Large organisations may have the money and manpower to develop new products and systems, but the reality is that small firms have long been acknowledged as the innovators. And increasingly they are not just coming up with forward-looking ideas; they are also brokering deals between much bigger businesses
Meyer believes small firms are capable of the sort of innovation that eludes large corporates because they are not tied up in bureaucratic red tape and because entrepreneurs keep on innovating. The concept of small companies acting as the economy's glue is not a new one. Charles Handy, the author and leading management thinker, explores this idea in his book, The Elephant and The Flea.
Handy argues that elephants are the large organisations of business and government, while the fleas are the technological start-ups and the dotcoms. It is the fleas that usually originate ideas, while the elephants prefer to pick up fresh innovations once they have been shown to work. Anecdotal evidence suggests that the pace of deal brokering by small businesses is gaining ground.
Director talks to senior directors at three companies that have acted as the catalyst for deals between large organisations.
Who Peter Whent
Position Chief executive, EGS
Sector e-procurement specialist
Helping to strike deals between large organisations is the raison d'être behind EGS. Last year, the e-procurement firm processed some 350,000 transactions, with a combined order value of almost £1bn. That figure is rising as increasing numbers of public- and private-sector companies sign up to use the company's services. EGS, which was set up in 2000, specialises in spend management, which allows firms to streamline their purchase-to-pay cycle. The technology the company uses means the previously time-intensive process of invoicing and chasing payments can be managed more efficiently.
Peter Whent, EGS chief executive, says the vision from the start was to do deals with big companies, and help them to work more efficiently with other large corporates. EGS now has more than 40,000 users across 150 organisations. Key customers include county councils, which are saving hundreds of thousands of pounds every year by using EGS to pay other large companies and suppliers as well as process invoices.
The figures are impressive: one major customer expects to save £500,000 and get a return on investment within a year by introducing
e-invoicing. Another has reduced its processing cost from £60 to £26 for each transaction, and this is expected to drop by another £10.
For customers such as Essex County Council the savings from streamlining its processes for dealing with other local authorities, government employees and suppliers are obvious. And this raises the question, why did it take a small company and a new entrant into the market to revolutionise the system of spend management?
Whent says the answer is simple. EGS has remained small, which allows it to innovate, adapting the core product when market conditions dictate and producing bespoke solutions for customers. "Small companies are the catalyst," he says. "All the great innovations start from small firms. We see ourselves as innovative thought leaders, entrepreneurial and risk-taking to make the service better for our customers."
Like most small companies an element of luck was needed before EGS got its big break. That good fortune was winning a contract with IDeA in the public sector. The IDeA:marketplace is the largest UK local government e-commerce platform, allowing councils to trade with existing suppliers and leverage their combined purchasing power to save money. "We became the preferred supplier to local authorities," says Whent, who joined the company last year. With one contract of that size in place, the success of EGS grew as customers realised the true cost of inefficient procurement. With annual revenues of £2.5m and employing 22 staff, EGS remains a small business but punches above its weight.
Whent has plans to expand into the social housing sector, where EGS has already had early success. The company is well positioned to grow through the recession. "I think innovation alone will make us successful," he says. "We have the ability to save people money. The internet has all been about how you make more money, but in the last year or so it has become about how do you save people money."
Who Alastair Lukies
Position Chief executive, Monitise
Sector Mobile banking
Alastair Lukies is proof that successful entrepreneurs don't give up, especially if they have devised a way of transforming an industry. In 2002, he stumbled on an idea to connect the banking world with the mobile phone sector so that customer payments could be made.
"It was more serendipity than strategic genius," he claims. But that has not stopped him building Monitise into an Aim-quoted company that has signed up all the UK's leading banks and mobile phone operators and is now expanding internationally.
Despite being a start-up with no track record, Lukies and his Monitise co-founder, Steven Atkinson, succeeded where the mobile phone industry had failed. The telecoms operators had come up with their own
version of a mobile phone payment method, but the banks did not have trust in the system. Lukies tackled it from a different perspective and set about getting the banks onside.
