Companies don’t fail behind their own backs. Disruptive technology doesn’t sneak up on you and pounce undetected. There is no element of surprise, especially when you have entire teams of people dedicated to market intelligence.
So why are the largest and most successful companies, the triumphs of free-market capitalism, so paralysed into shock that they’re failing to adapt?
Peter Drucker’s famous adage rings as true today as it ever has: "The greatest danger in times of turbulence is not the turbulence - it is to act with yesterday’s logic." Are large companies heeding his advice, or has a great corporate revolution already begun?
I wanted to know why corporate giants, with their abundance of human and financial resources, were finding it so difficult to adapt to the 21st century. I was also curious to talk to people who had made it their business to help these companies navigate the bumpy road to securing their futures. I knew the theory: the only way to thrive in times of change is to become as nimble and agile as change itself. But was this easier said than done?
Richard Stobart is the CEO of Unboxed, a London based company that collaborates with ‘traditional’ organisations to start, build and grow internally-driven innovation projects. Unboxed also helps the same organisations to realign their corporate cultures to befit an innovative and agile style of working.
"Innovation is by its nature difficult to plan and impossible to systematise," Stobart told me. "Corporate giants have grown to the size they have because they are great at execution. They execute very well on their existing business model. They build structures where the processes are more important than the people; corporates can’t have individuals who are indispensable."
"They discourage free thinking, going against the grain and not following the processes. Innovation, real innovation that disrupts industries, requires subversive thinking. Corporates believe that innovation is a continuum, from changing the types of pens ordered by the stationery team to cannibalising the current cash cow to disrupt the corporate’s industry. It isn’t."
Companies become large when they’re able to create a repeatable, scalable business model that delivers value to a specific group of people. Scalability is achieved by creating an internal workflow that can be maintained regardless of who does it. As the company grows, the scalable workflow becomes further refined and engrained into the organisation through systems and processes. The role of human input, especially towards the bottom of the pyramid, is largely to follow and repeat the prescribed processes that have proven successful many times over. If the process is overly reliant on any particular individual, then the system is at risk. The more mechanical, the better.
Innovation is simply a euphemism for subverting the existing system, the same system that has created a culture of following the rules. Herein lies a number of problems for large companies.
"The more radical the innovation the higher the returns but equally the more incongruent with the corporate culture the innovators need to be," said Stobart. "Even those corporates that encourage innovation try to control the innovations. They expect budgets, business cases, milestones, market research, organisational charts and detailed plans."
"What they often fail to understand is that the radical, high return innovation is nearly impossible even in the most conducive environment. Adding constraints makes the chances of success vanishingly small. A natural environment for the go-it-alone entrepreneur is naturally dynamic, free of constraints, time-pressured, scarcely resourced and high energy where the rewards are personal gratification, wealth and power. All these things are foreign to the corporate entrepreneur and their superiors."
So where does the responsibility of change lie? Is it up to free-thinking corporate employees to push change from the bottom up, or is it up to the senior leaders to set a new tone from the top down?
"Expecting 'company men' to arrive at work one morning and revolutionise their industry is naïve," according to Stobart. "I think it was W. Edwards Deming who said that the organisation is perfectly designed to deliver what it is currently delivering. The implication is that only organisational redesign will deliver different outcomes."
The question, then, is what can an organisation do to promote innovation from within?
"The organisational constraints need to be removed. The individuals chosen need to be radical thinkers, rebellious, keen to break the corporate mould and not truly aligned with the organisational culture. Learning is most rapid through repeated failure and re-trial; failures need to be encouraged and celebrated. [The Lean Startup author] Eric Reis says that in entrepreneurship, the measure of progress is learning. Speed of execution, repeating the cycle of execute, fail, learn, change course and execute again, needs to be inherent in the culture of the innovation team. As the Highway1 accelerator preaches, 'experiment like you breathe - all the time.'"
For many organisations, a transformation of thinking and behaviour requires a deeper rooted cultural shift. But this takes time, and it’s not easy (or cheap) to train your employees to adopt an unfamiliar working style. It’s not about teaching them a few new words, but a new language altogether. Not to mention, widespread cultural overhaul could threaten the stability of the organisation and jeopardise their existing business model.
"The cultural change required is the most difficult aspect to change and for many organisations, paralysed by the fear of losing their current market position, impossible."
According to Stobart, senior leaders at large organisations are caught in a game of tug-of-war, with the fear of abandoning the status quo at one end, squaring off against the growing necessity of revolutionary cultural change at the other.
"The biggest challenge for an organisation is the need to understand that they need to change from within. Most leaders want to retain the status quo and pay lip-service to radical transformation, until the organisation has deteriorated to the point where transformation is necessary for survival. Unfortunately, at this point, it’s normally too late. The organisation doggedly holds onto its traditions to stabilise itself against impending doom and digs in, resisting change and making the change painful, ineffective and acrimonious."
The tug-of-war is far from over, but one thing is for sure: somebody is going to end up in the mud.