Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 22 Please cite this paper as: Brøndum et al. 2015 ‘Kickass Companies: Leveraging business models with great leadership’, Journal of Business Models, Vol. 3, No. 1, pp. 22-28. Introduction and theoretical setting The world loves winners. Whether it is successful ath- letes, politicians, or business people who outperform the pack, there is a continuous longing to study successful people and to learn from them so that we too may im- prove ourselves. This mechanism is embedded in human nature but also goes for businesses and organisations in general. In the past, researchers and practitioners alike have strived to identify the outstanding practices, also known as “best practices”, and optimised processes of success- ful companies to learn from them and use them to im- prove their status quo. This is a good thing, as learning from best-practice cases is an effective means of un- derstanding the principles and specifics of good ways of doing business. However, in the literature, there is a tendency to study only large international corporations like Apple, Google, Amazon, and Proctor & Gamble, even though small and medium-sized enterprises (SMEs) constitute the dominant form of business organisations in all countries worldwide. SMEs represent between 95% and 99% of the enterprise population depending on the industry and state (Deakins & Freel, 2009). However, for an SME, it can be hard to learn from these multinational billion-dollar businesses, as the SMEs typically are con- strained by scarce resources in ways that larger corpora- tions are not (Knight, 2000; Chesbrough, 2007). There are countless examples of SMEs that clearly out- perform their competitors and deliver exceptional finan- cial results via outstanding practices, in many cases to much higher degrees than their esteemed global coun- terparts. When the spotlight falls on SMEs, we rarely see successful companies characterised as having unique patents, intellectual property, specifically nuanced strat- egies, or above-normal capitalisation rates. Hence, we speculated that there must be a set of alternative ex- planations and recipes for the apparent success of such SMEs and – literally – how they kick ass. The objective of this paper is to highlight what can be learned from the best SMEs and how we might apply their mechanisms of excellence as best-practice exam- ples. Our point is that a model of the critical elements and relationships that create a Kickass Company – based on SME data will – in the long run, comprise the most valid model for other SMEs looking at improving their performance. In our search for excellent-performing SMEs, it became evident that traditional strategy tools and mindsets like five forces (Porter, 1980), SWOT, or PESTEL analysis were incapable of explaining the dimension of excep- tionality. In the search for a stronger theoretical stand- point, we were inspired by a series of management the- ories relating to corporate culture (Logan et al., 2008; Collins, 2001). We were also influenced by the notion of Kickass Companies: Leveraging business models with great leadership Kristian Brøndum, Christian Nielsen, Kim Tange, Frans Laursen & Jesper Oehlenschläger Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 23 business models and the practical tools related to this movement (Osterwalder & Pigneur, 2010; Osterwalder et. al, 2014). The power of business models lies in their ability to vi- sualise and clarify how firms may configure their value creation processes. Among the key aspects of business model thinking are a focus on what the customer val- ues, how this value is best delivered to the customer, and how strategic partners are leveraged in this value creation, delivery, and realisation exercise. Central to the mainstream understanding of business models is the value proposition towards the customer, and the hypothesis generated is that, if the firm delivers to the customer what he/she requires, then there is a good foundation for extensive customer loyality and a long- term profitable business. Hence, the objective here is to study the intersection between business models, corporate culture, leader- ship, execution, and the ability to deliver continuously outstanding financial results. In other words, we want to determine how to leverage business models through great leadership – and ultimately create significant fi- nancial results from this. Our review of the aforemen- tioned literature led to the statement of the following hypotheses from which an empirical study could de- part: 1. The organisation and configuration of a company depend upon how competitive their primary mar- ket is. 2. Companies’ ability to create relationships with customers and partners and to utilise these rela- tionships are important factors in optimising the business model, as these relationships help to cre- ate lock-in and higher knowledge flows to and from these partners. 3. Clear communication from the management about the company’s objectives, a strong focus on em- ployee well-being, and a “we-culture” create a healthy environment and thus better business re- sults. 4. Companies that are propelled by a determination to become world champions perform better than average. 5. An open and decentralised leadership approach is necessary for employee satisfaction and ultimately influences the company’s performance. 6. Hiring personnel from matching value sets creates the best team in the long run and therefore also the best results. 7. How companies choose to compete and configure their business model will have an impact on the company’s performance. 