Large corporations have perfected six sigmas, quarterly budget management, product & roadmap management, off-shoring, evolutionary ROI-based innovation, etc. The best executives are those that can bring a business from $10M to $1B. Sales is king. Accountants and lawyers are lords. Business developers are tolerated. Developers and designers are peasants.
Unfortunately large businesses no longer are as successful as they used to be. Fortune and Forbes are kicking top companies ever faster of their lists.
Why do large companies stop being successful?
The big reason is because corporations can no longer take risks. Wallstreet in its efforts to maximise short-term profits has weakened corporations to the point that is has never been easier for startups to disrupt them. Telecom is slowly disappearing from the list of most valuable companies. Energy and financial services have weakened. In contrast technology has become more important with Apple, Google and Microsoft taking number 1, 2 and 5 respectively. Observant analysts will say that market valuation is different from revenue and profit generation but stocks normally reflect the future, not the present. Most of the top companies are in legally protected markets, e.g. energy, healthcare, telecom, etc. or are in industries that have high barriers of entry due to high capital requirements, e.g. mining, industrial, car manufacturers, etc. This means that they will take some time to be impacted. However telecom is a good example of a market where disruptive innovation is fast eliminating market value and shortly revenues/profits. Market value is now being created by companies that have unfair technology advantages. For the moment those technology advantages have been used to compete with one another. This is about to change. Take Google as an example. It is heavily investing in self-driven cars, networking infrastructure, etc. The result will be that logistics and telecom will be heavily impacted. Apple and Google are competing every day more with telecom operators. Apple, Google and Amazon are taking on the entertainment industry. Google, Tesla, etc. are disrupting car companies.
Why is this important?
The rules of competition are changing. Your worst competitor is no longer the factory next door but a disruptive innovator that makes your industry irrelevant.
How is management impacted?
Management can be experts in producing stamps that customers want and according to highly optimised processes however this is all irrelevant if a competitor makes email servers. Substitute stamps by SMS/calls, carbon-driven cars, DVDs/Blueray, etc.
Chief Disruption/Innovation Officer
What companies need is to focus both on growing their existing business as well as making it irrelevant. Sooner than later somebody will do it so it better be your team than a previously unknown competitor. Also instead of just looking to cannibalising your business, you should look for the next big thing. This is why you need a chief disruption or innovation officer who’s task it is to build scalable new businesses that go from zero to $10M. Most existing executives have never started a new business. They have no idea what it involves. Six sigma and roadmaps are irrelevant as long as you haven’t found a scalable business. The good news is that scaling a new business from $10m to $1b goes a lot faster now than it used to be. Google, Amazon, etc. don’t need a whole army of salespeople and lots of capital investment to double their revenue. Software scales and more and more software is redefining everything.
An online bookstore did not only redefine retail, content distribution and gave the postal services a second chance, it also is becoming the world’s data centre. The best way, to find out if the hot school girl is open for a new relationship, is now showing IT companies how to build servers & routers and telecom giants how people like to communicate. An online search and advertisement company has revolutionised how you find anything from text, images, location, etc. It redefined mobile computing together with a fruit-like branded company. It has global networks that even the biggest telecom incumbents can only dream off. It has cars that drive alone. Body accessories that puts science fiction authors next to historians.
At the same time stamps, travel agents, maps, telephone books, book publishers, bill boards, broadcasters, movie theatres, journalists, photo film, media storage, video cameras, taxi services, estate agents, high street shops, etc. have changed and not always for better.
If you work for a “traditional” company are you sure that in five years your company still is in business or can it be that some unknown small company launched a product that makes your company’s best products look like they belong in the history museum? Remember Nokia phones!!! Five years ago they had record sales…
If software disruptors have so much power, why aren’t companies hiring chief disruption officers. Senior executives whose goal it is to setup disruptive new product families that are owned by traditional players but are allowed to question any industry rules and launch cannibalising offerings often as independent companies.
It is a lot better that a big bank owns a bit coin exchange, a peer to peer lender, a crowd funded venture capitalist, a mobile payment provider, a micro payment cloud broker, a mobile app currency exchange, a machine learning financial adviser, etc. then being put out of business by any disruptive challenger.
Of course you can always copy the telecom model. Have everybody in your company look for potential cost reductions in the form of virtualized networks, squeezing (and killing) suppliers, etc. while your (mobile) broadband network is 12-36 months away from a data tsunami in the form of 4k streaming video, free mobile video calls, fitbits telling the cloud every minute (or second) your average heart beat and twenty other vital signs, free frequency crowd sourced mobile networks, etc. At a time where your business model has not seen a margin improvement in 10 years, your costs are exploding and your revenue will melt faster than ice in the Sahara.
Why don’t you think about hiring a chief disruption officer before you need to hire a chief miracle officer…