Defining a 'High-Potential SME'

Defining a ‘High-Potential SME’

I am not usually one for reading notices or advertisements but the following Article grabbed my attention because I perceive myself as a Lean/Frugal Collaborative Innovation evangelist with more than a passing interest in its role in small and micro enterprises (social or commercial).


The article promotes a workshop for SMEs interested in learning more about Horizon 2020 and its value in supporting collaborative innovation between partnering European SMEs.


Perhaps I am nit picking but two words jumped off the page for me when I read it.  (See: )


It was the last two words at the end of the following extract just before ‘SMEs’.  Here’s the context … “Provided with about €3 billion in funding over the period 2014-2020, the SME Instrument helps high-potential SMEs …”


For a moment I thought I could smell something a little off … so I began doing some googling on the EU commissions website because while I had often encountered the EU definition for what is an SME, I had never encountered a definition for a ‘High-Potential SME’.


Despite having posted the results of my rudimentary research as a comment to the article, I thought I would share the extent of what I had found in the hope of encouraging you to share your understanding with me of what the EU commission maybe defining as a ‘High-Potential SME’.


Let me set some background for you first however …


What is an SME? …

“The main factors determining whether an enterprise is an SME are:

  1. Staff headcount and
  2. Either turnover or balance sheet total.”1


How Low Can You Go?

The smallest of the Small to Medium Enterprises have a ‘Staff headcount’ of less than 10 people, a turnover or balance sheet of less than 2 million.2


Why SMEs? …

“Small and medium-sized enterprises (SMEs) are the backbone of Europe’s economy. They represent 99% of all businesses in the EU. In the past five years, they have created around 85% of new jobs and provided two-thirds of the total private sector employment in the EU. The European Commission considers SMEs and entrepreneurship as key to ensuring economic growth, innovation, job creation, and social integration in the EU.”3


What is a ‘high-potential Start-up?’ …

“HPSUs are start-up businesses with the potential to develop an innovative product or service for sale on international markets and the potential to create 10 jobs and €1m in sales within 3 to 4 years of starting up.”4


Of the 99% SME backbone, the main spine of which “In 2013, the European Commission stated in Europe, over 92% of all enterprises are micro-SMEs and employ fewer than 10 people.”.5


Keeping the 90% micro majority and my own research into “How Can Innovation Work For Micro-Firms?” in mind, small SMEs “… often lacking an ability to marshal time, resources, skills, expertise and cash flow required to breach the barriers to innovation. Micro-firms often encounter more numerous, higher and more difficult barriers than those confronting many larger SMEs”


So it can be difficult for SMEs to embrace an opportunity to collaborate and innovate.  Even the smallest of barriers can look very tall and insurmountable when your the smallest of the SMEs.  SMEs can be hyper sensitive to perceived barriers of words such as ‘high-potential’ which is (in this context) qualitative rather than quantitative.


SME’s require clear measured quantitative information from which to make informed often high risk business critical decisions.  These decisions must (for many) be taken in advance of beginning a long distance journey into the great unknown.  For most, collaborative innovation is to explore the unexplored areas they have never travelled into, experienced or explored in any way before and are often more used to encountering negative barriers of red tape rather than positive supports of shared resources and funding.


The EU has repeatedly clearly defined (and redefined) what an SME is …


My question relates to who, how, what and why have the words ‘high-potential’ been prefixed to create a new type of SME … a ‘High-potential SME’?


I just wondered if anyone could help me to best understand and define a measure of what a ‘high-potential SMEs’ as mentioned in the above article looks like? … (because it sounds like undefined qualitative selection (aka exclusion) criteria to me)




Bottom line … As I reflect on the limited time and resources SME’s have to attend such valuable opportunities to network and learn … we should avoid creating barriers to collaborative innovation … after all … you must first build, measure and then learn (E. Ries, 2013) in order to truly understand what is a quantifiable ‘high-potential’ collaborative innovation.


Remember, In this case, it is the sum of the parts that truly create the possibility of a ‘high-potential collaborative innovation’ and not a single (high or low potential) SME.


Just my 2 cents …









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