Instagram, a company with 13 employees was recently sold for $1 billion. At the same time Audi announced it was buying Ducati, a company with nearly 1,200 employees throughout the world that generated well over £100 million in revenue last year and a brand recognised globally since 1926, for almost the same price.
Questions were raised over the Instagram sale, did it signal the start of the digital boom or the peak of it? Who will be next? But for me the most interesting aspect of the sale was how such a small company was able to create a business worth that much money.
At PHA we worked with the startup company Floxx Media Group recently. Based in the heart of the Silicon Roundabout region of London and under the stewardship of 23 year-old CEO Rich Martell, working with the client was an enjoyable and enlightening experience as it allowed me to observe how these new breeds of companies function as businesses compared to more traditional corporations.
I was struck by several things, firstly the work ethic. These companies don’t do 9-5, the office is often accessible 24 hours a day and the approach is that the staff can come and go as they please as long as the work gets done. At a glance this might be disregarded as having a negative impact on productivity but I would argue the opposite. It promotes trust in the staff and also allows them to work at times when their creativity and energy levels are at optimum levels whilst also allows them to take a break if they have commitments in their private lives or need to simply take a break and come back fresh. It requires discipline to manage this approach but is an effective one that matches the needs and demands of the digital world which is more 24/7 than the business one.
Most striking for me was the fearless approach to business. For many entrepreneurs and startups, the first thoughts are on how to make money. Again this is different with many digital startups, the approach is all about designing a product with stickiness that will attract and maintain users meaning making money comes as an afterthought. The benefits of this are that it allows a company to concentrate its efforts on developing the very best product possible without restraints – hence Instagram was able to function with just 13 staff as it did not need whole teams for sales, marketing etc. Equally it means there is less on the line if a product for one reason or another is not working. An idea can be scrapped and a new one started. Instagram was not the first idea from their developers, but rather the result of several that were scrapped and improved after lessons were learned until the best possible product was built. When you have a product being used by millions of people throughout the world, there will be plenty of people banging on your door suggesting ways you can make money out of it so there is no need to worry until then.
Obviously the various approaches from digital startup companies cannot be applied to any business for functionality reasons but the business world would do well to study their approaches and theories and think about how they could adapt them for their own companies. After all, if 13 people are creating a business worth $1 billion, then they must be doing something right.