Business Development in the Cloud
By: Brady Bastian
The age of the cloud has enabled a new operating environment for corporations. We envision a more agile corporate structure in the Cloud Age. Instead of large, lumbering monoliths with overly complicated and inefficient governing structures we see a more nimble approach to achieving the holy grail of corporate structures: being able to take advantage of economies of scale while also outflanking agile startups. We see a world of compromise between the vested interests of Wall Street and the ambitions of the hungry entrepreneurs. Welcome to Corporate Engineering 101.
Article Contents
Level Up Your BusinessThe Root Node - Company Zero
The Child Nodes
Example Corporate Structure
What Can Be Accomplished With This Model
Level Up Your Business
We love the multiverse theory. Wikipedia outlines it as:
The multiverse is the hypothetical set of all universes. Together, these universes are presumed to comprise everything that exists: the entirety of space, time, matter, energy, information, and the physical laws and constants that describe them. The different universes within the multiverse are called "parallel universes", "flat universes", "other universes", "alternate universes", "multiple universes", "plane universes", "parent and child universes", "many universes", or "many worlds". One common assumption is that the multiverse is a "patchwork quilt of separate universes all bound by the same laws of physics."Essentially, it says that there exists multiple parallel universes to our own, and each universe is divergent based upon the choices made. Within the cloud this actually becomes possible. In "reality", your business exists of physical assets: buildings, plants, production lines, equipment, employees, etc. In the cloud, however, nothing is ever really "set in stone". Additionally, the cloud enables advanced automation which enables businesses to perform activities which were impossible even just 10 years ago.
The old way of thinking is that the website is an "extension" of the business, it was some sort of thing that you had to do so that people could find your business and seek you out for your products or services. But now, the cloud has enabled a new paradigm. Instead of merely being an extension, or separate entity within your business, the cloud has now become the business. The future of cloud based businesses go beyond a single website representing a single business. Instead, the cloud enables multiple "parallel" businesses, or sub-entities, to be easily and quickly spun up and enabled within mere days. It is entirely reasonable to have a "root" company whose sole purpose is to spin up "child" companies. This could be similar to what used to be known as subsidiaries or departments, but we think that the future is not just multiple departments under a colossal governing business entity or monolith, but instead it is a collection of smaller businesses which are spun up "just-in-time" to fulfill specific tasks or workloads, and are spun down if not needed. This is taking the idea of the cloud and translating it, quite literally, into a universal business model.
The cloud has enabled massive efficiency gains and streamlined operations (and, yes, displaced jobs) for the entire ecosystem of business development including operations, legal, accounting/finance, sales, marketing, product development, warehousing, shipping, etc. In almost all cases, these processes can be completely automated. However, we think this can go even further. We think that instead of these being individual departments within a business or corporation, we now believe these can be individual companies spun up by the host or "root" entity who exist only to process particular functions of the holistic entity. They are now actual businesses (owned by the "root" corporate interest) which produce economic value, process transactions, hire employees, pay taxes, and make financial reports.
The power of the cloud has enabled new business entities to come online in mere days, enabling dislocation of corporate organizations, independence of operations, and, most importantly, the sub-entities or businesses have now become interchangeable parts. We have now transformed corporations from vertically scaled monolithic enterprises into horizontally scalable entities operating independently, but decisively, towards a common mission, objective, or initiative. We are no longer managing businesses, we are now engineering businesses.
The Root Node - Company Zero
This sort of corporate infrastructure requires a high degree of sophistication and advanced automation. The root organization's (node) sole purpose is to create child businesses, manage the workloads performed by the child businesses, and provide the point of contact for investors. The root node manages shareholder interest across the whole universe of the corporation. The child business is wholly owned by the root corporation. It can be thought of as a business within a business, but I would prefer to think of this as cells operating within a body. You've essentially turned your entire corporation into a cloud, operating by the cloud, of the cloud, and for the cloud. Your business is no longer a monolith, but a collection of horizontally scalable "microbusinesses".
The root node sets the "parameters" for the child businesses, (or worker businesses, if you will), such as a "location" (renting space in a virtual mailbox), purpose, operational parameters and governing structure. The whole process behind setting up the initial corporate "shell" is completely automated. The root node uses api's to interact with every entity needed to spin up any child business. This includes setting up accounts with the government to pay taxes, using tools like digital form management software to initiate contracting with the child business, and setting up the initial management structure. Building the initial child business should be a completely automated process which can conclude within a single week.
Another important purpose of the root node is to manage contracting within the corporation. The root service could be the contracting service or it could be its own sub-entity. This includes managing the contract language or perhaps just managing the parameters and guidelines of the contracts. The contracting service would also approve all contracts between the sub-entities.
The Child Nodes
The child business is a captive entity of the root organization, and is set up to perform one specific economic activity, and perform it well. The child business is a captive entity and is given a clear mandate by the root node to perform a very specific economic activity in support of the corporation. This enables the child node to concentrate on very specific activities and hire only the people it needs and perform only the activities required to fulfill its mandate from the root node.
For example, imagine a child node is spun up to perform accounting activities for the entire corporation. Normally this is handled by the accounting department now, it is handled by the accounting sub-entity. The sub-entity does nothing else except manage accounting for the firm, with a clear mandate and with all governing and management structures already defined by the contract with the root node. Now imagine that this business interacts with all other sub-entities in the corporation. All other sub-entities must require accounting services, but instead of performing their own accounting, they instead form a contract with the accounting sub-entity to perform the accounting duties on behalf of the sub-entity. This changes governing structures from management of different departments into CEO's of the captive microbusinesses. The CEO's must fulfill the mandates passed from the root node and all work performed by the CEOs must be in support of this mandate. The parameters and workloads of the mandate are generated and maintained by the root node.
Example Corporate Structure
An very simple corporate structure could look like this:
The root node, ACME, is tasked with developing the mandates, contracts, and governing structure of all child nodes. Each child node, or sub-entity, is its own captive company, tasked with performing very specific economic activities, such as accounting, legal, or supply chain.
The other child nodes are replicas of "product development", each its own company with it's own CEO, and, it is possible since the root node manages all contracts, that none of them are even aware of each other. Since all company spin up activities are managed by the root node the replicants can all be spun up in parallel within just a couple of days. With this structure each replicant could be tasked with developing only a single product or a single line of products. in fact, maybe they could all be tasked with developing the same product, may the best replicant win.
What Can Be Accomplished With This Model
This type of operating model presents several intriguing possibilities. First, it enables rapid experimentation and prototyping of novel business concepts, products, and development structures. Second, if a brand new "child business" proves unsuccessful, it can be quickly wound down with minimal impact on the overall business. This ability to experiment quickly and easily is a major advantage for businesses that are trying to innovate, as it allows them to explore new avenues without risking the entire enterprise.
This approach helps established corporations mitigate the risk of being outperformed by agile startups while still capitalizing on the power and agility of innovative start-ups. The holding company identifies and recruits talented CEOs to manage the mandated companies, thereby capturing the benefits of their expertise while ensuring that the core ownership and essential governing structure are preserved.
This corporate structure equalizes the competitive landscape for large corporations, enabling them to outmaneuver more agile startups. It also helps mitigate risk for all parties, from the shareholders funding initiatives to the entrepreneurs and innovators leading change in the market. Core corporate identity can be maintained while still permitting a flexible approach to economic and market development. Hyper-specialization allows the sub-entities to fulfill their assigned mandates without concerns about external competition.