We explore 10 key challenges for business leaders in 2014, with expert commentary on the issues. For more stories on managing: tgam.ca/managing
Attempting to build a growth-driven business in an unproven market with almost no barriers to entry and a host of established players – it sounds like an impossible business-management task, one that could flummox even the most intrepid entrepreneur.
For Michele Romanow, it’s just another day at the office.
As the co-CEO of Toronto-based online deal-of-the-day platform Buytopia.ca – which partners with local and national brands such as Porter Airlines, Sears Canada and Staples to sell heavily discounted product or service deals to consumers – Ms. Romanow, along with the firm’s co-founders Ryan Marien and Anatoliy Melnichuk, are under constant pressure to keep pace with the rapid change in their sector and seek out creative new ways to adjust their firm’s organizational structure.
“We’ve been successful because we’ve been very flexible,” Ms. Romanow explains.
In spite of the many formidable obstacles to the firm’s success, Buytopia has grown more than 6,000 per cent since its launch in 2010, posting revenue of more than $6.5-million last year and with more than two million subscribers across the country. It’s also thrived when larger competitors, such as Chicago-based Groupon Inc., have been forced to rethink their business models to survive.
Of course, Buytopia isn’t alone in its drive to build an organizational structure nimble enough to withstand widespread market upheaval – it’s a challenge shared by CEOs across industries. Companies ranging from multinationals to small businesses are facing increasing threats from upstarts utilizing everything from new communication tools to cutting-edge technological innovations to disrupt established business models.
“We’re at a unique point because technology is forcing organizations to change quickly,” explains Elspeth Murray, director of the Centre for Business Venturing at Queen’s School of Business in Kingston, Ont. Buytopia “is illustrative of the many ways frictionless startups can challenge major companies.”
Indeed, a recent global survey of business executives by the Canadian Management Centre, a Toronto-based management training and career development organization, found that 82 per cent of respondents noticed an increase in the pace of change experienced by their organizations compared with five years ago, with 69 per cent saying that change caused a disruption to their business models.
To buttress against volatility in their sector, Ms. Romanow and her partners chose a relatively flat management structure early on. Beyond Buytopia’s founders, the firm maintains a tiny roster of senior executives and a performance-based culture that has tried to put a different spin on the deal-of-the-day model.
Buytopia focuses largely on hyper-local, brand-driven deals on everything from travel to spa treatments – averaging savings of between 50 per cent and 90 per cent of the original retail price – designed to appeal directly to subscribers’ individual tastes and needs.
“Our structure is top-down in the sense that when we decide to do something, we execute very quickly,” Ms. Romanow says, adding that Buytopia acquired six of its competitors over the past year in an effort to strengthen its market position – all rapid-fire decisions based largely on intelligence indicating the companies were struggling or looking for buyers.
“Another thing we do that allows us to be nimble is ensure that all of our employees understand their role is flexible and temporary. We’ve built a culture around the idea that every person should be generating revenue in their role.”
That means holding every member of Buytopia’s largely 20- and 30-something employee base accountable for his or her performance, while providing financial incentives – from bonuses to company equity – to reward innovations or stand-out work. Those who don’t mesh with that entrepreneurial culture typically find themselves looking for jobs elsewhere.
The CEO credits that structure, along with a focus on hiring for cultural fit rather than skills alone, with encouraging smart risk-taking and a willingness to embrace change across the company. “If you have people who are willing to be flexible and willing to adapt, your organization will adapt,” she says.
Another unique organizational feature: Buytopia boasts two sales teams that compete head-on against each other. Since introducing that competitive approach seven months ago, sales representatives’ individual performance has spiked an average of 30 per cent, the company says.
“I think they operate in an incredibly fast-moving space where there will be a few winners at the end of the day,” Dr. Murray says of the constant challenges facing Buytopia. She credits the flat management structure and the quick decision-making process deployed by its three founders, all friends and former schoolmates, as critical to the firm’s success.
“Businesses don’t fail to adapt because they don’t see change, but because they lack the ability to make key decisions in a timely fashion,” Dr. Murray points out. Buytopia’s founders “are truly a great team and they’ve been through the wars. They’re in a tough business where you have to be sharp, you can’t be lazy and you have to be paranoid.”
The experts weigh in
We asked two management experts for their views on the rapid-fire realities of doing business in the 21st century, and how Canadian business owners and managers should structure their organizations to brace for an increasing pace of change:
Director, Queen’s Centre for Business Venturing, Queen’s School of Business, Kingston, Ont.
“It’s phenomenal how quickly people can get into business and create it overnight, which is forcing a ton of change. It’s not just in the software world. With 3D printing, for example, you have businesses that can now manufacture goods anywhere. We’ll find a new steady state, but we’ve just experienced a major shift in pace.
“Having a flat organization forces you to be close to the market and avoid a long chain of command. Buytopia’s not that big, so they’re close enough to the market that even with a top-down management approach, they see everything. But when organizations get larger, top-down management no longer works because the people at the top just don’t see what’s happening [in the market]. The danger is that you then start to create your own reality.”
Marc-David L. Seidel
Chair of Organizational Behaviour and Human Resources division, Sauder School of Business, University of British Columbia, Vancouver
“There are two main ways [to speed decision-making], and one is decentralization,” says Dr. Seidel, pointing to steps that many organizations have taken in recent years to include stakeholders at various levels in the decision-making process. “One caveat is that decentralization may improve the speed, but not always the quality of the decisions being made.
“Another popular method nowadays is the community form of organization [c-form] … which is composed of a mixture of those [resources] internal to the traditional organization, as well as interested people outside of the organization.”
As Dr. Seidel explains, many Canadian business-to-consumer and business-to-business organizations have essentially begun outsourcing aspects of key tasks, such as product design, by tapping pre-existing communities to help develop a next-generation product, or determine improvements to an existing one – often at a fraction of the cost and time it would take to carry out the same tasks internally. “The final implementation might be done in-house in terms of commercializing it,” he says, “but you don’t need organizations to be nearly as large because there are so many outside resources available. The key is to figure out what types of business functions can be accomplished using the c-form approach, but I think any business owner can incorporate it.”