8. A strong customer focus is essential for good long- term performance, and a focus on helping custom- ers create value contributes to maintaining the company’s source of business. Methods The aim was to produce valid and reliable results based on research on SMEs. For this purpose, the data collec- tion was organised around the hypotheses and carried out in two phases. Data collection phase 1 The first stage is based on data collected through an online questionnaire published by the Business Mod- el Design Centre at Aalborg University. The survey was sent to over 7,000 Danish companies via direct e-mail and resulted in 755 useful responses from a broad se- lection of Danish SMEs. The research group then anal- ysed the data for non-response bias. To reduce the to- tal number of variables (93), variables within the same “theme” were merged using the Cronbach’s alpha test. The construction of the latent variables, equivalent to the hypotheses, was optimised for their effect on corporate performance using a factor analysis. The re- sponses are distributed across industries as indicated in Table 1. The survey included the following themes: • Background about the company • Characterisation of the market’s competitiveness and dynamics • The importance of the company’s collaborations with external partners in the value chain • Management style and the company’s mindset • Characterization of the company’s revenue pat- terns • Characterization of the company’s customer focus and interactions with customers • The company’s performance on financial and non-financial indicators Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 24 Table 1: Responses from industries Industries Frequency Percentage Transportation 47 6.2 Retail 123 16.3 Utility 9 1.2 Hospitality 38 5.0 Agriculture 127 16.8 Construction 63 8.3 Housing 30 4.0 Service 318 42.1 TOTAL 755 100.00 Regarding performance, we did a further study using available data from the NN Market Data company da- tabase1. This study was done to support the companies’ performance score with the average growth in turnover over the last five years and average growth in profit be fore tax over the last five years. Influenced by the crite- ria used in the Good to Great model (Collins, 2001), we selected parameters that were relevant and measur- able for our SME context. The research group validated each of the 755 data points on performance. The statistical analyses were performed by dividing the data set into two groups: a low-performance group (companies with an aggregated overall performance score below 6.00, using a seven-point Likert scale) and a high-performance group (companies with an overall performance score of 6.00 or above). The high-perfor- mance population consisted of 117 businesses, and the average overall performance score of this group was 6.23. The average number of employees in the popula- tion was 35, ranging from three to 216 employees. For the analyses, we used linear regression models and chi- squared tests to validate the initial hypotheses. Before this, the conditions for linear regression and analysis of variance as the root mean square was tested and verified based on the guidelines introduced in Stubager and Sønderskov (2011). In the last part of the analysis, the research group ranked the companies’ performance based on financial data collected through secondary data sources. In this step, a population of 24 companies stood out from the rest of the dataset. These companies both had good performance values from the questionnaire and par- ticularly strong financial characteristics based on our second analysis. We identify these 24 companies as Kickass Companies. Data collection – phase 2 In the second stage of the data collection, we used semi-structured qualitative interviews to analyse the population of Kickass Companies identified in phase 1. The purpose of this was to uncover the essential as- pects of being a Kickass Company. This qualitative part of the investigation was based on interviews with representatives of 12 of these Kickass Companies. The data processing and analysis included methods to en- sure validity and reliability, including a semi-structured interview guide, audio/video recording of the inter- views, transcriptions, and analytical pattern recogni- tion in the empirical work. Findings: What constitutes a Kick- ass Company? Based on the eight hypotheses developed from the lit- erature on business models, leadership, and how best to implement unique business models, the empirical evidence unveils a model containing six critical ele- ments that create a Kickass Company. From the exten- sive data analysis process – both the quantitative as well as the qualitative – we found several areas or prac- tices and processes where the Kickass Companies were significantly different from the rest of the population. These are presented in the following six findings. Finding no. 1: You need willpower In Kickass Companies, we found certain traits of a dis- tinct management style and mindset. More specifi- cally, the mindset of the management team and the relationship between the management team and the employees was an area where the high-performance Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 25 companies were significantly different from the rest of the population. To be a Kickass Company, you need a strong leader or management team with the ability to maintain focus on the company’s core business activities and , if nec- essary, the willpower to trim the business according- ly by outsourcing tasks and activities that are outside the company core. These traits were present in the high-performance companies in our analysis. In Kickass Companies, managers are leaders who lead the