Young, entrepreneurial companies create more jobs than older organizations, want to have a global presence, and deploy cloud, mobile, and similar technology solutions as a matter of course.
But what exactly are entrepreneurs? And what impact do they have? Accenture took a look at startups in the Group of Twenty major economies and explored these questions.
Lean, agile, and flexible are the adjectives CEOs often use to describe their companies to the outside world. However, those who developed these objectives tend not to be the major companies and corporations, but rather the small and versatile startups, which haven’t even been up und running for five years. These “entrepreneurs” are stirring up the way we work and developing new ideas.
In addition, they often address the obvious topics of the future: social media, mobile, Big Data, the cloud, and the Internet of Things. That’s why SAP partner Accenture surveyed more than 1,000 of these startups in the G20 countries – including India, China, the United States, Brazil, Argentina, plus the western European countries – and asked them about innovation, globalization, and the job market.
Three key traits of entrepreneurial companies emerged.
Innovation: Don’t work in silos
Those surveyed are not fans of conducting research and development behind closed doors. They are much more interested in having many partners, co-thinkers, and diverse opinions – especially from experts who are not at the heart of the enterprise. Open innovation is the buzzword. And that means putting collaboration on the agenda in some way.
Companies that have an open approach and see it as the most important requirement for innovation are more successful. They create twice as many jobs and expect almost double the revenue than young companies who don’t rate open innovation as highly. And the list of collaborators includes customers, peer groups, major corporations, and universities.
The approach is no less important for large companies. In its study, Accenture cites the three most significant benefits: better access to new technologies, exchange of ideas with new talent, and – ultimately – reduced costs for research and development.
With this in mind, SAP, for example, set up the SAP Startup Focus Program to support young enterprises that have developed especially good ideas for solutions using SAP HANA. Good ideas need intermediaries and sponsors. At the end of the day, venture capitalists, incubators, foundations, and universities help the good idea to hit the market and thus to achieve economic success.
The potential of open innovation is demonstrated by the “shareconomy” – with Forbes estimating the revenue flowing through as more than US$3.5 billion. Prominent “shareconomists” such as BlaBlaCar, a community marketplace for connecting drivers with empty seats, or the private hotel service AirBnB have triple-digit member growth rates.
Globalization: Take the risks seriously
The younger companies are, the more important they believe a global approach is. In contrast, the “established” companies who have been around for at least 10 years are more relaxed when it comes to globalization. Only half of them think a global business model is essential.
The young entrepreneurs of the sharing economy particularly place value on reaching the critical mass that will get their idea off the ground. Their recipe for success is therefore to be the first to have a market presence and be a global provider. Digital technologies like mobile, cloud, and social media simplify the implementation of a globally viable success model.
“You just can’t overestimate the significance of technology,” says one participant in the study. Yet, they view technology as merely a means to an end.
There are other pitfalls on the path to globalization. For example, many young companies underestimate the cost of worldwide logistics. They are more familiar with local markets. That’s why such enterprises find it difficult to find partners and forge alliances at the beginning. What’s more, they often lack the necessary knowledge about markets abroad.
Job market: Get the youth off the streets
New jobs are mainly created by young companies. As the Organization for Economic Cooperation and Development (OECD) discovered, companies less than five years old hire more people than any others. Particularly during the global economic crisis of 2008 and 2009, there were many employee layoffs in the G20 countries, but not among the entrepreneurs.
In light of high youth unemployment rates in many countries, they therefore bear a great responsibility. And they want to live up to expectations. The great majority of such organizations see themselves as socially responsible enterprises.
More than half of those surveyed say their goal is to set up a local community and to tackle social problems with their solutions. For almost a third of entrepreneurs, it’s not just about keeping their heads above the water, but about investing profits in new innovations – to benefit the company and ultimately its employees. With such motives, it’s no wonder that three quarters of the companies questioned expected to welcome new hires this year and are also continuing to expand their pools of external employees.
After a youth unemployment forecast covering the G20 countries, Accenture is assuming that the new enterprises will have the economic clout to create 10 million new jobs by 2017 and reduce youth unemployment by around 25%. By then, at the latest, startups and young enterprises will be accepted as quite normal pillars of society.