Start-up success demands an ability to surf the megatrends that are re-making the global economy
Shell oil started out as a shop in London selling exotic seashells. Berkshire Hathaway started as a merger of a textile mill with a spinning association. Never more so than now, to survive and thrive, businesses have to constantly reinvent themselves, often in unexpected ways. In this fourth industrial revolution, the pace of change is relentless. To meet the challenge, leaders need to make bold, brave strategic decisions that fundamentally reinvent their companies.
So argues Professor Peter Fisk in Business Recoded. If you are investing in a new company, starting a business of your own or perhaps creating a new business line in an existing organization, what does Fisk – who also runs a start-up accelerator – have to say about how to increase your chances of success?
Fisk’s first pointer is that your business must have a driving purpose. People – both customers and employees – expect you to do more than just make a profit; you must put more back into society and the planet than you take out. According to analysis by Corporate Board, purposeful companies outperform the stock market by 42%. They appeal to customers who pay more; they attract the best talent; and they have investors who support them in the long term.
Second, your business strategy needs to align to the wave of at least one ‘megatrend’ – the huge social, economic, political, environmental or technological trends that are driving change in global markets and our everyday lives. Examples today might be the drive for ecological renewal, the rise of Asia, or the development of cognitive tech. McKinsey claims that riding the right wave of change is the most important contributor to business results: a company that finds its wave is four to eight times more likely to be a future top performer.
You will need to be innovative to stay relevant and surf the trends. According to business thinker Larry Keeley, who surveyed innovation activities in 1,000 large companies, there are many different types of innovation – but some have a much greater impact than others. Keeley found that almost 90% of company time and resources went into product innovation, even though such efforts generally made only incremental improvements, were quickly copied by rivals, and offered little financial return.
The three strategies that had the greatest impact were bolder and more fundamental. First, innovate around your network – how you connect with others to create value – whether your customers or suppliers. Network effects increase exponentially as each additional node is connected. Second, improve your profit model. There are many choices. Epic Games’ online multiplayer game, Fortnite, uses a ‘freemium’ profit model: the basic game is free to play, but additional or premium options carry a charge. Applying a profit model that has proved successful in a different sector can work well. Third, make improvements in customer engagement – for example aligning products and services to your customers’ broader aspirations. This can reveal demand for new and profitable services beyond your original remit.
Some of this may seem obvious. But how often are these points ignored? Too often, future change is kept for an ‘away day’ once a year, and soon forgotten about because it is too difficult to combine with keeping the business ticking over. In reality, few leaders show an appetite for really bold and fundamental change, unless the organization is at risk of imminent collapse. While Fisk’s book sometimes feels rushed and a little under-written, it is full of interesting ideas on how to become more agile, responsive, and above all, more courageous.
Fisk’s call for action is important because too few businesses have the capability or appetite for surfing the megatrends that are reshaping the global economy. As the waves of change break ever faster, ‘business as usual’ will no longer be enough to stay afloat.