The 4-part cheat sheet for business transformation
Grown-up businesses are increasingly turning to start-up approaches as a means to address organisational stasis.
You’ll know how fraught this approach is if you’ve ever been involved in enterprise Agile training, tried to explain an MVP to senior management or witnessed the blank looks when you explain how Slack can be better than email.
There is perverse logic in recommending that mature companies should embrace start-up methods. Such methods might in part contribute to the handful of tech unicorns, but they also correlate to the majority of startups failing.
So where should these enterprises — hungry for transformation — turn for inspiration?
Well, how about a company that’s been around for over 20 years and has a market cap nearing half a trillion US dollars?
Yep, I’m talking about Amazon (soon coming to pillage Australian retail).
The good news is that Jeff Bezos recently shared some of the crucial dynamics that help protect Amazon from corporate entropy. His 2017 chairman’s letter is an invaluable insight into how Amazon maintains start-up spirit in mature organisations.
It will resonate with anyone in the midst of a business transformation (or “disruptive innovation”). While transformation is all the rage at the moment, it is very much easier said than done. Borrowing from Mike Tyson;
“Everyone has a plan [for digital transformation] until they get punched in the mouth.”
If this is the case, you could do much worse than turning to these 4 components described by Bezos. I’ve highlighted key quotes from Bezos for each element along with actionable suggestions for implementation.
The 4-Part Cheat Sheet for Transformation
- Customer Obsession
- Kill Your Proxies
- Adopt External Trends
- High-Velocity Decision Making
“Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.” — Jeff Bezos
In my experience, this is the easiest and most glaring failure of mature organisations. They simply lose touch with their customers. What this typically means is that the vast majority of employees are completely insulated from direct customer interaction. That job is left to support staff (often outsourced) or sales people who in turn are often ignored by the rest of the organisation.
If the customer’s voice is missing from internal conversations, you really are stumbling around in the dark.
No one would disagree customer obsession is important, but it’s another matter acting on it.
5 Immediate Ways to Obsess About Customers
i. Leave an empty chair at meetings
Amazon knows who “the most important person in the room” is. They have a meeting custom of leaving an empty chair at the table to represent the customer. Sure, it’s symbolic, but makes for an interesting jumping off point for team conversations.
ii. Get out of the building and talk to customers
That means everyone in your organisation, especially you marketing folk who purport to know your audience! You don’t necessarily need to have a script or plan, just find them, chat to them and listen, listen, listen.
iii. Ask Customers Deadlock Questions
Install something like Intercom and use customer conversations as circuit breakers to those interminable internal squabbles. Don’t argue back and forth — go straight to some customers and ask them directly.
iv. Do Customer Support
Rotate your entire staff (and especially new staff) through your support/service units so they have to talk to customers. Start by doing it yourself. Today. No, seriously.
v. Do User Testing
Do actual user testing, with you know, like real customers. Or at the least find out how people are actually using your website. Believe me, it will be painful but worthwhile.
Kill Your Proxies
“Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right.” — Jeff Bezos
Anyone who works in a mature organisation will be nodding their head in response to Bezos’ words right now. I see this in so many organisations. Marketing teams (again, sorry) are often culprits. You ask them about their responsibilities and they reply with something about sending newsletters, producing content, campaign execution, brand strategy etc. You ask how they measure their success and they stumble a little before mumbling about the difficulties of measuring brand and marketing activities.
The #1 Way To Focus on Outcomes Not Proxies
It’s actually pretty simple:
Build (and worship) a customer funnel
If you don’t do this already, you’ll remain a victim to the ‘we can’t measure that’ arguments.
If you claim to do this already, do you really have a proper, ingrained, respected and resourced process to define, measure and optimise your funnel? More people say they’re data-driven than actually are data-driven.
You need to do this because if you don’t have an objective measure of outcomes, then louder voices and bigger titles will continue winning the vast majority of business decisions. Which is demoralising.
The good news is that creating a customer funnel is actually pretty easy. Read up on Pirate Metrics if you want a simple framework. The beauty of this is that you can create as many customer funnels as is needed. You can have an overall one (great for start-ups) or you can have funnels for different departments (e.g. marketing, sales, content, operations, support).
(N.B. Some companies might struggle to define a linear customer funnel and might prefer to map out more of a customer journey.)
It’s relatively easy to gather online data about customer events (Google Analytics or Kissmetrics will do the job) or you might even need to capture the data manually.
