And the adoption of technology by consumers is hugely faster than organisations.
So, what does this mean for the future of large organisations? How do technology brands need to adapt their business models to survive in this rapidly evolving environment?
Ultimately, organisations that are better adapted to a dynamic and complex environment are in a stronger position. These are ‘exponential organisations’ instead of classic, linear ones. For these companies, speed, learning, unlearning and flexibility will become more important.
At a structural level, hierarchies will transform into networks and companies will become more open. Centralised top down systems will be replaced by decentralised solutions and systems, and ownership will be increasingly substituted by access.
Not only will there be radical changes in strategy, organisational structure and systems and processes, but also in people, KPIs and culture. While startups are able embrace these changes without any legacy, inertia or sunk costs, larger and older organisations tend to find themselves trapped in their previous successes and outdated business models.
In practical terms, startups are changing business culture:
- KPIs and goals are fully open and transparent to all employees, which in turn is depolarising the company;
- Employees are able to self-select projects or even create new ones with less, or even no, top down approval;
- Self organising teams and decentralised authority for individual employees is the standard;
- The use of short feedback cycles and goals have a motivating impact for employees and teams;
- Social technologies are woven into all corners of the organisation, using activity streams, file sharing, wikis, task management and even teleprescence robots;
- Curiosity is supported by embracing experimentation; and
- Employees and partners are proud to be a part of an organisation due to its higher purpose – how its products are creating a better world in ecological, health and/or social terms
It is very hard for large organisations to re-organise themselves and compete in this new exponential era. Most fail, and only a handful will succeed.
For example, the likes of Google, GE, Haier and Coca Cola have been able to adapt. Haier from China had 80,000 employees in 2005 and it was too rigid killing innovation. At this point, the management team decided to create 2,000 individual startups in their own organisation, stripping out the middle management. These 2,000 startups had decentralised authority and self organising teams with a customer focus. In the last three years the company went from $20bn to $60bn market cap due its radical new organisational model.
In conclusion, startups will continue to disrupt the older and larger organisations. The key reason is that older organisations kill corporate innovation themselves due to internal politics and the focus on shareholder value.
For example, why didn’t Blockbuster create its own Netflix a long time ago? Because it would have impacted its top- and bottom-line in a negative way at first, and ultimately disturbed its cash cow. Shareholders would not have appreciated this, as they have a short-term view. It would have also killed the bonuses of the executive team and directors. Additionally, risk taking and failure is a career-limiting move in most large companies. So what happens is that real radical innovation or disruption is avoided, and only incremental innovation is allowed.
That is why the old guard is being replaced by the new.
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