How large organizations can drive change in the face of disruptive competition.
The 21st century has introduced a new generation of competition. Capitalism in the 19th and 20th centuries was largely a matter of ‘bigger is better’. From the early days of the Industrial Revolution through to the 1980s, there was a common set of themes that defined business success: economies of scale, division of labor, quality through minimizing process variance, conglomeration, vertical integration, and so on.
The Information Age brought new capabilities that enabled small business to thrive, unleashing the potential of entrepreneurs everywhere to challenge mature industries and long established business models. Financial services, professional services, transportation, media, advertising, retail are all under threat from non-traditional competitors and disruptive start-ups.
Many large organizations struggle with how to respond and get ahead of these changes.
Why have we failed to make major change happen?
Let’s look at disruptive change from the perspective of a large company that is starting to see small startups entering various parts of their industry: none are having a major impact today, but it is unsettling nonetheless. And with daily business conversations centering around ‘digital, cloud, mobile, social, big data’, and people in meetings talking about the Ubers and Airbnbs of the world, CEOs are on edge, trying to understand and assess the risks and opportunities.
Creating disruption from within is about more than launching a new initiative with a catchy name or creating an investment fund. It can’t happen without teaching your people how to think and behave more like entrepreneurs, risk takers, and innovators. Making people in all parts of your organization accountable for:
- voicing new ideas;
- taking chances;
- challenging norms (and senior management); and
- moving things forward in a sometimes ambiguous environment.
Without vocal, repeated and demonstrable support for these behaviors, sustained innovation will not happen.
An organisation’s people are the drivers of innovation and disruption. Executives need to nurture this environment, not try to control and direct. The ideas that will drive the long term success of a company do not come from steering committees. People that live and breathe the business, the customers day in and day out, the intricacies of the products and services, the good, the bad and the ugly of the company, are the ones who will lead the way.
But it’s not as if organizations don’t already have the strong and talented management to recognize and take action to address these issues. So why isn’t it working?
Innovation vs. stagnation: Why do large, well-managed, successful organizations struggle when faced with disruptive change?
Solid research points to at least part of the answer: “Good management was the most powerful reason why leading companies failed to stay atop of their industries.”
Wait, what? Here’s why:
- Large firms with good management can fail for the exact same reasons they succeed:
- listening to customers;
- investing aggressively in technology, process and operational capabilities that their largest customers need;
- adding new features and services to their product suite;
carefully studying market trends; and
- systematically allocating investment capital to innovations that promise the best returns.
- The research has shown that the principles of good management are only situationally appropriate. Situations involving sustaining versus disruptive technologies require different management approaches.
- With disruptive change, there are times when it is right not to listen to customers, right to invest in developing products that deliver lower margins and aggressively pursue smaller markets.
Naturally, this cuts against the grain of most organizations’ strategy, management norms, structures, processes and cultures. So getting from here to there is a major challenge.
How to get there: things you can do now
A common trap is following traditional approaches: striking up a project team, creating a committee or having ‘regular meetings’. Forget it. If these activities haven’t worked in the past, even for more standard efforts, why would they work for your most challenging and disruptive priorities?
Try new tactics. Test and learn. Fail fast and try again.
Be ready for the ups and downs of the journey and keep moving despite them. When in doubt, remember this quote from Winston Churchill: “If you’re going through hell, keep going.”
Here are some new strategies and tactics to consider:
- Look outside your organization for wisdom and inspiration. Join groups, meetups, and mailing lists on topics that inspire you. (Example, ‘The Customer Development [Manifesto]’ has a lot of statements that can challenge your assumptions).
- Question and reconsider preconceived notions and assumptions of how change can happen in your organization.
- Keep in mind, if it doesn’t feel different or uncomfortable, you probably aren’t changing anything.
- Focus on execution of fundamentals and build a sense of urgency into everything you do.
- Adopt a startup mindset and culture. Keep things small and focused. Aggressively narrow scope and timelines.
- Don’t just throw money at things. Be frugal and invest in stages, spending only on what is critical and with milestones tied to progress. Quality of money matters: too much dilutes focus, too little implies lack of commitment and saps energy and speed. Think like an angel or VC.
- Build your ‘Goldilocks’ team. Is there a team, department, function or group that can propel you to an early success? It should be small enough that clear objectives and outcomes can be defined, while big enough that the result will be significant and measurable.
- Find smaller opportunities that can get to success quickly. Ones that demonstrate to others that change is possible, taking risks is rewarding, and innovative use of new technologies is happening.
- Emulate the characteristics of entrepreneurs and startups (probably the same strengths that powered your own company’s early success).
Exercise ways to get fresh perspectives
Just like you would train to run a marathon or study to learn a new language, opening up to new ways of thinking takes effort. Find and study one example of a way to get a fresh perspective and practice trying to gain a new point of view.
Here is one to try: a video that talks about how seeing the entire Earth from Space can change your whole perspective.
Perseverance is most important
There are many traits considered instrumental to business success: customer-centric organizations, singular focus on product and service quality, streamlined delivery, collaborative work, transparency, hunger for results. Above all is persistence. Perseverance. The belief in yourself and your vision. The trail is well worn, with others leaving signposts and markers, which are the wisdom and tactics to help us succeed.
Here are some inspiring success stories that endured repeated failures:
- WD-40 literally stands for “Water Displacement – 40th Attempt”.
- James Dyson created 5,127 failed prototypes over 15 year before his first Dyson vacuum cleaner model was proven successful.
- Angry Birds was Rovio’s 52nd attempt over 8 years.
- Nine months after launch, Pinterest had “catastrophically small numbers”. The site only had 10,000 users and very few of them were active on a daily basis.
- Response from Dustin Moskovitz, Facebook co-founder, when asked how he felt about Facebook’s overnight success: “If by ‘overnight success’ you mean staying up and coding all night, every night for six years straight, then it felt quite tiring and stressful.” Facebook was launched as Facemash in 2003 and it took almost 9 years to grow Facebook for an IPO.
- Starbucks began in 1971 and took 16 years before it started to expand beyond Seattle.
- OpenTable, the online restaurant reservations site, began in 1998, went public 11 years later in 2009 with a market cap of $626M and in 2014 was sold to Priceline for $2.6B.
- LinkedIn began in 2002 and launched a year later in 2003. Profitability was achieved 3 years after launch in 2006, it became a publicly traded company in 2011 and was purchased by Microsoft in 2016 for $26.2B.
While there’s no one recipe for success in every business situation, learning how to adapt your mindset and organizational culture to digital innovation and transformation only increase your likelihood of success.