Every company has a personalized business model, one that separates them from the herd. For EO Chicago’s Zak Dabbas and Ryan Unger, co-founders of Punchkick Interactive, a mobile app and web development agency, the secret to their sustainability comes from “going flat.” In this special interview, Zak and Ryan offer insights into their EO journey, the decision to adopt a new business model, and how a flat focus has led to a surge in productivity and innovation.
WALK US THROUGH THE ORIGINS OF PUNCHKICK INTERACTIVE. WHAT INSPIRED YOU TO START A BUSINESS TOGETHER?
Zak Dabbas (ZD)/ “Ryan and I first met at Kent State University in Ohio. At the time, I was a pre-med student—my father was a physician—and although I’ve always been a design junkie, I had never considered pursuing software or technology as a career path. I first met Ryan when he was in our school’s design program, where I discovered he was doing freelance work on the side. I wanted to be a part of it, so we started working together. Before long, we were winning projects and earning weekend money. After a battle with cancer in my last year of the pre-med program, I completed the program, shifted gears and decided to study law … but I didn’t like it. It wasn’t for me. I realized that what I was building with Ryan was the only thing that really gave me joy. In 2006, we officially launched Punchkick Interactive. I play a lot of video games, and ‘punch’ and ‘kick’ are a natural combination for fighting games, so we combined the two for our company name. By the time we graduated college, we were landing Fortune-level clients. We’ve been growing ever since.”
EARLY ON IN YOUR ENTREPRENEURIAL JOURNEY, YOU RELIED ON EO GSEA AND EO ACCELERATOR TO HELP YOU BUILD YOUR BUSINESS. WHAT VALUE DID THESE PROGRAMS PROVIDE?
Ryan Unger (RU)/ “It was 2008, and Zak and I were still building our business from the ground up. I remember seeing a web banner for the EO Global Student Entrepreneur Awards (EO GSEA) while working toward my graduate degree, so I decided to go ahead and nominate myself. I really just thought it would look good on my resume, but I wound up becoming a global finalist and connecting with other young entrepreneurs from around the world. I remember finding a flyer in my registration bag at the EO GSEA Global Finals, which highlighted the benefits of EO Accelerator. I showed Zak and sold him on the idea of joining. We still had a lot to learn about running our business, so we signed up. We went into the program with US$432,000 in revenue, and we graduated with EO qualifications and the kind of knowledge you can’t put a price on. EO Accelerator showed us how to scale Punchkick to realize our vision.
“Around this time, we met an EO Chicago member who introduced us to the Entrepreneurial Masters Program (EMP). When Zak and I applied, we agreed that if one of us didn’t get in, the other wouldn’t attend. As it turned out, we were one of the only duos in the program’s history to be accepted. In a lot of ways, EMP was the catalyst to joining EO in the first place. We had been drinking the EO Kool-Aid for so long, and we didn’t want it to stop. I really think EO should advertise itself by guaranteeing you positive ROI or your money back, because I don’t see how anybody won’t get that. The value is just incredible.”
A FEW YEARS AGO, YOU DECIDED TO ADOPT A “FLAT” BUSINESS MODEL. HOW DID YOU ARRIVE AT THIS DECISION, AND WHAT HAVE BEEN SOME OF THE BENEFITS OF GOING FLAT?
RU/ “We have never been a traditional business, so we’ve been more or less flat since day one. But we didn’t really start to scale in this way until EMP. We realized we needed to change how we were running our business, or we would be on a death march. I remember hearing Verne Harnish give a speech in our third year of the program, and afterward, I spoke with him about the concept of going flat. He suggested I read a book called ‘Emergence,’ which motivated me to learn more about the model. And then I came across ‘Reinventing Organizations,’ a book by Frederic Laloux, and I was freaking out about what I was learning. I remember being on a plane with Zak, trying to get him to read a summary of the book. After he read it, we were both sold on the idea. Zak and I started the company partially because we hated the idea of working for someone else. If we were feeling that way, everyone else probably was, too. So, we found ourselves wondering: What would it be like if we got out of the way?
“Really, ‘flat’ means that you believe people are inherently good, and that with the right information and transparency in the business, people can make decisions without the need for management layers. I truly believe, with the exception of people having fear for self-preservation purposes, that people are good. And all things being equal, they will do right by their peers. For me, that was a huge component of going flat. So, we decided to build a company where it feels like you don’t have a boss. It was nonhierarchical from the start, and the more I learned about removing the bureaucracy, the more I was blown away by the business model. It seemed like some sort of fictional utopia that I absolutely wanted to realize in the company. It’s been hugely rewarding in so many ways.”
ZD/ “Going flat has a lot of tangible and intangible benefits. Tangibly, I believe it helps attract better talent, reduce turnover, and bring the best ideas to the forefront. It’s the people on the frontlines who are able to see the opportunities for business improvement, but they’re often ignored in a traditional hierarchy. Intangibly, people chill out; there’s no need to ‘kiss up’ to superiors or prove that you’re better than everyone else. In a flat organization, people see their peers growing and making big changes for the business; someone else’s success is not perceived as a threat to their own. In fact, they’re happy about it, because it means good things for them in their career, and it means longevity and security for the business. In our first year of going flat, we experienced 28% growth. Since then, relationships have grown stronger and processes are more reliable. We’re rowing in the same direction. For me, just being around people who are enjoying what they do and feeling empowered, that’s the best feeling of all.”
