What Should A New Business Look Like Today?

Tuesday, 7.59pm

Sheffield, U.K.

The reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption. – Clayton M. Christensen

What kind of company would you really not want to work for?

Maybe it’s a company with a dictatorial owner who puts capital into setting up a business and then hires you for your labour. You get paid as little as possible while creating value for the owner, that makes its way back to them as profits. The company takes your time and your health and limits your opportunities until you are no longer necessary, at which point you are replaced.

That situation, one assumes, was how things used to be not that long ago. Working environments have improved, driven by health and safety legislation – making owners responsible for keeping workers safe has made a big difference in countries where laws have been brought in.

In today’s economy the value of capital and labour have fallen. Money is cheap – people everywhere are virtually begging you to borrow it off them at cheap rates. There is a shortage of good businesses that actually create value and that’s because so many businesses are not capital intensive in the way they once were. Simply taking money in advance, before you provide a product, has made it possible for companies to finance their operations without external capital. And working with your hands is less and less relevant in a world where you can automate processes – not to save money but because you can do things with better quality and faster.

What the labour force brings now is knowledge – it’s a knowledge force that you need to work for you, or is it with you? A company used to mean the group you did things with – and perhaps that’s how you should think of things again – how do you get a group of people to contribute their knowledge and expertise to help you create value?

If you’re the owner, the founder – what you need to bring now is leadership. While there are plenty of people with knowledge, there are fewer people who can provide the leadership needed to bring a company together and keep them together. Leadership is not management – and it’s not really the old idea of leadership either. It’s more to do with creating the conditions that enable value to be created through the contributions of others.

If we accept these two points, that what you need to bring as a founder is leadership and what you need to leverage is the knowledge of your company, that gives you a new way to think about a new business opportunity.

But is the end result still the same – payments to your employees and profits to you? Or do those models need to change as well?

I might spend a few posts exploring the nature of business models and what’s desirable and feasible these days.

Cheers,

Karthik Suresh