The Billon Dollar Startup Club is a collaboration between The Wall Street Journal and Dow Jones VentureSource which tracks venture-backed private companies valued at $1 billion or more. The club follows some of the most rapidly growing and valuable businesses on the planet. You will see some very familiar names on there but the ‘engine of growth’ underpinning all of these successes is inspiring, imaginative and highly innovative technology-infused business models that break the mould and disrupt competitors.
Take for example, Xiaomi, the Chinese maker of highly specified but cheap smartphones that have weekly updates to the user interface. It has a reported market capitalisation of $46 billion just 5 years after its formation. Or Uber, the developer of a smartphone app that can summon a private taxi with the press of a button. It was formed in 2009 and now worth in excess of $41 billion. Finally, AirBNB the online marketplace connecting home and apartment owners with an extra room to rent to travellers looking for a low-priced alternative to hotels, now rents more that 12 million room nights per annum – enough to rival some of the world’s leading hotel chains. It too has grown in market cap to an impressive $10 billion in a matter of six years.
Clearly, ground-breaking business models are one of the ways to secure exceptional performance in a marketplace in which low single-digit growth has become the norm.
Digital technologies are a formidable threat to established businesses and it is not an exaggeration to say that CFOs that ignore the impact of digitisation could be putting their businesses at risk. Businesses today are failing at a rate 30 times faster than they were 30 years ago and 80 percent of businesses are either static or in decline.
A recent piece of research from CapGemini Consulting, “The Digital Advantage” supports this view. It shows how digital leaders outperform their peers in every industry. Fascinatingly, this research shows that no industry is immune from the ravages of innovation and those businesses that successfully combine investment in technology-enabled initiatives with an appropriate leadership vision, the so called “Digirati” will significantly outperform their industry competitors in revenue, profitability and market valuation.
What is most compelling about this research is that unlike the Billion Dollar Startup Club these are traditional businesses in ‘old’ industries ranging from telecoms and retail to hospitality and banking. Sooner or later all industries will become digital and all business will either adopt digital practices or wither on the vine.
And this is why the pursuit of innovation has become one of the principle tenets of the modern finance function. The CFO of the future must be scanning the horizon for digital opportunities and threats. But that’s not enough. The CFO as influencer and business catalyst has to become adept at persuading colleagues to recognise the warning signs and to act on them – to create an environment that supports experimentation without blame, which budgets for innovation and which provides enough ROI-elasticity to enable innovation to get off the ground.