Either way, worshipping a customer funnel is one of the best ways to shift the conversation from activities or proxies to measurable outcomes like customer acquisition, activation, engagement, retention and revenue.
Adopt External Trends
“These big trends are not that hard to spot… but they can be strangely hard for large organizations to embrace.” — Jeff Bezos
I love Bezos’ use of “strangely hard” regarding companies adopting market trends. So many enterprises seem to be stuck in the ‘How We Do Things Around Here’ style of thinking. It’s logical if they’ve had previous success with a certain approach — and maybe you want to have philosophical conversations about the Innovator’s Dilemma (or maybe not) — but the real question is how can you make this imperative more actionable?
A Hack to See The World Outside
There’s one very effective hack to help your team (or organisation) de-anchor themselves from a mindset of internal continuity and explore more external possibilities.
It’s a simple question that you really shouldn’t ask unless you’re ready for a slightly disturbing wrecking ball to swing into your work life.
What would we do if we were starting from scratch?
A mentor of mine threw this curveball to me a few years ago and it stuck hard and fast. In my experience, when you answer this question you are forced to consider external trends, new technology and competitive innovations. And if someone didn’t bring in an external input to answer that question, you don’t have an innovation problem, you have a team problem.
The reason this question works is the corollary that if there is something you would do differently — because it’s newer, smarter, better, faster or more effective — then why the hell wouldn’t you seek to implement that ASAP?
I understand there are various legacies and constraints that don’t give you a completely free hand, however, there will still be a huge over-supply of possibilities.
(Of course, if you want to explore and validate external opportunities in a more sophisticated way, get in touch with us at Early Days)
High-Velocity Decision Making
“… most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow.” — Jeff Bezos
Every person I’ve encountered in large organisations complains about this. They know what to do and how to do, but getting people to agree and budget to be allocated takes so long.
If you don’t have top-down support for this, there are no easy answers to increase the velocity of decision making. There are however a few techniques that Amazon and others embrace which you should definitely steal.
4 Tricks for Acceleration
i. Replace Business Cases with the 6 Page Memo
Go and read this article about how Amazon frames and considers new initiatives. In short, they prepare a detailed 6-page narrative explaining the rationale and components of the project. Key stakeholders read the memo at the start of the meeting, and then, equally informed, have an earnest conversation. No sexy presentations or 85-page business cases. Considered, holistic and shared with key people simultaneously to allow for real discussion.
ii. Work Backwards
Yet another tactic used by Amazon (and many others) is the idea of working backwards.
The first thing you do on a project is to write a ‘future’ press release outlining what you’ve done, why it’s valuable and the impact its had. It’s so simple and out of the various methods I’ve used to get team members and stakeholders up to speed (e.g. project charters, lean canvases, kick-off briefings etc), this is probably the fastest and most effective. It also helps to remove project friction along the way by creating a shared future vision.
iii. Collaboration Over Committees
Enterprises create committees to protect from chaos. But they are also a terrible proxy (!) for actual collaboration. If you don’t believe me, listen to Steve.
If you don’t believe Steve, then how about Elon Musk? One of his staff emails was recently published (read it), where he explicitly articulates why ‘chain of command communication’ is less useful than open, direct communication.
“… you can talk to anyone without anyone else’s permission. Moreover, you should consider yourself obligated to do so until the right thing happens.” — Elon Musk
iv. Stagger Your Budgeting
Given their inherent risk, startups are funded in relatively clearly defined stages. Typically these are Angel (to explore potential), Seed (to prove potential) and then Series A (to start to scale) and so on.
Organisations should do the same for funding internal projects. Getting funding approval for multiple stages of growth takes too long. Don’t ask for $1 million+ for 12 months of runway when you can ask for $50-100k to explore or prove potential in just 1–2 months.
A final word
Business transformation and cultural change is hard. Start-up methods work in the context of start-ups, less so in mature organisations.
It’s less about acting like a start-up and more about being inspired by start-up concepts.
At the least, you might like to assess your own organisation’s capabilities on the 4 ingredients Bezos highlights.
If you’re thinking big, you’ll certainly identify a world of possibilities. But unless you want to be discussing them for 12 months, best to start small with 1–2 specific exemplar initiatives.
At that point everything hinges on the team you assemble and how they are empowered to work. But that’s a conversation for another day.
In the meantime, just steal from Jeff.
Justin McMurray is the co-founder of Early Days, a Sydney-based studio that helps organisations explore and validate technology opportunities.