The survival of the fittest: Aarhus BSS looks at Danish entrepreneurs
About 30,000 new enterprises are established in Denmark annually, but after just three to five years, more than half have disappeared, and of those remaining, the vast majority fails to grow significantly beyond their original moderate size. Why is this? A new research report from Aarhus BSS, Aarhus University, focuses on some of the factors accounting for why so few Danish companies manage to reach true economies of scale.
According to the report – Management Talent for Growth in New Enterprises, which has been prepared in cooperation with the Danish Industry Foundation and was released on Thursday – external talent is vital if it is allowed to fulfil its potential. The talent typically comes in two kinds: either they are recruited by the company’s founder right at the start to form entrepreneurial teams, or they enter slightly later to man the company’s board.
”It’s an important objective of our report to attain a better understanding of how you optimise skills in new enterprises, and how in turn these skills improve the chances of survival and growth. The best way to describe it is as strategic entrepreneurship,” said Anders Frederiksen, a professor at the Department of Business Development and Technology at Aarhus BSS and one of the co-authors of the report.
Mistakes
Many entrepreneurs commit mistakes while recruiting and deploying this external talent, and as a result they prevent their own company from reaching its full potential. The new report describes how this happens and offers advice on what entrepreneurs can do to make their companies more competitive.
The report is the result of thorough quantitative and qualitative inquiries into the entrepreneurial sector. The quantitative part utilises comprehensive data from Statistics Denmark, which reach back decades and offer a macro-picture of Danish entrepreneurship in a historical perspective. For the qualitative part, the authors have interviewed 42 people from 24 different companies to get a better idea of what makes them tick and why.
Every successful start-up has its own unique story. Decades of research have failed to come up with a “golden formula” for inevitable success. Still it is possible to point to certain characteristics which many business stars do have in common.
Five commandments
The report concludes by offering “five commandments” for the entrepreneur to guide his or her way towards success in a highly competitive marketplace:
- Pooling of resources, skills and ambitions offer the best hope of success. A limited liability company also protects the entrepreneur from losing more than he or she has invested.
- A board of director or advisors enhances the chances of success. Talented board members from established companies can contribute knowledge, sparring and legitimacy for the enterprise.
- Industry experience is a huge advantage. If you don’t have any background in the industry, make sure to put together a team of people with a proven track record in the business.
- Management experience is another major plus likely to feed into significantly better results.
- The board needs to be challenged. Don’t hesitate to be critical towards its members. Make changes if the current board seems to have run its course. There will be no shortage of people offering their assistance. Not all of them will be primarily interested in the good of the company. Be careful and pick only the people you genuinely trust.
The co-authors of the report also include Michael S. Dahl, Lars Frederiksen and Sabine Müller, all from the Department of Management at Aarhus BSS.
Contact:
Anders Frederiksen, professor
Department of Business Development and Technology
Email: afr@btech.au.dk
Mobile: +45 61 62 02 07
