Chair
- Sarah Webb, Partner, VWV solicitors
Panellists
- Phil Parry, Aerospace Business Development, Impression Technologies
- Omair Mahmood, Founder of PhosCycle
- Richard Stobart, Founder of Char.gy
- Chris Weir, Midlands Aerospace Alliance
- Steve May-Russell, CEO, Smallfry
Great market opportunities exist for businesses that adapt their existing product or service in a new context to solve a challenge in a new sector. This session heard from companies that have innovated into a new sector and a discussion followed with an expert panel and the audience on the cultural, regulatory, data and other barriers that need to be overcome to realise such opportunities.
After introductions, the session heard from three businesses that had successfully pivoted into new sectors. Each had very different drivers and routes into their new market, with various obstacles to overcome along the way, but ultimately each company was profiting and growing as a result of adapting into a new sector.
Phil Parry explained that Impression Technologies had initially developed an aluminium stamping technology with Imperial College 1990s that allows cost-saving and light weighting of components for application in the automotive sector. They successfully supply about 25 components to various automotive companies. About five years ago the investor-led company was looking for new market opportunities and targeted aerospace with its £4bn UK market. Phil was brought in, as an expert in aerospace, to enable them to make the transition. They had two principle challenges to juggle – to identify components to target and secondly to identify a manufacturing partner, initially not wanting to disrupt their automotive manufacturing operation. Currently, after further R&D, they are prototyping their first complex aerospace part with an aerospace OEM and are expecting it to be on the market this year. This work was enabled in part by the PIVOT project, run by the Midlands Aerospace Alliance as part of the WM Innovation Programme.
Omair Mahmood recounted that PhosCycle is part of the industry disposing of the 4 million fire-extinguishers that must be replaced in Europe each year. Of all the elements to dispose of, the white powder was the most problematic, resulting in most businesses simply stockpiling it. Phoscycle realised that there was a new market opportunity as the powder contains valuable materials, including phosphates and sulphates, that can be re-purposed. Without appropriate expertise, Phoscycle both recruited engineers and collaborated with universities to develop and patent a process for recovery within four years. They are now the only company recovering these materials and successfully selling them into the agriculture market as a value-added sustainable fertilizer.
Richard Stobart had previously founded and run a digital services agency working predominantly on large contracts with the public sector. Workload had peaks and troughs, and returns were marginal, so managing staff numbers was a major, ongoing challenge. The solution they sought was to develop their own products, so in-house brainstorming led to three ideas to pursue, one of which was development of lamppost car chargers, leading to the founding of Char.gy. This turner out to be fraught with challenges, such as council ownership of lampposts and their inertia and turning from a software to a hardware company, but they have now got to the point of having installed about 1000 points (in London and Coventry mostly) and are about to access their third round of funding (first from friends and family, second and third from an institutional investor).
The remaining panel members were experts in Intellectual Property (Sarah), Business transformation (Steve) and Supply Chain culture (Chris), and quizzed the three business case study speakers on the challenges they encountered in moving from one sector to another.
Some of the key points were:
- The Patent process is tough and costly, but essential to protect your product or process. For PhosCycle, as a small business, a patent attorney with experience in a relevant industry and used to working with SMEs was critical in getting them through it and future-proofing the protection, for Impression Technologies they recruited an IP person as they are continuously evolving products. However, businesses also need to consciously decide which IP battles they will be prepared to fight – some may simply be too costly.
- Finding and persuading the key person/ people with the authority, the money and the need to enable a company to break into a new sector is critical. If this requires investment, it is likely to be the chief executive to get on board. If there is development required a champion amongst the technologists/ engineers that gets what you are trying to achieve is key.
- Awareness of different cultures in different sectors is important as a move is made, though cost is likely to be a major driver in most cases, and their may be very different lifecycles, eg software versus hardware development.
- Moving from an idea to understanding the need/ demand and specifications for a new product/ service takes time and investment. Using networks, collaboration and other sources of information (even YouTube!) to get expert inputs can help to understand whether the market and technology all stack up. Feasibility funding such as InnovateUK Smart Grants can help with resource and validation of the idea and development of processes and prototypes.
- Understanding the market being moved into is critical. If the market is already served (ie not a completely new market), at a minimum your product or service must perform as well as the existing offer, but it must have a value add such as being a more sustainable product that will appeal to at least some customers.
- There is a balance in ensuring the original business is not drained or weakened by the new business, though the original business may provide equity to enable additional investment and the existing business infrastructure and team can accelerate the new business, eg providing offices and admin functions initially. Likewise, the new business is likely to take up more time, so you need to ensure you have a good team left in charge of the original business if it is also to continue to flourish.
- Transitioning from one sector to another can really be worth it, but it is tough and not to be taken on lightly. Once a transition is made, it is preferable to consolidate and grow in the new sector than look for yet another market.
The next topic was if there is a formula or steps to follow for success. There was an agreement that there isn’t a formula, but it is important to balance looking at the bigger picture and focusing on the little things, and taking little steps, one thing at a time. And that in the end it’s up to you as an entrepreneur to make the decisions, which might not always be the right ones, so perseverance is important. Another point was the importance of working with the right people, partners, and professionals. And a suggestion that the best education is to learn from not only your own mistakes but also from those of other entrepreneurs. And to seek people that are honest enough to tell you there is no magic formula, that you have to be prepared to adapt and change.
Then discussion moved on to ecosystems and experiences of accessing support. There was recognition of the value of communities like Birmingham Tech for founders with little tech expertise, and the importance of embracing the ecosystem. However, it was recognised that while Birmingham is great for start-ups there is not enough support available for scale-ups. Also, because it can be lonely life for an entrepreneur, it’s important to be part of a community, and to get all support that is out there. Even if it is hard to find time to get out there and access support. In addition, Birmingham is a friendly place with great support, networks, and a strong community. So do ask for help and you will most likely get good recommendations.
The last theme was on underrepresented founders and talent. One issue the panel brought up was on education, and that there are not enough skilled people to support all the entrepreneurs out there. There is the need to start giving people different growth paths, and to get mentorship at a young age. Continuing on the question of a skills gap, there was a point raised about entrepreneurship being a career that doesn’t necessarily need to go down the traditional education routes. So, we should look beyond the traditional training and reach into the communities and give people the skills and the confidence they need to take the next step. Furthermore, it is important to get out to the communities, not only to stay in the city centre.
The chair moved back to the audience, and a question was asked about where would a business that was new to the ecosystem go for support, and what would be the first port of call. The panel agreed that it is not easy, that as an outsider there is so much information out there that it is overwhelming. Which raised the issue of a need for a resource, or tool to get all information together in one place. However, there was a reminder not to forget that the Growth Hubs are well connected and a good place to start.
Final top tips from the panel:
- Phil Parry: Don’t try to boil the ocean, be focused initially on where you want to go. Once established you can be more opportunistic.
- Omair Mahmood:
- Don’t try to do everything yourself, seek advise and build a team.
- Public funding and university collaboration to validate your product can give confidence to investors.
- Sarah Webb: Keep a log of all your IP and recognise its value.
- Chris Weir: Research your new sector thoroughly, it may not be as easy as it looks.
- Steve May-Russell: Remember you are not your customer
- Richard Stobart:
- Build a diverse team bringing complimentary skills.
- Validate everything as you go.
Author, Dr Pam Waddell OBE
Director; Innovation Alliance for the West Midlands
Slingshot