The Future of Organisations: What sets Amazon & Reliance apart from companies like GE?
Disruption is an everyday phenomenon in today’s business world. The transition brought on by megatrends like geopolitics and demographics, although affecting the global community as a whole, forces businesses to upgrade their game to retain a fighting chance. Further, the ongoing COVID-19 pandemic, on the heels of a decade of global recession, is changing the face of businesses for the foreseeable future. The one spectacular consequence of these events is the impermanence of corporate success, forcing companies to keep reinventing themselves in order to avoid extinction.
Like Kodak, Blockbuster, Blackberry, Nokia, and recently, GE have shown, being a multinational, multibillion-dollar company is no guarantee that it will override the disruptive trends. Threat analysis must include all probable and improbable rivals. As technology opens up the world and makes it globally accessible, anyone who has passion can build a company. Airbnb and Netflix, which started small and grew gigantic. Startups like these have the potential to topple giants, much like how, in an almost Biblical fashion, the upstart Netflix demolished Blockbuster in a matter of a decade.
The necessity of keeping up with the advancement of technology, which seems to travel at the speed of light, is real. The virtual world is the world where most of the action happens. Along with the emergence of Asia as the hotspot of investment, technological advancement connected two unconnected dots to form a reality that is now a gamechanger. In the wake of Globalisation 4.0 and the world closing up physically because of growing nationalism and a destructive pandemic, it is the digital economy that keeps the world connected with very little fuss.
The emerging trend in economies, like the sharing economy and the circular economy, are necessities born out of a tired world. As a new generation inherits the earth, a more aware, a more connected customer base must be catered to, to whom sustainability and income equality are more than just catch phrases; they are goals worth working for. We are talking about not just a new set of strategies for businesses to rake in revenues, but a complete realignment of their action plans and end product/service that will serve a purpose higher than satisfied customers and wealthy shareholders.
As the world advances exponentially, the audacity to place bets on disruptive innovations will be the most required skillset for legacy companies. As they are wiped off the S&P Fortune 500 list mercilessly, long before their time, new thinking — in processes, R&D, products, distribution, and organisational structure — will be the disruption that legacy companies must introduce in their own establishments.
The need for it is underway but the action must begin right away. The journey towards an assimilated, integrated organisation of tomorrow must promptly, inevitably, begin today.
I have watched the rise and fall, the stagnation and transformation of many business giants in that time — and I have been associated with a few of them as well.
In 2000, when I started my industry career and joined GE, it was a leader in its sector with a net worth of $600 bn. Now, many years and many wrong decisions later, the company has derailed and is no longer an influencer. As GE plummeted, its shareholders made drastic changes to its Board, cutting it down from 18 members to 12. Jeff Immelt stepped down as CEO in 2017 and John Flannery, who replaced him, was himself replaced by Lawrence Culp Jr. in less than a year. GE surely waded through some very turbulent waters. In 2017, GE lost its place in the Dow Jones Industrial Average after more than a century. For a company like GE, it’s the ultimate fall from grace.
GE’s mediocre performance by no means stands alone. Long-standing companies, like GE, Nokia and Blackberry, are prisoners of their own principles, with their inflexible hierarchies forming stumbling blocks to change. Process-driven companies stand the risk of slow information flows, making the decision-making process that much slower. Bureaucratic procedures often stop the process of ideation from bottom to top, and stops innovation in its tracks.
Exceptions to this rule also exist. Companies like Reliance Industries and Amazon have prospered even during the 2008 recession, as if they held the fabled, magic formula for success.
This Indian giant’s growth in multiple directions has been nothing short of miraculous. According to Bernstein Research, “With activities spanning oil and gas, telecoms, retail media and fintech, Reliance is one of the most diversified conglomerates in India, if not in the world. There is simply no other company like it.” In a recent report, it went on to highlight that, “In India, Reliance dominates energy, telecom and retail in the same way that Exxon, AT&T and Amazon do in the US. But rather than three separate companies, Reliance comprises all three of these businesses rolled into one.” It seems that global economic recession, a worldwide pandemic, and technological disruptions are simply no match for this multifaceted giant.
Amazon’s rise and steady climb, on the other hand, has continuous reinvention at its core. What started out as an online bookstore in a Seattle basement has now become a trillion-dollar company. Amazon’s growth has been unstoppable and its expansion borderless. It has disrupted multiple sectors in its journey towards stardom, and has become the company that can do everything. A stark opposite to what happened at GE. Jeff Bezos’s visionary leadership has steered the company towards greater heights. Continuous innovation has been one of the critical driving forces behind Amazon’s growth and the company nurtures this in its employees.
What sets Reliance and Amazon apart from companies like GE? How are they able to not only survive, but thrive, while others struggle in the face of rapid disruptions?
The inspiration, in these organisations, flows from top to bottom, and the opportunities for innovation are limitless to all. Amazon and Reliance have proven that flat entrepreneurial organisations, where managements give way for leadership, tend to perform better in times of rapid change because they become entrepreneurial in nature.
Organisations, like individuals, tend to get set in their ways. They become heavily hierarchical, and growth fuelled by innovation gets lost in layers of bureaucracy. Whereas, Amazon, a startup that was born in a garage, continues to function like a startup even when it has reached the top of the world.
While startups have the option to pivot for the simple reason that they are young, for legacy organisations this is a luxury, and an expensive one at that. These companies, which have spanned multiple decades or even centuries, were built in a different era and designed to steer through a different sea. They were formed to perform efficiently and effectively, with fewer competitors, and in some cases, with no threat of emerging competition. But things have changed. Now, relaxation means complacency, and that’s a very dangerous trait.
Rethinking Existing Organisational Paradigms
The startup organisational model is the ideal one for businesses to integrate, small or big, at a time when the maximum lifespan of companies on the S&P list is 15 years. A lean, agile, inclusive, diverse organisation driven by a higher purpose has a better chance any day to ride the tide than a traditionally hierarchical and bureaucratic one that has an inflexible approach to change.
Profits must be led by a purpose other than the interests of shareholders, because the time has truly come to revise the ideology Milton Friedman propagated in his now infamous essay of 1970. Times have changed and there is no “one sole purpose,” like Friedman argued. What you stand for is as important as what you are and what you sell.
In this era of advanced technologies and changing customer expectations, holding on to the old formula of viewing your business as a single entity might tip the balance from winning to losing. And an empathetic, compassionate, inclusive leader with the ability to think expansively, will indeed be the deciding factor. If a business wants to stay competitive, it must upgrade its talent so that they can innovate with speed. Leaders of today, and of the near future, will find themselves beset with the need to develop ecosystem thinking — to be more agile, more responsive, and more resilient.
Finally, it is crucial that organisations tap into the new talent pool and upskill existing talent to stay competitive. New organisational design, talent and innovation, after all, will differentiate successful organisations from declining organisations in the new world order.
In my book, The New Age Organisation, I identify five fundamental forces driving the change and offer actionable practices on how organisations should respond to the changes, to sustain and achieve business growth.
Aravind Chinchure is the author of a new book, The New Age Organisation: How to Navigate Rapid Disruption and Lead in the Fourth Industrial Revolution, which offers a new organisational framework and a new leadership approach to build agile and responsive organisation.