way, not administrators hiding behind desks. The aforementioned finding is in line with another cru- cial aspect of Kickass Companies, namely a passion for becoming the best in one’s field of operation. In the best-performing companies, this is often sensed all the way down to the employees’ passion for the job. It also means that there is an understanding of the com- pany’s core mission and a focus on it throughout the organisation and that the management can transform its vision into a language that the employees under- stand. In other words, to become a Kickass Company, you need to have a clear vision and a transparent strategy that the employees can relate to. However, within the Kickass Companies segment, we found that employee involvement at the strategic level is not essential for performance. However, employee involvement plays a significant role at the tactical and operational levels with respect to improving and developing the company and how it works. Kickass Companies are found to ap- ply both a traditional top-down management style at the strategic level and a more bottom-up approach at the tactical and operational levels. Finding no. 2: You need to be there for your cus- tomers Kickass Companies are found to possess specialised knowledge of their customers and their respective needs. As such, they have high customer intimacy, re- sulting in a deep understanding of the customer’s sit- uation and desired outcomes. Kickass Companies are found to be superior at optimising the customer’s val- ue creation by focusing on helping to deliver superior customer value to the customer’s customer. The idea that companies succeed by selling value is not new. However, Kickass Companies had a significantly greater focus on improving their customers’ business and helping the customer become more efficient about his/her respective customers. Our study illustrates that the highest-performing companies are able to im- prove the liquidity of their customers, which is a strong anchor point for cooperation. Kickass Companies have the unique ability to focus on creating economic profit within the “us and our customers” ecosystem. Finally, the highest-performing companies in our sam- ple are significantly different when it comes to fo- cusing on sales. Their knowledge of the customers is found to be a crucial resource in this work, and listen- ing to the customer is an important point in creating value-adding processes from idea to final product/ser- vice. In short, Kickass Companies are customer-centric organisations. Finding no. 3: You strive to be the best In line with finding no. 1, Kickass Companies compete through product/service leadership. They tend to offer a superior product or service and can achieve premium prices because of the experience they create for their customers. They are excellent at leveraging their ex- pertise across organisational boundaries by mastering such disciplines as collaboration and knowledge man- agement. Because our sample of companies consists of SMEs, this finding correlates significantly with the character- istic that Kickass Companies, in some manner or an- other, specialise in a certain niche, so they ensure that they do not end up competing exclusively on price. Finding no. 4: Success is a “we thing” Kickass Companies have a “we culture”. Even though our sample of Kickass Companies has a top-down man- agement approach at the strategic level – as learned in finding no. 1 – they furthermore succeed in developing a strong culture with a high degree of “we–conscious- ness”. In such a corporate culture, the employees are typically deeply involved at the tactical and operational levels to improve and develop the company and how it works. 1 NN Market Data is one of Denmark’s leading knowledge banks. Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 26 In the data, we also found strong relations between the management, who are sometimes also the own- ers, and the employees, which provides a breeding ground for good internal relations that leads to better knowledge sharing. Kickass Companies emphasise the importance of collective knowledge sharing, giving the employees responsibility and ensuring that everyone can contribute. Finally, Kickass Companies emphasise the importance of competence development and the fact that employees need to feel challenged to a cer- tain degree to perform best. Finding no. 5: You need to be able to accelerate Kickass Companies’ performance is found to be driven by a focus on growth. One of the ways for these com- panies to expand their business is through internation- alisation. In contrast to the rest of the pack, Kickass Companies are significantly different in their attitude towards exporting, as they continuously scan for op- portunities to sell abroad. These high-performance companies are found to have implemented business models that are flexible in that they can accommodate changing market requirements. Our research illustrates that, besides frequent existing messages in the business literature relating to the im- portance of creating agile businesses in both growing and declining economies as well as hard-to-copy value propositions or value propositions that take a long time to replicate, business model scalability in Kickass Com- panies can typically be placed in one of the following four dimensions: 1. The firm is removed from otherwise typical capac- ity constraints of the particular type of business. 2. Partners that enrich the value proposition without hurting profits are included. 3. Stakeholders take multiple roles in the business model and create value for one another. 