An Alternative to “Agile Transformations”?


A message from John Kotter

My recent article in which I explained why I think attempting an “agile transformation” in a corporate environment [1] is a waste of time (in a nutshell: because corporations are inherently dysfunctional) got some attention and one of the readers sent me an interesting video. Watch it:

http://www.youtube.com/watch?v=Pc7EVXnF2aI

The only solution Dr. Kotter sees for corporations is basically spawning off new entrepreneurial parts — essentially startups — that could provide them with badly needed innovation and nimbleness in the marketplace.

It is nice to see the man who is referred to as the guru of organizational change saying pretty much the same thing as me. I in turn agree with his proposed solution — at least on the theoretical level. I am just a bit skeptical whether it would work in practice in most cases. This is so, because I was once working in exactly such a startup.

A corporation spawning startups – a case study

The startup I was working for was spawned by a large and fairly old corporation, with a very static, hierarchical culture. It was started as a high-risk project by people from a very small department for “business experiments”. In all fairness they actually did it quite well. They hired a smart CEO with previous startup experience (my boss), gave the newly created company little money (little in relation to the overall investment power of the parent corpo) and did not interfere.

The problems started when after a major pivot we stumbled across the right business model for the market we were in and started to take off. Immediately the rest of the corporation saw it as a success and hence it was decided somewhere high up that it is time to put “real managers” in and make it into a “real company”. Those “real managers” thought that this meant applying the methods they were using previously in the parent company. In their ignorance they forced us to adopt a broad service portfolio (instead of our lean model based on a single service with few, easy to understand billing plans), complex expensive backend system (instead of our in-house cheap, but reliable solution) etc.

Of course the expense and complexity they introduced was too much too early for our startup. The services they introduced were utterly rejected by the markets they didn’t understand. In effect they killed the company before it could mature and flourish.

Today I see other companies finishing off what we have started. And indeed now they do have a broader service offering and probably quite complex backend systems (though I doubt many off-the shelf solutions would fit) and structure. But almost nine years have passed since…

Interestingly, I have recently met the ex-CEO of another company same corporation started at more or less same time. His startup’s story was very similar. When he had a super-innovative product he was shot down by corporate managers who blocked it arguing that the existing business model of his startup was good enough thus preventing him from pivoting. He quit – and then a year later another startup came up with this very idea and was very successful.

Purely financial investment – foundation for future transformation?

To the credit of people from the “business experiments” dept. that started our startup’s journey they have learned from this and other experiments. I don’t know how that exactly happened, because by then I was out of the picture building up my own company, but they separated themselves from the parent corporation and became its separate venture arm, which operates more or less like an investment fund. Now they have a whole portfolio of startups in different stages of development, some of them quite successful.

And this – I think – is the best course of action for corporate executives conscious of the situation John Kotter so eloquently describes in his short talk. In this way they use one of the greatest powers their company has – funds – and once some of the startups they seeded mature they have a choice of either keeping them as a purely financial investment, selling them off like a true investment fund – or gradually shifting the focus of their companies into what those startups became. In this last scenario it wouldn’t be the startup that would be “infected” with corporation’s culture, but rather the startup (or startups) would be the “new body” for the parent corporation, a place where it could have a new life while the old parts are gradually made smaller & less significant.

This is a vision I believe could work. A startup in a sense replacing its “parent”, a startup that was founded on different principles and using different methods from its very inception grows into the Holy Grail of all agilists: the Agile Corporation.


[1] By “corporate” and “corporations” environment I mean traditional, hierarchical, command and control large organizations no matter what their legal structure is. Places like Google, Spotify etc. are formally incorporated, but are not this type of environment. Conversely, I have seen mid-sized, privately owned companies with all the corporate dysfunctions.

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