Welcome to the 20,000 person start-up
Once upon a time size was what made a business strong. Legions of workers, plentiful capital and global reach delivered the power to dominate markets. The decades — possibly centuries — spent getting to that point built a heritage that made such organisations seem unassailable.
Now, suddenly, such scale can be a major vulnerability. The environment in which businesses now operate is one of continuous change and inevitable disruption. It creates winners of those who can adapt and innovate, and losers of those can only alter course at the rate of a super-tanker.
The road is littered with familiar corpses — Blockbuster Video, Eastman Kodak, Woolworths, Borders — with many more, such as Yahoo and Nokia, shadows of their former selves.
Back in 1965, the average lifespan of a company in the S&P 500 index was 33 years. By 1990 this had fallen to 20 years and is expected to plummet to 14 years within the next decade, according to consultants Innosight.
“At our forecasted churn rate, about half of the S&P 500 will be replaced over the next 10 years,” their report predicts, adding: “Frequently, companies miss opportunities to adapt or take advantage of change.”
Sonos founder John MacFarlane, who has just stood down as CEO, recently admitted to one such missed opportunity — initially failing to fully grasp the threat posed by Amazon’s Echo. He told the New York Times: “I fell into that trap where I’ve been watching voice recognition for years. I tried Echo in the beginning and wrote it off. I had too many distractions at that time. I wasn’t playing at the level I should have been playing at in all frankness.”
And that from a technology leader who was instrumental in building Sonos into a household name with sales of $1billion.
Technology is the key driver to this climate of disruption. It has dramatically lowered the cost of entry to many markets and created entirely new ones. It has enabled rapid innovation that has made everything faster, with urgent demand for the new and improved. And it has provided the means to create entirely new business models and ways of working that show little regard for what’s gone before.
Large businesses need to become more nimble, flexible and responsive if they are to survive the new jungle they find themselves in. They need to become agile.
In a global survey by The Economist Intelligence Unit, 90 per cent of business executives believed that organisational agility was critical to business success.
The same study found that revenue growth in agile businesses was 37 per cent faster than non-agile ones, and generated 30 per cent higher profits.
But how does a large enterprise doing so many things with so many people in so many places behave like a one-office start-up of twenty people and a single great idea?
The 20,000-person start-up
While a start-up can focus all its energy and money on getting its product to market, a big business needs to plough resources into just keeping the back office functioning. So large organisations need a significant degree of stability simply to operate. They need processes and structures to handle the size and volume of projects and to organise huge global workforces. Directing it all requires, well, organisation. Take the lid off all that and chaos breaks out, right?
The result, though, is rigid management structures that are hierarchical, with business functions split into self-contained departmental silos. These are the antithesis of agility. Such organisational structures slow down decision making and pit one internal empire against another instead of fostering responsiveness and collaboration. They also mean crucial intelligence is locked inside those silos instead of being freely shared to drive innovation.
As consultants BCG put it in a recent report: “Much of the problem is created by a traditional business model that’s been created for scale and standardisation, rather than for agility and innovation.”
If the big established companies are not where exciting new things are being done, they lose their attraction for the brightest talent. Who wants to be chained to a desk five days a week, logging into some antiquated enterprise IT system to get anything done when they can make a bigger impact and enjoy greater freedoms in start-up land?
Don’t be your own worst enemy
Technology has leveled the playing field and created a culture that favours the agile start-up. But why shouldn’t it also offer up the tools to transform restrictive ways of working in even the most traditional and established enterprises?
Companies are already trying to tackle this shift by introducing aspects of agile working to parts of their organisations. The BCG researchers found that at the project level, introducing agility is fairly straightforward but gets more challenging when applied to a portfolio of projects and even more so at the organisational level.
It suggests that instead of roles existing in departmental silos, “agile teams need dedicated employees from every part of the business, including operations, product management, and IT”.
Similarly, consultants McKinsey has found that many large, more traditional, organisations are taking a cue from digital companies and experimenting with more agile ways of working, but with limited widespread adoption.
Again, the report finds “a chief impediment is their existing operating models and organizational structures. In most of these companies, the process of software or product development remains fragmented and complex”. Those that crack it, though, have seen innovation accelerate by as much as 80 per cent.
Doing so requires bold, progressive leadership and a willingness to embrace the tools that usher in new ways of working.
Time for a new set of tools
It’s ironic that technology is so often what is holding companies back. By clinging onto outdated legacy IT systems rather than embracing the tools that will make them more agile they risk keeping more progressive and productive ways of working beyond reach.
New tools make it easier to collaborate across an organisation, with group messaging enabling effective team working and artificial intelligence automating tasks that divert time and talent from core business activity. It’s not about tearing everything down and starting again, but finding better ways to use existing enterprise software while streamlining workflows within a simple interface that puts work into one place instead of many. Crucially, it’s about being mobile so that people can work where, when and how they want to, rather than conforming to old-fashioned ideas of what work means.
Technology, then, can help bring about the cultural shift that is necessary for a large organisation to become more agile. It can provide the tools for team working, collaboration, communication and sharing of data — the ingredients for a more responsive and flexible business capable of quicker decisions and faster execution.
The danger of doing nothing should be clear enough for the most Luddite of leaders to see. As McKinsey says in its report: “One of the chief risks in a digital business world, however, is standing still.”
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