Many successful companies in technology and software have an ‘insurgency mentality’, where agility and a competitive attitude creates a disruptive business model – enabling them to succeed, grow and challenge the scale players in their industry.
But this growth, in turn, leads to scale, which can smother the very characteristics that made the business successful in the first place – obstructing innovation, creating an environment where it is harder to spot talent, harder to stay close with customers and, crucially, leads to a dilution in the company’s founding culture.
This can be described as the ‘Growth Paradox’, where growth creates complexity, but complexity kills your growth.
At this year’s Forum, over 40 CEOs and Chairs from Hg’s portfolio came together across two days to speak to each other, listen to expert speakers and to discuss this very issue – how to scale, how to scale fast, and how not to sacrifice the very qualities that got you there.
Maintaining the Founder’s MentalityJames Allen, co-author of ‘The Founder’s Mentality’ spoke to the group about how to maintain competitive advantage in a world of accelerating change. He talked about sustaining this mindset, maintaining the core strengths and values that helped them succeed and grow. To help reinforce a business’ insurgency mentality, James suggested that founders ask themselves this question – would you, as a 23-year-old, join the company that you’ve built today?
A bias for fast action – how to continue to implement strategies that are quick and agile to improve your businesses.A panel comprising Carl Shuker (A-Plan), Chris Bayne (Access Group) and Thorsten Schliebe (MediFox) discussed this theme and gave practical examples of how their businesses had implemented small scale strategies to improve specific functions within the company. Real life case studies came under the microscope during the session – including bringing a new product to market, integrating an acquired business and implementing initiatives to maintain an honest and transparent company culture.
Arrogance is expensive for a company – never believe you know more than the customer.The next panel saw Gunther Thies (STP), Craig Rodgerson (Foundry), Claudio Corbetta (Dada) and Christophe Vanackère (Trace One) discuss strategies they had applied over recent months to ensure they were staying close to their customers and suggested other methods to encourage customer feedback – ensuring they were up to date with what customers really want from their services.
Preventing the “Bozo Explosion”Competing against the large tech companies for talent was a topic that Agnes Greaves of the UP Group addressed – giving practical advice on how to maintain talent while growing your businesses. She updated the group on some of the work currently going on in Silicon Valley, how they are tackling this problem, and acknowledging the rise of the CPO (Chief People Officer) role within companies.
Don’t be afraid to hit the reset button – you learn far more from mistakes than you do from success.Jim McGeever, President of NetSuite, gave a fascinating account of his company’s rise, most importantly, describing the ways that they failed along the way, and how they learned from these mistakes to build a true subscription, recurring revenue-based model. The key takeaway concluded – there’s always something you can do better and there’s always someone after you.
The Rule of 40David Toms, Hg’s Director of Research, showcased how growing businesses should ensure they implement the ‘Rule of 40’ – a rule directed at SaaS businesses that suggests your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. Or if you are growing at 40%, you should be generating a 0% profit. When analysing all publicly-listed tech companies across the globe – David showed one commonality amongst those who manage to achieve the rule of 40 – they all have subscription models.
Organisational effectiveness – the intersection between creating great software companies and creating shareholder value.Ann McCloskey discussed the importance of organisational health, where companies globally are losing billions of dollars because only a fraction of their employees are truly engaged and truly productive. She discussed her framework for avoiding this trap, by ensuring reinforced clarity, aligned and cohesive leadership, organisational clarity and consistent messaging. Accompanying this topic were case studies from Stephen Baxter (JLA) and Geoff Love (Commify) on how they’ve built organisational effectiveness across their businesses.
Stay hungry, stay paranoid – if it ain’t broke, consider breaking it.Rasmus Ankersen, author of ‘Hunger in Paradise’, showed how organisations can stay competitive and continue to grow once they’ve achieved scale – giving practical examples from the world of sport and business. Rasmus warned us against the common biases of large organisations including: outcome bias (wrongly attributing an outcome to an input), talent bias (finding ‘talent that whispers’, not just ‘talent that shouts’) and how to avoid looking at lagging indicators of success (which can a more comfortable way of assessing success) and promote looking at leading indicators (a tougher way to look at the world, but ensures the company is prepared for what’s down the road).
During another highly engaging forum, Hg demonstrated the value derived from connections made between peers, and discussions across the range of topics.
The topics discussed were supplemented with examples of how Hg’s Operations Innovation team have helped tackle some of these issues at a number of companies across the network,
Until next year, portfolio leaders will continue their discussions on Hg’s Hive platform – our newly launched, trusted, online environment for portfolio collaboration.