The challenges of scaling-up a business
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
I wanted to start today’s newsletter with something different. I want to reflect on our latest podcast episode. That episode features an interview with Tom Beahon, the co-founder and chief executive of Castore, the sportswear brand. Beahon is pictured in the image above with Sir Andy Murray, an early investor in the company.
Tom and his brother Phil have built Castore into a UK sportswear brand that is worth more than £950 million and is taking on global giants like Nike and Adidas.
The podcast episode looks at the story behind how Castore was built - from the origins of the idea to the present day. However, what I want to focus on today is the challenges that the company has faced in scaling-up - going from a promising start-up to a medium-sized business and then a multinational sportswear brand.
These challenges will be a focus for the relaunched Business Leader magazine. Businesses in the UK struggle with them. The country has a flourishing start-up scene with more unicorns (tech businesses valued at $1 billion ($790 million) or more) than anywhere in the world apart from the US, China and India. But the UK has been less successful in helping these promising start-ups become big businesses. There are 110,000 medium-sized businesses in the UK but only 7,500 big businesses, according to the Office for National Statistics, which defines a large business as one with more than 250 staff.
Why is this? Why do we speak of a “forgotten middle” in the UK economy while Germany celebrates its Mittelstand as the powerhouse of its growth? Is the UK a home for great ideas but not great execution? Answering these challenges will help the UK economy to grow and overcome its problems with productivity, which have been highlighted again by a new Centre for Cities report (see more on that below).
The podcast interview with Tom Beahon offers some insight into the challenges and how to overcome them. Management, strategy and mindset feature prominently. This is what he said when I asked him about the challenges of managing Castore as it has got bigger:
“You have to change as the founder, the co-founders. Your role has to change. The skill-set that gets you from zero to one - that drive, that determination, that passion - that isn't the same skill-set that gets you from one to two. So there's a recognition or realisation that you have to change.
“It sounds really simple but it is actually really hard. When you've had success doing something I think it's human nature to think ‘Brilliant, I'm going to go and do more of that thing.’ To recognise proactively that no, you do need to pivot, you do need to evolve, you do need to change how you operate - that's difficult.
“I do think a lot of entrepreneurs struggle with that as they scale up of it. We certainly had our challenges, so I am not claiming to be the font of all knowledge. But recognising that you need to evolve is one aspect of it.”
One of the setbacks that Castore has faced is Aston Villa’s male and female football players criticising the kit that the company had made for them. They said the kit became too heavy with sweat and looked like it was wet. On that, Tom Beahon said:
“I think there's a really interesting difference between American entrepreneurs and British. Americans expect themselves to be successful. I do think that's a big reason - that psychology, that mindset - behind why they create the phenomenal businesses that they do.
“In Britain there's often this mindset that ‘Oh you've had a setback. Yeah, we told you it is going to be difficult to disrupt Nike and Adidas. You were never going to be able to do that were you and now here's the evidence.’
“I just don't subscribe to that view. All of the setbacks are opportunities to learn, to get better - as long as you take them in the right way with humility. The setbacks are what you learn a lot more from. They'll make you stronger in the long run. There's no doubt about that…”
Tom Beahon also touched on what he had learned from Phil Knight, the founder of Nike:
“Phil Knight, the founder of Nike, wrote an amazing book - Shoe Dog. There’s an expression in that book - ‘grow or die’. His mindset for the first 20 years of Nike was ‘grow or die’. You have to grow, you have to be on offence, and you have to think about how you can make the market better or offer something positive, exciting, new and innovative to customers. If you're in a defensive mindset you can't do those things.
There is always a balance to that, for sure. Yes, you learn. Yes, you refine and improve. You bring in people that are focused on supply chain and operations and systems. Absolutely. But those things are not mutually exclusive to ‘We want to build a global brand and we're going to go where that opportunity takes us’. It's not a case of one or the other.”
There is one last quote from the podcast I want to flag. When I asked Tom Beahon if he had any advice for other founders or business leaders who are struggling to grow their business, he said:
“I'd say don't be afraid to pivot. I do meet a lot of people who had an idea, had some success with that idea and have done really well. But then the world changes, the market dynamics change, and they find it hard to change. That advice can be interpreted in many different ways, depending on the business and the sector. But not being afraid to pivot and go and do something different is something that would benefit a lot of scale-ups.”
If you haven't listened to the episode yet and want to hear the story of Castore in full then you can listen via Substack here, Apple here and Spotify here
Other stories that matter…
1. Cities across the UK have stagnated economically since 2010, according to a new report by the Centre for Cities think tank. The number of jobs has grown in all but two places - Aberdeen and Worthing - but productivity growth has been weak across the country. Productivity has grown by just 0.6 per cent in real terms compared to 1.5 per cent in the previous 12 years, the Centre for Cities said. The UK economy would be £88 billion larger - that’s 4.6 per cent in GDP terms - if economic trends before 2010 had continued. You can find the report here. In more upbeat news, growth in the UK economy should improve towards the end of 2024 as inflation eases and interest rates start to come down, according to forecasts from the EY Item Club. You can find that report here
2. Entrepreneurs in the UK are frustrated with HMRC for how long it is taking to access tax incentive schemes, according to a BBC story here
3. The Apple Macintosh was launched 40 years ago this month - January 24, 1984, to be precise. AFP has done a short but insightful piece on how Steve Jobs and Apple launched the device with an advert directed by Ridley Scott. The Macintosh then went on to revolutionise personal computing. You can read more here
4. The London Business School professor Lynda Gratton has revisited a collection of predictions she made in 2010 about how the world of work would change by 2025. The predictions included more flexibility for staff but technology causing issues with fragmentation and isolation. It’s a fascinating piece - and the predictions were prescient, as you can tell. It is refreshing to see someone look back at their own work. You can read more here
5. A piece from the Sunday papers which I enjoyed: The Sunday Times interviewed Shaun Edwards, who is the defence coach for the French rugby union team. Edwards was a star player in rugby league for Wigan before moving to union and becoming one of the leading coaches in the sport. However, despite his success, he has worked under a head coach for Wales and France and has never led an international team or worked for England. You can find the piece here
And finally…
Some app recommendations for you today courtesy of The Wall Street Journal, which has published a piece titled “Turn your devices from distractions into time savers.” We could all benefit from that…
The piece looks at how to do a “digital decluttering”. This includes cutting down the number of apps on your phone, reducing unopened emails and reorganising all the tabs running on your web browser.
Some of the apps it recommends are Blank Spaces - which reorganises your iPhone home screen so you only see the most important apps - OneTab - which transforms all the open tabs on your internet browser into one page - and Copy’Em - an app for Apple computers that allows you to save text and images that you cut and paste in one place.
You can find more details on these apps in the WSJ article here
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Best
Graham