What’s an Agile Company?

By Julia Valentine

In a groundbreaking book called Our Brave New World, Louis Gave described a new business model that he called the platform company. I met Louis Gave and his business partner, Anatole Kaletsky, when I worked at Mousse Partners and Gavekal, a firm that Louis and Anatole created, was a vendor that provided global investment research.

I still remember how fascinating it was to learn about Louis’ take on the platform company model. “The new business model is to produce nowhere, but sell everywhere. Platform companies know where the clients are and what they want and where the producers are. Platform companies then simply organize the ordering by the clients and the delivery by the producers (and the placing of their logo on the product just before delivery).”

“Platform companies keep the high added-value parts of research, development, treasury and marketing in-house, and farm out all the rest to external producers. Typical examples include Dell, Wal-Mart, IKEA, Hennes & Mauritz, Li & Fung and many others.”

Let’s think for a moment about IKEA. IKEA kept marketing and design in-house, but it does not manufacture any of the products that it sells. Another example? Hotel companies, including Hilton and Marriott, have been trying to shed assets. They do not own the hotels - they manage them.

Of course, this idea is not new. Anyone who has taken an economics class remembers David Ricardo and his astute observation that growth can come from a rational organization of talents. My accountant will always be better than I am at filing my taxes because he loves it and joyously runs his accounting practice (and he’s amazing at it). I am better off hiring him, rather than becoming a CPA (and I probably couldn’t, even if I tried). My attorney is much, much better at employment law than I am, and I don’t see that changing any time soon. Ricardian law of comparative advantage applies to complex operations of modern companies, including banks, PE funds and family offices. Although the platform company concept never really became mainstream, it is a super efficient way for companies to operate.

The Agile company concept must pay its dues to its intellectual predecessor, the platform company concept. We find agile a simpler concept to understand and apply. But it adds up to the same great idea: decide what to keep in-house, and what to outsource. Outsource anything that can be done by an outside provider in a more expert fashion, especially when making a full-time hire is difficult, or there is not enough for them to do. One of the ways in which AlphaMille is truly special is our expertise in identifying functions that your company performs and combining them in the best possible way - Ricardo would be proud.

P.S. Get Louis Gave’s book for FREE.