By Philip Letts, CEO, Blur Group
More than a decade into the world of digital business and following a deep global economic recession, organisations are discovering new ways of operating that challenge many long-held assumptions. We are witnessing the rise of slimmer, smarter businesses that operate in new ways, taking advantage of new collaborative technologies and a globally available resource base. These organisations are ‘just big enough’, highly focused on delivering value, and use data to drive insights and innovation. Some of these businesses were start-ups not that long ago and some are long-established, but all share a new mindset and belief that growth does not mean the number of people you have in your organisation, but the value you create. We call these organisations, Size Zero Enterprises.
Maximising the value of your business is all about doing more with less. An example of a Size Zero big enterprise is Amazon, who realised from inception that the value of a retail business was not in its stores, but in its ability to manage inventory, not all of it within its own facilities, and built a global retail giant with no physical stores. As a result, Amazon’s revenue per employee hit $855,000 last year compared to a store-based operation like Gap which managed a mere $108,403.
Making your business size zero is not about slashing headcount, rather it is about deploying people appropriately and using technology to automate and manage, reducing real estate and fostering creativity at every level of the organisation.
An organisation may need 100 people working on a project, but do all these people need to be employees? Outsourcing projects or aspects of projects to service providers or agencies can typically save up to 30% in overheads, from office space through to national insurance costs. In his book on the 10 Principles of Open Business, David Cushman argues that for every 10 people working on your business only one should be a full time employee.There is another compelling reason why outside resources should be embraced: statistically, the bigger your company gets, the more average it will become. To counterbalance this unfortunate side effect of growth, new thinking from outside service providers can be invaluable.
While many businesses choose only to outsource services that they don’t have in house expertise on, the question when choosing what to buy and what to produce should be what costs less, improves quality or ultimately increases value.
The key to maximising value is minimising outlay. It is not about downsizing, it’s about re-shaping to create value. Slimming down, speeding up and becoming more intelligent.
This is where technology comes in. The latest technology can have a great impact on efficiency and productivity, however, not enough companies, especially in the UK are investing enough in R&D. The US puts us to shame. They invest some 2.79% of GDP, but in the UK just 1.7% of GDP is spent on research. Clever business leaders are more often starting to recognise the potential of Big Data, using data to analyse and identify efficiencies, and subsequently increase value.
One area technology can really help businesses to cut costs and increase value is office space. Business owned property is more often a burden, not an asset. We can see the evidence for this by the growth of short term rental and the shared workspace business. Companies are increasingly faced with crippling rents and taxes that add no value to anyone. Technology has given us cloud computing, making location largely irrelevant, and reducing the need for an oversized expensive office.
Twelve months ago we relocated from our London premises and moved 150 miles west to Exeter. This move saved around $240,000 on property costs and the staff found their salaries went a lot further in the local economy. We are now on the journey to become truly Size Zero with every job, task or project being posted on to our exchange. The business has itself grown 5 fold in revenues with zero increase in headcount.
The rules of business, fashioned centuries ago during the industrial revolution, are there to be broken. The “we’ve always done it like that” culture is being eroded by technology, globalisation and the super-slim businesses it has helped create. Making radical changes to the way your business operates isn’t going to happen overnight, but it does start with a commitment to change.