Ireland’s challenge – it will take 200 start-ups to replace one Dell

3 Apr 2009

A former vice-president of Dell who coaches young companies has said the challenge Ireland faces to recover from the loss of Dell is impressive – it will take 200 start-ups to replace a single Dell – and the need to grow the indigenous sector is of key importance to the economy.

Speaking at this week’s NUIM Connect conference in Maynooth – which was attended by 200 SME owner managers and academics – Jim Humphries said the need to marry SMEs with new technologies and encourage more university spin-outs was vital.

Humphries is managing partner and head of the European practice of LGE Executives, a business of over 70 retired executives of global blue-chip companies, which helps and encourages new businesses to grow.

He has held senior management and executive positions at Dell and Wang, as well as a number of start-up companies. While at Dell, Humphries was responsible for driving the implementation of Dell’s Q.U.E.S.T. quality program across EMEA.

He also ran Dell’s Enterprise Operations for Europe, which grew to US$1bn per year, and also surged from the 13th position to the No 2 position in market share.

In addition, Humphries ran Dell’s European Value Added Services Operations, which grew from US$50m to US$250m over a period of two years.

“I was recently reading a study by Ernst & Young about where CEOs of multinationals were thinking of making investments for expansions and new facilities, and what shocked me was Ireland didn’t feature in many of the responses.

“It was also clear to me that eastern Europe was emerging as a considerable threat to Ireland. Foreign direct investment (FDI) is under threat, and there’s a need to grow the indigenous sector – this is of vital importance to the economy.”

Humphries pointed to research by the University of Limerick’s Professor Eamon Murphy that pointed to Ireland’s present challenge – “It would take 200 new start-ups to replace one Dell.”

Humphries continued: “The challenges to creating a new start-up are considerable. While we are seeing a significant increase in new start-ups, licences and university spin-outs, the challenge is we need to accelerate the number of start-ups.

“A key problem I see is the process and development cycle is very long. The key characteristics of change we need to bring about are speed, agility and risk.

“We also need to get our heads around the fact that the world doesn’t owe us a living. The challenges Ireland faces are the same challenges facing the entire developed world: ‘How do we create our own knowledge economies?’

“Having a good idea is a huge risk in itself, because there’s a large amount of similar research going on. Once you evolve and develop an idea, speed is of the essence because someone could get there before you, whether it’s a license, a patent or just getting to market. Also, a plan is only a roadmap of where you want to get to.

“Irish start-ups, particularly technology start-ups need to be agile. If you go in the wrong direction and find your way blocked, reverse gear and go in another direction. Don’t set a plan for five years that you’ll follow rigidly without listening to market advice,” Humphries said.

“Risk is another thing the Irish economy will have to get used to. We don’t like failure, but it’s an unfortunate fact of life. In fact, you’ll learn more from a failure. Failed businesses are traumatic events, people emerging from them will have valuable experience.

“Bureacuracy is not all bad, by its nature it brings fairness. But, overall, bureaucracy goes against the principles of speed, agility and risk.

“Existing Irish businesses that are fighting for survival, or new start-ups that want to stay in the game, also need to think lean. Every time you do something, figure out how you’ll achieve 25pc more at the same cost.”

Humphries said that firms queuing up for support from Enterprise Ireland need to get the benefit of a faster support process.

“Under the current support process, only 36pc of firms that apply for support funding qualify. A further 36pc go again for a second go, and eventually 72pc of firms get accepted. Enterprise Ireland employs a lot of people in the approval process, from university investigators, researchers and other administration staff.

“But if 36pc of firms get funded on the first pass that means that 64pc of the resources are wasted first time round. If we need to do things fast, we can’t continue to live with these processes.”

Humprhies called for better collaboration between university researchers and SME owners, and called for them to march in “lockstep”.

In terms of the current support and approval process for start-ups to get public funding, the model needs to improve, and Humprhies used the metaphor of Henry Ford v Toyota. “The Toyota model changed industries from batch to continuous flow. Continuous flow will always beat a batch process.

He said that state agencies are punching above their weight, but need to be acting faster.

“Enterprise Ireland will need to become a divisional organisation that moves faster. IDA Ireland will need to figure out how to put Ireland on rocket fuel.

“The challenge is that whatever we do today it has to be 10 times greater in two years time. It’s a big challenge that forces everyone to think differently.

“This is what big companies do to ensure survival for the future. When I joined Dell, it was a US$180m a year company. Eleven years later, it went to US$42bn.

“Ireland needs to think in these kind of metrics. If we need 200 spin-outs to replace a Dell, then the current targets aren’t going to get us there. This is a global environment, nobody owes us a favour.

“But we have the talent and the intelligence – we can lead the world,” Humphries said.

By John Kennedy