Why big companies struggle to reinvent themselves

Posted by Mike Walsh

8/24/20 5:42 AM

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Spoiler alert. It is not about their size. One of the most dangerous traps for corporations is to consume the idea of disruption, without internalizing it. They redesign their offices and add more open-plan spaces; they upgrade their technology and give their employees new collaboration tools; they sponsor a startup accelerator and create an innovation division in a separate office. Fast forward a few years, and nothing has changed. Why?


Startups are a 21st-century wish-fulfillment story. It's a familiar trope: from working out of a garage to a billion-dollar IPO, from using old doors as desks to becoming a global tech platform, from anonymous geek to master of the universe. Seductive fairytales for sure, however, it is not only aspiring entrepreneurs that are entranced by the idea of creating the next unicorn. Corporates fall for it too, and in doing so - mistake form for essence. What makes startups effective industry disruptors is not their size or their 'work-as-play' offices, but the relentless focus that comes from combining limited resources with the prospect of unlimited reward.

Here is the paradox: if big companies dream of being as disruptive and innovative as a startup, startups dream of attaining the market power and resources of a big company. Scale matters. Without a critical mass of customers, infrastructure, and transactions - you are unlikely to make a significant impact. Once you have achieved scale (and most big companies have done exactly that), your real goal should not be acting like a startup but instead convincing everyone that you are a very different kind of company altogether.

 


Consider Dominos Pizza. The key to their successful transformation is that they didn't treat technology and innovation as an experimental division or an enterprise IT upgrade project. For example, their 'pizza tracker' app, which first appeared in 2008, not only provided a new interaction channel for customers, it allowed franchisees to streamline operations, track performance, and continuously improve. More recently, Domino's embrace of everything from AI cameras in kitchens to autonomous delivery robots further reinforces the brand's assertion that they are not a pizza company at all. They are a technology company.

Don't get me wrong; this is more than just a PR or marketing spin. Becoming an actual technology-centric organization is not easy. Pretty much every supermarket brand these days offers online ordering and home delivery, but few can rival Ocado. Most fitness brands have their mobile training apps, but Peloton, they are not. The reason for that is building a value-generating technology platform is hard. It demands not only a massive investment in systems and talent but also a radical rethink of your culture.

As Terence McKenna put it, 'culture is your operating system.' You can upgrade your entire enterprise stack, but unless you also change the way your people interact, communicate, use data, make decisions, and design processes - then fundamentally, you are no different than you were before. The kind of technology that makes a difference is rarely the kind you can subscribe to on a monthly plan. As a simple rule of thumb, if a new technology is widely available and easy to integrate, it is probably just table stakes.

What makes you a technology company is not using technology; it is your ability to make technology work in new and unexpected ways. Despite the plethora of startup boot camps and business model canvases, there is no obvious playbook. Long before computers and the Internet, the original killer app was electricity. The British scientist, Michael Faraday, invented the electric dynamo in 1831. Yet, it took 82 years for someone like Henry Ford to realize that electricity meant you could now design factories in very different ways. His big idea, the 'moving assembly line,' relied on the fact that compared to a steam-era factory, electricity allowed for more decentralized operations. Electromagnetism was brilliant science, but factory automation changed the world.

Unfortunately, we won't have 82 years this time - when it comes to figuring out how AI, algorithms, and automation should transform the way we do things. The COVID-19 crisis has been a forcing function for many organizations. Even the most reluctant leaders learned to work from home, embrace Cloud technologies, and become more data-driven in their decision-making. While that may have been sufficient to survive the early days of the crisis, it won't be enough in the post-pandemic future.

 

The stock market is rapidly diverging between more traditional stocks and those, whether they are delivering groceries or pizza - that can be said to be technology companies. To be part of that club, you need to challenge your orthodoxies. Don't imagine being more like a startup; rather - ask how AI might reshape your industry or market. In other words, what is possible now that wasn't even conceivable before?

Topics: Leadership

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