TO SUPPORT YOUR FLAT INFRASTRUCTURE, YOU INTRODUCED TWO AVENUES OF PEER ENGAGEMENT—AN ADVICE CHANNEL AND A FEEDBACK CHANNEL. HOW HAVE THESE BEEN IMPACTFUL?
ZD/ “The advice channel is the single biggest component to going flat at Punchkick. We’re not short of people who have brilliant ideas on how to move the company forward, but they may struggle to make decisions because they don’t want to ‘ruffle feathers’ or make a mistake. The advice channel arms employees with what they need to know that they’re doing the right thing. It starts with talking to experts, inside or outside of the business, to learn more about the decision they’re trying to make. The second step is talking to peers in the office who will be impacted by their decision; whether that’s finance because of the cost, or IT because of the integration within the company. After using the advice channel, the final decision is entirely up to the employee. The advice channel exposes people to other parts of the business, and that dialogue is priceless. What we’ve found is that when people are socializing their ideas and getting advice, they make the right decision.”
RU/ “The feedback channel is also a critical component to running Punchkick flat. Whenever you feel strongly—positively or negatively—about an idea or decision a peer has made, you have to give them feedback in a timely and non-violent manner. When matters don’t resolve themselves through a simple feedback session, it can escalate to what’s called a ‘dispute resolution,’ which can include third parties within Punchkick. Every decision you make at Punchkick, you’re free to make through the advice channel, knowing the feedback channel also exists. So, if you leave someone out, or you make a decision that’s in your own best interest and not that of the business, your peers will hold you accountable. This checks-and-balances system helps people make great decisions because they know their peers and the company will feel the impact of it. You’re not dissociated from your decisionmaking anymore, and that makes it really special.”
WHAT ARE SOME CHALLENGES OF INTRODUCING A FLAT MODEL INTO THE WORKPLACE?
ZD/ “I think a lot of people don’t understand what goes into going flat. If you are a co-founder or founder, and you’re ready to be flat, you have to go all in. Going flat is the last executive order you make. You’re saying to the company, ‘We are all managers. We are all running this place.’ It’s very hard for people to let go. At times, I find myself wanting to jump in and make a big decision, and I feel so much happier when I use the advice channel to gauge people’s feelings about what I’m working on or the direction I’m moving toward. The validation I get in return is wonderful … but, if you’re not open to that kind of dialogue with your team, flat is not going to work for you.
“Going flat might not be for everyone. In order to be a flat organization, you have to truly believe in sharing with others the experience of running the business; the highs and lows, really letting people understand the numbers and processes that make the business tick. You have to say to your employees: ‘If you’re truly interested and invested in this model, the doors are open for you to help make a positive change. You will be judged on your merits, not your titles or seniority.’ Going flat creates a platform for everyone to have a voice, and it opens you up to constructive feedback from your colleagues. It is peer accountability at scale, and it really works.”
WHAT ARE SOME COMMON MISCONCEPTIONS OF GOING FLAT?
RU/ “I think one big misconception is that you can just decide to go flat, and you’re flat. To be flat, you have to commit to transparency. It’s not enough to make the data and metrics inyour business transparent. You have to take that data and make it meaningful. You need to let people understand the levers they can pull to help reduce company expenses, increase revenue and maximize customer satisfaction, so that everybody in the business can understand at all times what they can do to help move the business forward. We’re transparent about everything in Punchkick, except for salaries, which I’m hoping will change soon. We learned early on that making our data transparent is a critical step in the flat process, but a lot of people don’t realize the magnitude of work involved in taking that information and making it meaningful to everyone in the company.”
ZD/ “I also think there’s a misconception that flat has to look the same in every business. The way we run flat is different than how others run flat. Depending on your business, the channels you might need to put in place to keep the company flat at scale will vary. At Punchkick, we’ve gotten to a place where we can find excellent talent who really fit in, so for us, it’s less about putting in channels to keep cultural protections in place, and it’s more about encouraging people to continue giving feedback to each other. In a flat environment, everyone is holding each other accountable for the decisions they make and the actions they take, and that’s a beautiful thing. But you have to keep working at it to make it stick.”
WHAT TIPS DO YOU HAVE FOR YOUR EO PEERS WHO ARE THINKING ABOUT TRANSITIONING INTO A FLAT INFRASTRUCTURE?
RU/ “Make sure there is financial literacy among your staff. For years, we’ve been transparent about our numbers, and what we found is that when we started sharing profit data with our people, they were like, ‘Oh, so you don’t have a 100-foot yacht docked in the harbor?’ It was really awesome to see how grounded people became and how much they bought into the business, once they began to understand the expenses and see how their decisions and actions directly impacted the bottom line. So, I think financial literacy is a huge component to going flat.”
ZD/ “The biggest tip I can share is: If you are not evolving as a business, you are dying. In our industry—software development—the next big thing is always around the corner, so we have to stay agile. Right now, we’re moving from a service-focused model to a more product-centric one. With products, we see higher margins, shorter sales cycles and renewable revenue. It will help us normalize and have more predictability behind our revenue. The idea is that we will get 80% of our revenue coming from products, with 20% coming from our services, and it will just be a cycle. We’re constantly innovating as a business because if we don’t, we’ll get left behind. Going flat ultimately taught us that you have to truly be willing to disassemble your operating system and evolve if you want to survive. It’s been an incredible journey so far, and we’re excited to see what the next 11 years has in store for us.”
For more inspiring stories about the entrepreneurial journey, check out other Project Octane videos.