Article on the beneficial synergies of a ‘matrix’ structured business.
The first business I studied that employed what I refer to as the Matrix business model was Rocket Internet. Their goal: To be the biggest online business outside of the US and China.
🇩🇪 Founded by German brothers, the business model was simple. Find concepts that have been successful in large, difficult-to-enter markets and replicate these business models (with a local) flavour for emerging markets. Whether it be online shopping, fast food delivery, clothing, or dating sites — they have it all covered.
🗺️ The business model is irresistible in the sense that each local variant of a business i.e. a Food Delivery Service in South East Asia, has multiple advantages compared to their local opposition.
Firstly, they have their local office. This office can provide support for things like banking, company incorporation and local regulations. Translation, advertising, and local human resources are other examples of how a local office might support the businesses in the territory.
Combine the local office, with the technological and centralised capability of the head office to create a user experience that far exceeds anything on the local market and a decent war chest for M&A behind you — it’s a recipe for success.
📈 More recently, a venture capital group named Yolo.io is employing a similar model albeit, slightly differently.
Whilst they have many local offices, Yolo enjoys the value of synergy from investing in businesses that exist at every point within the value chain.
Whether it be payment processing, banking, web development, motion graphics, or operating an online gaming brand — All of the ecology, even the root technology, is somewhat managed in-house.
💸 Finally, controlling the vertical and enjoying synergies between group companies can have a positive accounting impact. The parent company investing may claim a tax benefit or rebate based on their investment, money paid for services from investment A to investment B, shows as a cost (which was previously revenue) for investment company A and Revenue for investment Company B. In a simplistic version of this model, possibly investment Company B declares a dividend and a virtuous and robust cycle is in motion.
