Designing High Growth Creative Companies
efining a high growth company is a little tricky since there is no agreed definition of the term. David Birch initially coined the term in reference to a business that grows turnover of about 20% annually for at least four years starting at a base of 1 million USD. At that pace, the company would within 4 years double its revenues. The OECD takes a slightly broader approach and defines it as a firm of 10 or more employees that grows either its employees or its turnover by an average of more than 20 percent per year for 3 consecutive years.
In the private sector, interest in high growth businesses is at an all-time high. The reason for this is due to the following statistics. Whilst these companies represent a total of 5% of businesses, they drive 50% of employment growth. In the UK for example, high growth businesses represented 3.4% of the total yet generated 2/3 of the jobs generated. Don’t think it is possible to grow a business that fast while hiring, growing innovating and balancing day to day? one needs only look at the growth rate of Uber.
In the technology world, the development of a high growth company has been perfected. The private sector has become so specialized in the formation of these companies that they are almost being mass produced. From angel networks, to standardization of legal forms, the manufacturing line is made efficient and the players all know their roles. It does make sense as tech companies require fewer employees and are subject to faster and more agile growth. This is not to say that this is the rule and no exceptions exist. We-Work, despite its challenges on valuation, is relatively low technology but still a Silicon Valley unicorn. Similarly, though many startups are being nurtured through robust mentoring programs, expert incubators and generous venture investors, many still fail. The game is still a gamble.
The presence of growing tech expertise forming an educated labor force, as well as education institutions working to produce the next ‘big pocketed entrepreneur’, for purposes of boosting their standing, helps to reduce the gamble. For example, a current shift in focus toward tech oriented MBAs serves to show how all relevant sectors are working to grow the high growth tech industry.
Creativity and High Growth
The lean start-up by Eric Ries argues that a successful business must always be in the process of building, measuring and learning. Conducting low cost experiments to determine the way forward and quickly shifting based on the data driven market needs. This implies a company capable of quick recovery and a narrow focus. Simple enough when dealing with an application. A change of style is inputted in lines of code and applied globally. (This of course is an over simplification of the technical process.) Creative industries however are arguably more difficult at least the data shows. The number of venture funds investing in tech industries is lower than the number of firms investing in creative industries. Creatives here meaning companies working with creative partners i.e artists, designers, writers, photographers animators etc without a high technological emphasis.
This however is shifting. An analysis of 5000 high growth companies by sector shows that advertising and marketing is a close second to IT services in terms of revenue. The willingness of venture firms to fund ‘creative driven’ companies is also steady on the rise globally. It then doesn’t take a genius to put 2 and 2 together to make an argument that advertising and marketing if structured correctly can turn into a creative driven high growth company.
Structuring a Creative driven High Growth Company.
From the above, the following check boxes must be ticked to meet the requirements of a high growth company:
- Ability to increase employment by at least 20% annually for at least 4 years
- Ability to increase revenue by at least 20% annually for at least 4 years
- Ability to scale to meet the needs of a large market, and to have a large market
- Ability to constantly innovate and improve (internally or through acquiring smaller companies)
- Ability to relentlessly accept change and drive it.
- Different approach to funding.
Sounds simple enough when outlined like that. But as outlines in our previous blog posts, creative companies working with creatives must also factor in the idiosyncrasies involved in the creative process. The balancing act is even more complex but not impossible.
How would a fresh new player in the scene, boasting a wide variety of creatives from all over the world, constituting of every shade and speaking every tongue perform? A company like this as well as its competitors with a similar business model could easily check the box of scaling employment. This is done through lean mean management and a globally customizable creative partnership, allowing the company to meet the needs of their brand clients.
The challenge for such a company would not be meeting the needs of the market, creatives have for so long turned even the shabbiest product into a desirable. Do not believe me? Look at the sales for any celebrity endorsed product. Look at the beautiful products out there, engineers may have built it but a creative designer is behind what makes it a hype worthy entity.
Innovation too wouldn’t be challenging. Each campaign would be different as different people are employed and different demographics are tapped into. The only challenge to such a company would be acquiring the right entities or partnering with the right startups to meet the innovation quota and prepare for sustainable growth.
Another challenge would be funding, as creatives tend to be more fickle and not as narrow focused as business persons. Backing by the right investor/ mentor and stable leadership would allay fears by investors.
Needless to say, charting the path for high growth companies in an ethical fashion within the creative industry is exciting. Challenging but not improbable.
Grace Guyatu Diida
Growth and Strategy, INCMMN