High Growth And Technology - Qut

HIGH GROWTH AND TECHNOLOGYHigh Growth Firms in the Digital EconomyPART A: EXECUTIVE REPORTA REPORT FORTHE DEPARTMENT OF SCIENCE, INFORMATION TECHNOLOGY ANDINNOVATION, QUEENSLAND GOVERNMENT, AUSTRALIA

ACKNOWLEDGEMENTSThe authors would like to extend sincerest thanks to the owners and CEOs of the firms who were interviewedand responded to our enquiry. The authors would also like to thank the Queensland Government’sDepartment of Science, Information Technology and Innovation (DSITI) and the PwC Chair in DigitalEconomy members, especially Ms. Sara Bennett and Ms. Amanda Briggs, for their support. Ms. BerniClose-Ivers at the Queensland University of Technology (QUT) School of Management also providedvaluable administrative support.THE AUTHORS Rowena Barrett is a Professor and the Head of the School of Management at QUT. Rowena’sresearch focusses on managing people at work, especially in smaller firms. Marek Kowalkiewicz is a Professor and the PwC Chair in Digital Economy at QUT. Marek’s researchfocuses on product and process innovation and management. Shahid M Shahiduzzaman is a Research Fellow with the PwC Chair in Digital Economy team at QUT.His research focuses on the impacts of digital technology on business performance and productivity.This report was prepared by the PwC Chair in Digital Economy based at QUT. The Chair investigates,stimulates and educates to help organisations and individuals thrive in the digital economy.Join our online community at www.chairdigitaleconomy.com.au or on twitter @chairdigeconomyPlease cite the study as:Rowena Barrett, Marek Kowalkiewicz and Shahid M Shahiduzzaman, 2016. High Growth and Technology:High Growth Firms in the Digital Economy, PwC Chair in Digital Economy, Queensland University ofTechnology, Brisbane.Copyright 2016. PwC Chair in Digital Economy

FOREWORDCONTENTSUnicorns, gazelles and cockroaches: entrepreneuriallanguage is full of references to the animal world.There is even a shark tank! While the ‘animals’(or businesses) considered may be very different,everyone is hoping to spot or become the nextsuccessful one.Acknowledgements 2What is the difference between a business that justmanages to survive and a business that thrives?What is the magic recipe? What are the essentialingredients? Or is it just sheer luck? These questionshave been asked many times and the answers seemto be a moving target—just like our economy—withthe answers coming with an expiry date.In our research we decided to look closely athighly-successful businesses in Queensland. Ouranalysis clearly shows that, indeed, successfulfirms share certain characteristics. This documentsummarises the research outcomes and providesspecific recommendations. However, enjoy themresponsibly—merely following them will not ensureyour business becomes a high-growth one. However,ignoring them will likely make it much harder for youto grow.While a lot of us wonder how to get there—how tobecome a high-growth firm—what we have learned isthat successful businesses do not ask this question;they focus on how they work, not who they become.It’s the journey, not the destination.The Authors 2Forward 3Introduction 4Focus 5Our Sample 5Research Questions 6Research Process 6Key Findings 71. Business Models of High Growth Firms 72. Technology and High Growth 93. Role of Public Policy 9Policy Recommendations 10I hope you enjoy reading our report!Professor Marek KowalkiewiczPwC Chair in Digital Economy at QUTHI G H G R O W T H F I R MS I N Q UE E NS LA N D 3

INTRODUCTIONThe high-growth journey is not simply a result ofinvesting in technology; it results from a uniquecombination of technical and qualitative factors,such as managerial expertise, digital capabilitiesand having a deep understanding of customermotivations.In this study we highlight a selection of key driversbehind high growth, with particular emphasis on therole of digital technology. To conform with internationalapproaches to measuring high growth the studyadopted the Eurostat-OECD [1] benchmark, where‘high growth’ is defined as firms experiencing anaverage of at least 20% turnover growth over threeyears. In-depth interviews were undertaken withmanagers from 11 high-growth Queensland firmsbetween November 2015 and February 2016. Thefirms varied in size, employing between 5 and 250employees, and were from a range of industries.Seven of the firms were broadly classified as operatingin the services sector and four in the manufacturingsector of Queensland’s economy.4 H I G H GROW TH FIR MS IN QUEENSL A NDIn analysing the data we argue that it is theinterrelationship between the nature of theenvironment, the firm and the people operating thefirm, rather than technology itself, that underpinsthese firms’ high growth. Critical capabilities forgrowth included: organisational culture and strong,team-based organisations; having founders/owner/managers, as well as staff, who are willing to embracechange and use technology to streamline processesand reduce costs; and having founders/owner/managers willing to commit to searching for ways tomanufacture the product or deliver the service moreeffectively through the application of technology.The one similarity across all these high-growth firmswas that they all had the customer and the customers’needs embedded at the heart of their organisationalactivity and could clearly define and deliver on thevalue proposition they offered those customers.