4. The business model becomes a platform that at- tracts new partners, including competitors. Finding no. 6: Use motivating KPIs Last, the use of target figures and key performance indicators (KPIs) are found to have a particular role in Kickass Companies. Here, KPIs are used to improve the performance of the company through a positive out- look. KPIs are thus not used as a control mechanism but instead to measure, develop, and improve the or- ganisation and to stay focused. Our study finds that KPIs are all too often not identi- fied through a strict analysis of value creation, for ex- ample, based on the business model of the company. Our analysis of Kickass Companies’ performance con- cerning some financial and non-financial parameters leads us to formulate four pieces of good advice: 1. Identify KPIs that will motivate owners, managers, and employees. 2. KPIs should be used to focus on what needs to be improved/developed in the company. 3. KPIs should reflect the core focus of the company. 4. KPIs should inspire and create energy around the vision of the company, not serve as control mech- anisms. Concluding remarks This paper is based on a study of 755 Danish SMEs and further in-depth case studies of 12 of these. Its objective was to identify a model of components and relationships among the very best, most efficient, high-performing SMEs. We call these Kickass Compa- nies. The result is a model made up of six interrelated dimensions, which together illustrate what makes up a Kickass Company: 1. You need willpower 2. You need to be there for your customers 3. You strive to be the best 4. Success is a “we thing” 5. You need to be able to accelerate 6. Use motivating KPIs Following these six dimensions might not be a guaran- tee of success, and not all components will be imple- mentable in all types of companies. However, the em- pirical evidence here suggests that, if companies think along these lines of doing business, their probability of success will be higher than otherwise. Finally, there is the question of “how to do this”. We suggest that you take a closer look at the online tools available on www.kickasscompanies.com, where you will also be able to sign up for our forthcoming book. Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 27 References Chesbrough, H. W., 2007. Why Companies Should Have Open Business Models. MIT Sloan Management Review, 48(2), pp. 22-28. Collins, J., 2001. Good to Great: Why Some Companies Make the Leap... and Others Don’t. William Collins. Deakins, D. & Freel, M., 2009. Entrepreneurship and Small Firms. 5th ed. Maidenhead: McGraw-Hill Education. Knight, G., 2000. Entrepreneurship and Marketing Strategy: The SME Under Globalization. Journal of International Marketing, 8(2), pp. 12-32. Logan, D., King, J., & Fischer-Wright, H., 2008. Tribal Leadership: Leveraging Natural Groups to Build a Thriving Or- ganisation. Harper Collins Osterwalder, A. & Pigneur, Y., 2010. Business Model Generation. John Wiley & Sons. Osterwalder, A., Pigneur, Y., Bernarda, G. & Smith, A., 2014. Value Proposition Design. John Wiley & Sons Inc. Porter, M.E., 1980. Competitive Strategy. Free Press, New York, 1980. Stubager, R. & Sønderskov, K., 2011. Forudsætninger for lineær regression og variansanalyse efter mindste kvad- rants metode. 5th ed. White paper, Aarhus Universitet. Journal of Business Models (2015), Vol. 3, No. 1, pp. 22-28 28 Frans G. Laursen holds an MSc in Business Economics & Foreign Trade and is a partner in the consulting company 2beGREAT ApS. Frans has many years of practical experience in sales and management with positions as Director of Sales as well as manager of Danish and international companies. Since 2004, Frans has worked as a consultant with a particular focus on the development and embedment of business models, business strategies and strong, customer-oriented corporate cultures. http://dk.linkedin.com/in/frans-g-laursen-8523403b Kim Tange is a partner in 2beGREAT ApS and Marketing Manager at Tradium. He is a professional board member of several private small and medium enterprises and an Educational manager and teacher at the Executive Board Programme. Kim is a co-author of several books on management and sales. Furthermore, he has extensive experience in business development and market orientation, as a consultant, adviser, director and teacher, both in the private and public sector. http://dk.linkedin.com/in/kimtange Jesper Oehlenschlager is a partner at 2beGREAT ApS. He is a Diploma Manager and affiliated with the Centre for postgraduate business courses at continuing EASJ. Jesper is an experienced facilitator helping companies and organizations to new results through the development of language, stories and culture. Additionally, he has many years of background in the development of sales organizations and productive relationships in the knowledge-intensive industries. http://dk.linkedin.com/in/jesperoehlenschlager About the Authors Kristian Brøndum holds an MSc in Innovation and Entrepreneurship and works as a part-time researcher and part-time project manager at Business Model Design Center (www.bmdc.aau.dk), one of the world’s leading interdisciplinary centres of excellence in business model research. Kristian has worked with business models, creativity and entrepreneurship since 2011. http://dk.linkedin.com/in/kristianbroendum Christian Nielsen is Professor at Aalborg University, Denmark. He heads the Business Model Design Centre (www.bmdc.aau.dk) and has worked with the field of analysing and valuing business models since 2001 both as a researcher and as a buy-side analyst, portfolio manager, consultant and board member and is also Joint-Editor of the Journal of Business Models. https://dk.linkedin.com/in/christianhnielsen