Corporate Accelerators and Their Advantage | Por @OpenEXO
The advent of disruptive technologies has produced a discrepancy between linear growth organizations and exponential organizations. Typically, most leaders of a Startup dream of turning their organization into a large enterprise, even if they don't know how to achieve it.
The growth of a business can adopt different models. For example, most established organizations today choose to grow through mergers and acquisitions (M&A), which brings with it many well-documented challenges in post-merger integration and rarely moves to the company's boundaries . Instead, they opt for organic growth through business development, primarily in the form of new products for existing channels, but which usually represents only incremental growth for the company's core.
We can speak of two models: linear (non-scalable) or exponential (scalable). From a business point of view, understanding scalability is the capacity of a company to multiply its revenues at speed or in a proportion greater than its costs while maintaining its capacity to operate efficiently and generate value.
What is the linear model?
It is a business model where the level of revenue is proportional to the level of costs, so if, for example, infrastructure and personnel are increased to increase revenue, costs will increase proportionally. Therefore linear growth is achieved, as is the case of many companies or startups globally. However, it is a model that involves significant investments but carries the risk that, if for some reason revenues decrease, the same will not happen with infrastructure and human resources costs, which can lead the company to bankruptcy.
The main characteristics of this type of company include a hierarchical, military-type organization, with a system in which authority flows from top to bottom in a linear, unambiguous, and rigid manner:
- They are driven by financial results
- Their thinking is linear and sequential
- Their strategic planning is largely an extrapolation of the past
- They are intolerant of risk, inflexible in their processes, and have many employees.
What about the exponential model?
It is a model in which the level of revenues has the potential to increase at a much faster rate or in a much higher proportion than costs, increasing the profit obtained for each additional unit produced or sold. While revenues increase exponentially, costs grow linearly and are independent of the level of sales and production.
In addition, this growth model usually allows serving an indefinite number of customers with relatively low capital investments and efforts since they do not depend on time or inventory and very little or nothing on infrastructure. This is the case, for example, with SaaS (software as a service) software, which, once developed, is marketed and involves little or no new costs each time it is sold to a customer.
Exponential organizations are generally based on the digital world and information technologies, and their characteristics include: having a structure suited to deal with today's fast-paced, nonlinear, web-driven pace; they achieve geometric results thanks to the duplicative exponential patterns of information-based technologies; they leverage external resources to achieve their goals, with few employees and small facilities that allow for great flexibility; they leverage virtual and physical communities for everything from product design to application development; they rely on existing, and emerging infrastructures rather than owning their own; and they grow at an incredible rate because they are not in the business of taking ownership of their market, but rather using it for their purposes.
For clarity: a linear growth company invests $1,000 to earn $10,000, and to earn the same amount, it has to invest another $1,000; the exponential growth company invests $1,000 to earn $10,000, but to earn the same amount it only has to invest $100.
Exponential companies are Hi-Tech organizations whose advanced characteristics and capabilities lead them to focus on selective business and industry problems. Thanks to this technology it has been possible to reinvent basic processes and business models & change the behavior of society toward existing services and products, and, consequently, modify the way of life.
High-tech companies are investing in and reconfiguring their innovation strategies toward deep technology, which is a technology focused on solving humanity's problems by addressing social and environmental issues; although it is revolutionary, game-changing, and disruptive, it takes a long time to reach the market and requires significant capital investments.
They also consider the generation of value and the proximity between all the actors involved, from the creation to the final recipient of the product or service, in what various authors have studied as the quadruple helix environment. The fourth helix model not only focuses on actors from academia, government, and industry but also recognizes the growing role played by civil society. Although there is no consensus on what comprises the fourth helix, most researchers tend to address the fourth helix in terms of civil society, consumer, and end-user.
It is a perspective understood as a network of relationships. Public and private organizations interact in value creation processes to transform various inputs into valuable products for themselves and others.
Accelerators
Many successful Startups act as exponential organizations, meaning that their performance is at least ten times that of their peers. This term was coined by Salim Ismail in the book "Exponential Organizations: Why Startups Are Ten Times Better, Faster, and Cheaper Than Yours."
Having a large customer base or good revenues is no guarantee that a company can succeed. The difference is in the drive for innovation to move it towards exponential growth. That is, connecting strengths and resources with external innovation to avoid becoming a victim of digital Darwinism.
While large companies have valuable resources such as infrastructure, brand reputation, business relationships, experience with regulators, scientific expertise, process excellence, and access to data, Startups and exponential organizations can offer those companies: ideas, organizational agility, willingness to take risks, and the drive to scale quickly. That bridge between large enterprise and Startup innovation is known as a "corporate accelerator."
An accelerator is a company or program that invests in and supports one or more Startups with mentorship, office space, expertise, and additional resources; basically, everything that helps startups get off the ground and accelerate their growth. It helps develop a new environment to establish new rules, proactively spot disruptive ideas, and a place where those ideas can be protected from the organization while being supported by it. It does so in a cheaper, faster, and more flexible way than research and development.
By investing in and creating scalable early-stage companies and gaining access to exponential new technologies, the accelerator creates a great economic benefit and, at the same time, fosters entrepreneurship and entrepreneurial culture within the company while helping to promote the company to be innovative.
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