To be a disruptor rather than a digital dodo, organizations need to be agile and innovative, with business models and technology to match.
That’s all well and good for the small fry, digital-native start-ups – the Spotifys of this world – but what about the bigger fish in the corporate ocean?
According to Nick Holley, Director of Learning at the Corporate Research Forum:
The challenge is, how do large global businesses with hundreds of years of heritage become disruptors in their industry?
Holley thinks the answer lies in culture. It’s a slippery customer to define at the best of times (and even more of a slippery customer to change), but this is the best definition Holley’s heard to date:
Culture is what people do when you’re not watching them.
To be a disruptor, organizations need employees who can think and act for themselves and trust them to do a good job – even when the boss isn’t looking. In practical terms, says Holley, there are four main elements of culture that need to change to keep organizations in the disruptor category: risk taking, collaboration, agility and hyper-awareness:
Organizations that disrupt are brilliant at taking risks and, for me, disruption is all about taking risks.
Holley gives the example of 3M, which started over 115 years ago as a mineral mining company, but now manufactures 55,000 different products and is acknowledged as one of the most consistently innovative companies in the world.
The way 3M maintains innovativeness is to actively encourage failure and mistakes – not in areas such as safety and policy, but in its attitude to experimentation.
One famous and fabulously successful mistake happened when chemist Spencer Silver failed in his task of creating the ultimate super-superglue. Instead, he came up with a sticky substance whose chief characteristic was that it remarkably unsticky.
Spencer used the half-day a week allotted to 3M staff to doodle – to do something that is not part of their day jobs – and went round the company talking to people about his unsticky glue. Colleague Arthur Fry asked to borrow the glue and, the story goes, saw a use for it in helping create bookmarks in his hymnbook that would stay put. The Post-it note was born.
3M’s example also illustrates the second commandment of being a successful disruptor: thou shalt collaborate.
As human beings, we are hardwired to collaborate – we wouldn’t survive unless our parents worked with us to feed and nurture us. Yet, as we move through the school system, the notion of ranking children and testing creeps in, which discourages collaboration and increases competition. This idea is perpetuated into the workplace, where things like performance management ratings continue the anti-collaboration mind-set.
Increasing collaboration is not straightforward, as another senior citizen in the corporate playground, the 177-year-old Siemens, has found. Despite its longevity, Dan Simpson, Head of People and Leadership at Siemens in the UK, says the company is well aware there is no guarantee its success will continue against disruptors in its market. As a result, the company is making major changes to the way it operates. Simpson explains:
We are fundamentally rethinking the idea of a conglomerate. Do we have to have a collection of business that are tied together or could we have a loose confederacy of businesses that are free to be more innovative, more agile, but still held together by something? The ‘something’ is what we‘re still working on.
The traditional conglomerate model works on the premise that when one area of the business is not doing well, another can bolster it up. But that is no longer seen as fast enough in today’s disruptive environment. Instead the idea is to treat each business separately but together, like a fleet of ships, each operating autonomously and on different journeys, but still owned by the same company.
To make the company more agile and encourage risk-taking, Siemens has created a standalone incubator organization, next47, so that it can invest its capital reserves into start-ups. A few weeks ago, one of these incubated companies, Materials Solutions, announced the launch of the UK’s largest 3D printing factory.
The reason behind such activity, says Simpson, is because Siemens felt it needed to be able to react faster to market changes. As a result of a corporate corruption scandal a decade ago, the company developed a compliance organization to ensure nothing like that could happen again:
This was staffed with a very well-meaning people, but the culture it drove across the organization was one of absolute treacle…it completely stymied our risk taking.
So Siemens has begun a cultural shift giving power back to employees to take more ownership and responsibility. It also wants to increase collaboration, but the separating the business into more loosely tied operations has made this difficult. It’s very much a work in progress, says Simpson:
We operate very much in our verticals, but are trying to find a few things on the horizontal that add up to something more and that’s the brand. But that’s difficult, because the fleet of ships strategy says that we actually want you out of the family to be independent and free of the conglomerate to be able to innovate in your market.
The changes at Siemens are all part of trying to increase agility and that comes down to how a company is structured. The core tenet of agile is that you have to have a fluid structure that’s always changing.
One large established company that has dismantled traditional organizational structures to increase agility is the Dutch multi-national bank, ING, which has followed the blueprint set by Spotify of splitting employees into squads, tribes and chapters.
Instead of traditional department silos, the organization is split into large numbers of nine-person, multi-disciplinary squads, grouped together to work on one area, such as mortgage applications. Product ownership is assigned to one member, though they are not the boss of squad. The team is disbanded when they’ve completed their goal.
Squads with a connected focus are grouped together into tribes. Each tribe contains fewer than 150 people and is led by a tribe lead. Each discipline, such as marketing, has its own chapter to encourage cross-tribe collaboration. Holley says:
Here’s a bank taking the concept of agility and has completely restructured its business not around traditional reporting lines, but actually around the customers.
The exact Spotify or ING model is not a blueprint for all agile working – each individual company has to work out its own path that will increase its nimbleness.
The final key to unlock the door to become a disruptor is to become hyper-aware of what customers want and able to react to it. The key idea for this is that most ideas for change don’t come from the leadership, but from the front-line workers who are dealing directly with customers.
One organization that Holley believes has nailed the hyper-aware customer focus is Spanish clothing chain Zara.
Every employee, says Holley, is trained to ask customers questions. Not the run-of-the-mill ‘Can-I-help-you?’ brand of question, but questions about what customers like and don’t like and what they ask for?
At the end of each day employees report any trends or comments to their store manager and then these insights are shared at higher level. If there are common traits among these insights, these can be immediately communicated to designers to incorporate into their designs. It can take less than a day to go from customer comment to designer and just seven days to go from design to a new garment on the shelf. Holley says:
They don’t carry loads of stock, because they have a hyper-awareness of what the customer is actually buying tomorrow.
HR has a key role in helping create and support these four areas of organizational change and culture. As Holley notes:
The first lesson of HR is we are not the people-people, we are the people and organization people. Our role is yes to bring in the right people and the right skills, but we need to create an environment in which people can perform.
Disrupt or die may sound dramatic, but the competition is dramatic. The number of unicorns – start-ups valued at over $1 billion – is rapidly growing. If there isn’t a start-up disruptor in your industry today, there soon will be.
There are some great examples here of how big, established companies are proving agility is not just for start-ups.