Hypergrowth startups typically leverage simple business models

09 January 2017 Consultancy.uk

Hypergrowth companies typically leverage simple business models to simplify transactions. New research also highlights that hypergrowth companies face different challenges and are enabled by different factors than "normal" growth companies.

Hyper growth companies are those that are able to grow at more than 40% per year. These companies tend to be technology startups, such as Uber or BuzzFeed, that are able to leverage simple technological advances to capture and transform whole markets. The proliferation of new technologies has seen the rise of startups that rapidly scale, and, with new ways of working, new devices and rapidly scalable innovations, disruption is feared by incumbents in a range of sectors, not least, financial services.

Study participants

In a newly released report from the World Economic Forum in collaboration with EY, titled ‘Mastering Hypergrowth, the conditions which give rise to the scalability of startups are considered. The report was based on an analysis and survey of 200 global companies. The companies are relatively evenly distributed across different sectors.

Key priorities for hypergrowth

Hyper differentiation

The research highlighting that while on the outside it looks like startups that enter hypergrowth do so because of luck, the right idea at the right time, it is, in most instances, the result of deliberate actions on the part of the company. One of the major differentiators is that, in many instances, hypergrowth companies are able to reorganise or organise something that was either very inefficient, or not possible, through a simple business model – usually connecting buys and sellers. 

The research finds that, besides business model, a number of factors set the different types of companies apart from growth companies. Hypergrowth companies tend to be focused; keen on acquiring talent that fits culturally, rather than specifically functionally;  are able to access funding and finance as well as being keen to partner with other organisations; and to acquire new capabilities through acquisition or to buy away the competition.

Growing pains

Life pains

The research also found that, contrary to intuitive beliefs on the matter – which suggest that the startup phase in the most difficult – the whole development of the company from startup to its full scaling are shown to be challenging for the different kinds of companies interviewed. 37% of respondents said that the first 1-5 years were difficult, 27% of respondents cited the years 6-10 as difficult, while 36% of respondents found the period following the first ten years to be a challenge.

Primary Growth Challenges

Hyper growth challenges

The research also looked at the biggest challenges faced by growth companies and by hypergrowth companies. For growth companies, client related issues were much more prominent (40% of respondents) than for hypergrowth companies (10% of respondents). However, leadership and management were found to be considerably more challenging for hypergrowth companies over growth companies. Hypergrowth companies were also more challenged than growth companies by organisational related issues, supply chain, investment and financing and M&A. Both types of growth model company had similar issues with technology and regulation. 

“Digital technology gives businesses in every region a license to disrupt, innovate, take risks and expand into new markets in a way that has never been possible in the past,” says Uschi Schreiber, Global Vice Chair of Markets at EY. “We live in a world where the opportunities are both borderless and boundless. Hypergrowth can be the outcome for companies that are ready to ride the wave of disruption and work hard to take advantage of those opportunities.”

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