Why Do Gazelles Thrive in the Best of All Possible Business Worlds?

Gazelle-143x200The term “gazelle” refers to the classic entrepreneur of myth and reality, someone who starts a new business venture (or a new way of doing business) and aims for it to explode into a white-hot phenomenon such as Home Depot, Facebook, Jenny Craig, Netflix, Under Armour, and Instagram.

The term “gazelle” was coined by the economist David Birch. His identification of gazelle companies followed from his 1979 report titled “The Job Generation Process” (MIT Program on Neighborhood and Regional Change), wherein he identified small companies as the biggest creators of new jobs in the economy. In 1994, however, Birch revised his thesis, isolating job-creating companies he called “gazelles.” Characterized less by size than by rapid expansion, Birch defined the species as enterprises whose sales doubled every four years. By his estimates, these firms, roughly 4% of all U.S. companies, were responsible for 70% of all new jobs. The gazelles beat out the elephants (like Walmart) and the mice (corner barbershops). When you hear politicians say, “Small businesses create most of the new jobs,” they’re really talking about young and growing firms. They are talking about gazelles.

Unsurprisingly, gazelles are rare creatures. A 2008 study by Zoltan Acs, director of the Center for Entrepreneurship and Public Policy at George Mason University, found that a mere 2% to 3% of all companies were high-impact firms. Elephants and mice cut jobs, and the deeper they slice the higher unemployment rises. But when it comes to job creation, they are almost irrelevant.

In Design to Grow: How Coca-Cola Learned to Combine Scale and Agility (and How You Can Too), David Butler and Linda Tischler explain how design with purpose can create substantial value when scale and agility are combined. This is precisely the “secret sauce” of Gazelles’ success. Consider these observations by Butler and Tischman:

“If you’re a big, established company, you’ve got scale, which enables you to expand almost effortlessly from Boston to Bangalore. Over time, you’ve built up powerful assets — expertise, brands, customers, distribution, channels, relationships — that most startups could only dream about. Scale is not your problems. Your problem is agility — you must be smarter, faster, leaner than the startup that’s got your industry in its crosshairs — targeted for disruption…If you’re a startup, you’ve got a different problem. You’ve got agility, nothing but agility. Trying new business models, repositioning your company, developing new features, or even whole new products within days — things big companies can only dream about — are not your problem.

“For you, building the right team, deciding which metrics matter, acquiring customers, and securing funding are what keep you up at night. Scale is your problem — doing what it takes to expand your startup into new geographies, including the land of profitability, is your challenge. That’s why most startups fail — only a dispiriting one out of ten succeeds.”

Leaders in all organizations, whatever their size and nature may be, need to use the principles, techniques, and resources of design thinking to combine both scale and agility throughout their organization, at all levels and in all areas. How? Almost everything they need to know is provided by David Butler and Linda Tischler in this book.

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