In October of 2008, I wrote about a company that had a reputation as a paragon of good management that was its own worst enemy when it came to sustainable efforts to innovate and transform. With economic uncertainty in the air, a lot of firms are falling right into those same old patterns.
The collapse of Lehman Brothers in September 2008 triggered a severe global financial crisis. It led to a worldwide recession, financial market turmoil, and a massive government bailout of banks and financial institutions. This brought the speculative world of Wall Street right to Main Street’s doorstep and left a lot of people angry and disillusioned.
Businesses, unsurprisingly, responded then as they are responding now, by pulling back on non-core activities, making cuts, and halting their innovation efforts. It is particularly painful for the tech sector, which rode high on the “free money” period of the mid 000’s and are now coming back to earth. I commented on this pattern back then, in a blog post about a company I was working with.
Here’s what I wrote back then, about a company that made Fast Company’s list of the most innovative companies for 2010!
“I am spending today (October 08, 2008) with a very well-managed, large company. Even here, the long fingers of the economic slowdown are creating more obstacles to innovation-led growth than in more ‘normal’ times.
I asked a group of company leaders to articulate the most common barriers and obstacles to growth that they observed in their organization.
The issues they raised included:
- The “de-risk” mode that many companies have gone into which makes anything even remotely unpredictable look dangerous.
- A lack of a global mindset that leads to local optimization of investment and cuts off more promising corporate projects.
- Brand conflict – when a new project isn’t a great fit for the existing brand.
- Churn among the managers and leaders involved in innovation projects.
- Silos within the organization.
- Existing metrics and rewards that are not suitable for innovation.
- Fear of cannibalization of the existing business.
- Fear, in general.
- Short-termism driven by quarterly results pressure.
- Existing power structures in the company.
What I find absolutely fascinating about this list (and remember, this is an extremely well managed firm) is the extent to which the barriers to growth are essentially self-inflicted. They are internal processes, systems, relationships and politics that can get in the way of doing anything new.
Existing companies tend to have accumulated lots of these sorts of barriers – but it doesn’t have to be a foregone conclusion that these will be or should be in place. Here is where adroit innovation leadership, to me, can make all the difference. This is one of the key themes in our forthcoming book Discovery Driven Growth.”
Innovation leaders that won then and are winning today
Discovery Driven Growth did indeed get published in 2009, the following year. Quite delightfully, the book has since gone on to be accorded a “management classic” by Global Management ranking Thinkers50.
The book’s central message is that firms that figure out a way to keep their innovation programs healthy, even in the face of difficult times, benefit. They don’t succumb to the panic of the moment and over-react by lopping off everything deemed non-essential.
While Apple’s iPhone was introduced in 2007, the App store was not introduced until 2008. What a lot of people have forgotten was that the iPhone was one of a series of breakthrough products, including a touch screen version of the iPod. This showed the world how powerful that form factor could be.
After a few stumbles in the late 90’s, Amazon emerged as a dominant force in e-commerce during and after the Great Recession. The company’s unique management system and willingness to make long-term bets propelled a truly staggering amount of growth. As one long-term employee observed, Amazon “played offense” in the midst of the recession, being willing to make moves other companies might have shied away from. Even as much of the retail economy collapsed, Amazon invested heavily in logistics and operations, innovated in how it stocked inventory and leveraged the power of its Amazon Prime (shipping included) offering to create loyal customers initially attracted by lower prices.
After a period in which Steve Ballmer of Microsoft was called “the worst CEO in America,” Satya Nadella was appointed CEO in 2014 as the criticism became overwhelming. Though Ballmer was widely criticized for keeping Microsoft PC-centric when the world was moving on to mobile and the cloud, many of the investments started on his watch allowed the company to transform itself and experience significant growth. The company focused on cloud computing with its Azure platform, achieved success with its Office 365 subscription model, and made strategic acquisitions to strengthen its position in various sectors.
Another firm that came out strongly after the Great Recession was Netflix Inc. The company was able to capitalize on the benefits of new technology (the invention of DVD’s and the establishment of a standard for them) and eventually transitioned to a major streaming service.
What did these firms all have in common? A consistent process for balancing the needs of today with opportunities for their future. A willingness to “disengage.” And a way of balancing the power imbalances between the core businesses of today and the future potential opportunities of tomorrow.
And the original, “well managed” company?
The barriers that I wrote about back then got worse, despite things looking great to the outside world.
In an unfortunate turn of events, a program that I’d been running to help them create a more entrepreneurial mindset got mixed up with a faddish but not very well thought through effort to do something similar. It could have potentially worked, but the teams doing the facilitating didn’t have big-company experience. Predictably, the thing went down in flames, a victim of an inability to manage “mothership” issues, all represented in the list above.
I’ve watched this same movie over and over again, as firms announce corporate innovation programs only to drop them, only to restart them again. It’s sad.
One of the biggest tragedies is that great ideas that could have been game-changers never make it into market-facing business units (example: Nokia’s invention of what could have been an iPad like device years before Apple explored the concept). If this goes on long enough, top talent leaves, the business gets stuck in a rinse-and-repeat cycle of being dominated by the core and the company, sometimes quickly and sometimes slowly, becomes irrelevant to its markets. The result? To quote the New York Times, it becomes “an organization so swollen by its early success that it grew complacent, slow and removed from consumer desires.” And lest you think this is an old, solved problem, have a look at the current crop of once do-no-wrong companies backpedaling on plans and laying off people.
Can these issues be addressed? Absolutely. Can they be addressed using the same techniques that you use to manage the core business? Absolutely not. Enabling the implementation of the Discovery Driven Growth approach is what I founded Valize to do. We’ve now got a very robust toolkit that covers resourcing, governance and alignment at the corporate level and project management at the team level. There’s software to make tracking projects more transparent and less onerous. There are on-line learning guides to help upskill teams in the flow of work, rather than interrupting it. You can find out more at Valize.com.