5 REASONS WHY YOUR COMPANY NEEDS A CORPORATE SHED

Many large successful enterprises are starting to set-up small, autonomous teams to think and act like start-ups. Why do big successful organisations feel the need to set up these “Corporate Sheds”? Good question. I don’t know whether your organisation needs one, but I can tell why we thought we needed one.

1. THE PACE OF CHANGE IS ACCELERATING

Moore’s law states that computing power doubles roughly every 18 months. The computing power in your humble little smart phone? In 1994 you would have needed a computer the size of a tennis court to match the processing power that you now carry in your pocket. In 2034 the computing power you have in your phone will fit into the size of a red blood cell. You cannot make this shit up. Our kids will one day laugh at Google Glass. The singularity is near, and the point where someone tries to up-end your long established business model is even nearer.

2. NEW TECHNOLOGY MEANS NEW WAYS TO CREATE VALUE FOR YOUR CUSTOMERS

So what if technology is changing fast? That doesn’t necessarily mean your business will be disrupted. After all, you understand your consumers better than anyone. You have so much experience and heritage, and a well known brand. Anyway, any change is likely to unfold slowly, right? And besides, we don’t want to do anything that would cannibalise your core business.

That’s what Kodak’s management team used to think. So did Blockbuster’s.

Technological change redefines markets. Start-ups that might look like they are in a different business to you end up eating your lunch. How? Because they use technology to find new ways of getting your customers’ job done. We can see this coming in our own industry as the Internet of Things fundamentally changes the way customers will interface with our products. If we don’t react we will be toast (but it would be easy to ignore the trend now as it looks a long way away).

3. OLD WAYS OF ORGANISING DON’T WORK

Do you have a few hundred people sat in IT? In the IT building. In another building (might as well be another planet) you have a few hundred marketing and product folk, right? They don’t talk much. When they do talk, it is through committee meetings where they endlessly rearrange a list of things that are never going to happen. The way you get something to the top of the list is to crate a fictional business case made up of guess work, hope and delusions. But by the time it actually gets delivered the world has moved on and you have since found out that none of your made-up assumptions were right. The functionality gets delivered, and then quietly nobody ever uses it. Any of this sound familiar? It’s a joke.

At Amazon it takes 40 independent teams to make Amazon’s home page. Jeff Bezos has the two pizza rule, where if you can’t feed a team with two pizzas the team is too big. These teams are multi-functional and autonomous. They have designers, developers, product owners and marketing guys sitting in the same team, organised around a specific user experience. You know this makes perfect sense. And yet, so many established businesses do not work this way. There is a better way.

4. YOU NEED FUTURE FOCUS

Rajesh Chandy at London Business school has done a lot of work on what makes some companies innovative. He found that the key is “future focus”, meaning the degree to which a company and the CEO is focused on future customers, competitors and technologies relative to today’s. Our CEO realised he didn’t spend much time at all focused on the future. What’s more, our organisation was 100% focused on today too. There was not a single team or individual who’s day job was to focus purely on the future. That is the key function of a Corporate Shed: to focus 100% on the future without the worry or the hassle of managing the existing business.

5. THE CORE BUSINESS IS ON VENUS, THE SHED IS ON MARS

Our early business model innovation efforts were done from the side of our desks, while we held on to our secure and predictable day jobs. There are many problems with this (a topic for a future post). One of the biggest issues is that the work of business model innovation requires a fundamentally different mindset from that required to run an established business efficiently. The core business is executing in an environment of certainty, whereas a Shed is experimenting in extreme uncertainty. The core business is designed to leverage existing resources and sustain competitive advantage, whereas a Shed needs to discover or build new resources and ignore the current competitive advantage. The core business needs divisional experts. A Shed needs generalists. The core business has processes designed to maximise efficiency and avoid errors, however a Shed needs maximum flexibility and needs to embrace failure. The conclusion we reached is that to develop a team with this mindset and culture so different to the core business, you need to spin the team outside of the core business. You need to put them in a Shed.

6. WHY NOT BUILD A SHED?

The best argument to building a Shed is to ask, “why not build a shed?” The returns might be uncertain, but the overhead to set up a small autonomous team to test new business model ideas is minimal. A budget of £1.5m is probably adequate to staff a multi-functional team and give them enough resources to ascertain “product-market” fit for a number of new start-up ideas. Most seed capital rounds are a fraction of this, so it can be done.

Ask yourself what risk is your business taking by not building a Shed? What risk are you running if nobody in your business is thinking about the customers, competitors and technologies of the future?

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