FOCUSOUR SAMPLEThis is a study of high-growth firms in Queensland.While much has been written about high-growthfirms, in a variety of studies, locations and contexts,and using quantitative and qualitative methods toinvestigate different firm populations, there remainslittle agreement on the drivers of high growth.However, there is agreement that high-growth firmsare found across all sectors of an economy [2-5] andthat high-growth firms are not necessarily high-techoriented [3]. They are, however, more likely to beknowledge-intensive firms.The 11 participating firms operated in diverseeconomic sectors, both traditional and non-traditional.Firms were established in different time periods—the oldest being established in 1975 but havingundergone organisational change from a partnershipto incorporation in 2008. The youngest firm wasestablished in 2012.The heterogeneity of high-growth firms is importantin the context of this study. While our interest isspecifically in understanding the interaction betweentechnology and high growth we do not focusexclusively on high-tech, high-growth firms. Instead,our case study firms operate across industry sectors:seven high-growth firms operate in the service sectorand four operate in the manufacturing sector. Thepreponderance of service sector firms among thisgroup of high-growth firms is not unexpected giventhe evidence that human capital or knowledgeintensity is critical to high growth [3].The 11 firms participating in the study all experienceda period of high growth being at or above the EurostatOECD standard related to turnover over the period2010–2015.The firms were different in size and ranged from 5 to250 employees. A mix of nationwide and internationalmarkets was the focus of these firms. In fact, only twofirms limited their operation to Australia-wide marketsas a result of the regulatory environment in whichtheir key services were provided.Customers ranged from individuals to businesses,with each firm being clear about the customersegment they targeted or the niche their product orservice addressed.Firm founders and owners brought a range of differentexperiences to their firms. Six had some form ofprior experience in owning or managing a firm. Ofthe other owners or founders without prior businessexperience three had worked in different industries tothe one their firm now operated in.We found each firm to be a complex systemoperated by founders, owners or managers whomake decisions which are shaped by the firm’senvironment. Queensland firms, like firms globally,are being impacted by technological change anddevelopment. Technology was found to be a criticalfactor in each firm’s operating environment.HI G H G R O W T H F I R MS I N Q UE E NS LA N D 5

RESEARCH QUESTIONS1. What are the similiarities across the business models of high growth firms?2. What is the relationship between technology and high growth? In what ways do high growth firms usetechnology as a resource?3. What can governments do to support high growth firms?RESEARCH PROCESSSample selectionLiterature review There is no known database that identifies highgrowth firms in Queensland (or nation-wide). A list of 50 high-growth firms was generatedthrough extensive searches and crossreferencing of different databases and publicsources. Those firms with the closest matchto the OECD measure were targeted forinclusion in the study. While there is likely onlya small proportion of firms in Australia, let aloneQueensland, that satisfy this criteria, our aimwas not to target the ‘usual suspect’ high-growthfirms such as the ones identified in other studies.An extensive literature review was conducted toframe our understanding of high growth and therole technology plays in this context. Both theoryand empirics were reviewed. Representation of the business model wasimportant to uncover the architecture thatunderpins the ways in which technology enablesthe cost-effective and timely delivery of productsand services, meeting customers’ needs anddelivering value to customers. The resource-based view is the widely acceptedapproach to explain how exogenous orendogenous technological forces of change—opened up through digital enablement for trade,changes to work practices, supplier relationshipsand market practices amongst many possibleothers—had interacted with high growth. Each firm was contacted by telephone and/oremail with a request to the CEO, founder and/orowner to participate in an interview.Semi structured interviewsData Analysis A total of 11 firms participated, with semistructured interviews undertaken jointly orseparately with 17 key informants in these 11firms. Semi-structured interview questions focussedon the firm’s growth, what that meant for key firmpersonnel and what they thought the relationshipwas between technology and high growth in thecontext of understanding their business models,and what they thought governments could do tosupport high-growth firms.Content analysis was performed by means ofconceptual and rational analyses. Text wasexamined for the presence, frequency andcentrality of concepts by using Leximanceranalytical software. Two researchers independently completedbusiness model canvas representations foreach of the 11 high-growth firms. Results werecompared, discussed and collated into onerepresentation for each firm.6 H I G H GROW TH FIR MS IN QUEENSL A ND