Lukies was convinced that his idea, and the technology that underpinned it, would be accepted by the banks. But he admits he underestimated the complexity of dealing with the lenders and navigating their security requirements. He points to one bank that took three and a half years and 279 meetings to convince. Even so, he says: "I am a passionate believer that great ideas will come from small companies rather than big ones because they need their own life to breathe. And then they need scale."
And that is where big companies come in because they can transform innovative ideas or products if they recognise a concept is good and that it can be scaled. Monitise was incubated by IT giant Morse, which gave it access to a solid track record, financial capital and, crucially, the credibility needed for talks with the mobile operators and the banks. "We were clever with the capital-raising," says Lukies. "We became part of a £300m company with public shareholders. Companies can fall down if the structure of the company is not set up to do business with big organisations."
Lukies cultivated a contact at Link, whose ATMs were used by the High Street banks, and this gave him a head start in persuading the security- conscious banks that they could work with mobile phone operators. He describes the process as "beyond our wildest nightmares", but says Monitise eventually had its breakthrough because the business was small.
"Small companies can reinvent themselves and be more flexible. It does not mean you always win, but it means that you come at things from a different angle," he says. "We are the glue in the middle [of the banks and mobile phone companies] and have to be adaptable."
The Monitise service is marketed as Monilink in the UK and around 60 per cent of bank customers have access to the service. Banks involved include HSBC, NatWest, Royal Bank of Scotland, Lloyds TSB, Alliance & Leicester and First Direct. Juniper Research predicted that more than 41.4bn financial transactions will be carried out by mobile phones by the end of 2011. Monitise is taking advantage of this growth by improving the UK operation as well as growing overseas. It already has a joint venture in the US with Metavante and is moving into East Africa and Asia.
Who Nat Billington
Position Managing director, Map of Medicine
Sector Healthcare innovation
At the end of last year Intel launched a care management tool for healthcare professionals who treat patients with chronic conditions. The Intel Health Guide marked the company's first foray into a new category of personal health systems. But even though Intel is a global technology giant it took a small company, Map of Medicine, to get the Intel Health Guide to be adopted within the NHS.
Map of Medicine, which is now owned by US corporation Hearst, was originally created as a tool to improve dialogue between primary and secondary care specialists. Like many cutting-edge innovations in the medical world, Map of Medicine was started by a group of clinicians. It
began life when a collaboration between the Royal Free Hampstead NHS Trust in London and UCL BioMedica, University College London's commercial arm, established a development team, Medic-to-Medic. Managing director Nat Billington, who joined Map of Medicine in 2003, was tasked with developing the research prototype into a commercial product. "There are many examples of where technology has worked well with clinicians," says Billington.
Map of Medicine is an online clinical knowledge source that helps healthcare professionals plan the best treatment programmes for patients. Billington explains that the quantum leap came when the NHS noticed what the company was developing and Map of Medicine started to partner it in specialist areas such as cancer care.
Map of Medicine's conversations with Intel began two years ago. "They were developing a product for supporting chronic conditions in the home," says Billington. "Intel recognised there was not any company that was focused on creating best clinical practice information—they are focused on developing the product."
Without the clinical knowledge provided by Map of Medicine, Intel would not have been able to get its product to market. Intel's Health Guide is designed to enable patients to monitor their own condition at home, using information given by their doctor.
Claire Medd, clinical specialist at Intel, says that the company spoke to Map of Medicine because it wanted to seek out credible clinical input. It then used Map of Medicine's existing pathways in the device. "One of the key aspects of the Intel product is that it enables health commissions to design their own care plans for patients," she says. "For example, they can decide what vital signs they [patients] should be looking for and put thresholds on things such as weight. The tool allows nurses and doctors to do what they want with patients. We wanted to give them a template and that is where we talked to Map of Medicine.
"Map of Medicine is recognised for the delivery of evidence-based medicine. If there had been a bigger company with the same capabilities we would have considered it. But it does not exist."
Map of Medicine is well positioned to grow. Billington is in talks with other healthcare bodies around the world. "It is something that is transferable," he says, and is not confined to the NHS.
