What are we playing at?'

In other words, stick to the knitting, especially if the wool shows no signs of ever running out. Demand is 'virtually unlimited. A lot of people want to buy from us at the price at which we want to sell.' The market (with defence still accounting for half) consists of 'problems where you can't ignore science and technology.' Such problems involve very exacting practical and theoretical work, but you don't always need computers and Ph.Ds for the three-stage process. Elliott speaks very highly of 'the back of an envelope.'

That embodies 'the principle of maximum laziness', doing just enough work to know whether something is worthwhile. Back-of-envelope calculations would have stopped many of the great and small fiascos of our time. And you can even do them in zero-gravity - with a pencil.