Founder: Turnaround Talk
Reeling from the permanent change enforced by a global health pandemic, businesses have had to deal with a global economic system facing significant pressure and a local electrical grid where demand far exceeds Eskom’s capacity.
The main concern that many businesses are dealing with as they look towards revising their future outlook is scale. How do they scale up their business to sufficiently achieve growth while not overextending to the point of placing the company in financial distress?
This global corporate challenge requires agile businesses that are future-fit enough to respond to challenges as they arise. Over the past two weeks, we have been focusing on a McKinsey report which details how companies can approach this. We round off this discussion with the imperatives that companies need to focus on when it comes to scale.
Imperative 7: Adopt an ecosystem view
The McKinsey article points out that, in 2014, Tesla made the seemingly radical decision to open source its patents and encourage other companies to use its intellectual property. In retrospect, that choice is a brilliant model of the ecosystem-oriented decisions that all future-ready companies must make. Tesla recognized that it couldn’t grow without partners that would build charging stations and offer services to create the infrastructure to support electric vehicles. By putting itself at the center of a burgeoning ecosystem of partners, Tesla laid the groundwork for its own explosive growth.
Future-proof organizations will take such examples to heart, recognizing that traditional understandings about what an organization is and where its boundaries lie are being upended. The old thinking was all about gaining leverage and controlling the supply chain. Increasingly, however, value is created through networks where partners share data, code, and skills; where communities of businesses create value and antifragility together.
The article adds that the underlying recognition that top companies embrace (and that laggards struggle to accept) is that the sources of value will be constantly changing—in ways that can’t be tapped solely by a company’s traditional, core business. Successful companies need to excel at blurring boundaries, taking a systems view rather than a mechanistic one, and embracing fluidity over fixed plans.
Future-ready organizations view partners as extensions of themselves. These relationships feature porous boundaries and high levels of trust and mutual dependence to share value and let each partner focus on what it does best. For example, Amazon encouraged the formation of new delivery start-ups by launching a last-mile delivery program that offered top-performing employees seed money, leased vans, and training. While these delivery-system partners are self-employed, Amazon views them as both an extension of their logistics ecosystem and a new form of homegrown partnership.
The article points out that partnerships should be cultivated for the long term to better develop the antifragility that helps partners weather shocks. For example, Johnson & Johnson’s JLABS provides support and resources on compliance, markets, science, and other topics to promising start-ups. By doing so, the company supports and develops relationships with entrepreneurs on the “fragile front lines of innovation.” Instead of transactional, win–lose relationships, models such as this one embrace partnerships motivated by shared success.
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Imperative 8: Build data-rich tech platforms
The McKinsey article points out that future-proof companies take data seriously. For them, data isn’t simply about reporting what is happening in the business or answering a business question. Data is the business.
The rise of Netflix is a case in point, as demonstrated in its transformation from a small, mail-in provider of DVDs to a multifaceted global platform, streaming service, and content creator. Netflix achieved its growth by leveraging its user data in the powerful algorithms that created its recommendation engine. The company’s recommender system now accounts for 80% of the time customers spend streaming Netflix content. Future-ready companies understand that data can continually empower decisions and the value agenda in unexpected yet promising ways.
The article adds that to make the most of data; leading organizations must tackle complex tasks. They must create compelling approaches to data governance, redesign processes as modular applications, tap the benefits of scalable cloud-based technology, and support all this through variable-cost technology budgets that are reallocated dynamically. By seizing upon data’s ability to connect and scale, these companies will be able to develop new products, services, and even businesses in fast release-and-upgrade cycles—much as Tesla updates its products over the air several times a year.
Imperative 9: Accelerate learning as an organization
Capitalizing on new approaches to data requires modern DevOps skills and other capabilities that will be new to most leaders. This underscores the urgency of the final organizational imperative, the one that helps make the others go: accelerate learning. Companies need to get learning right to fuel their talent engine and create an empowered workforce that’s fluent in the art of “fail fast, learn, repeat.” High-performing companies promote a mindset of continuous learning that encourages and supports people to adapt and reinvent themselves to meet shifting needs.
The McKinsey article points out that getting to this level requires instilling a growth mindset, curiosity, and an openness to experimentation and failure. Microsoft CEO Satya Nadella describes it as hypothesis testing. “Instead of saying ‘I have an idea,’” Nadella observes, “what if you said, ‘I have a new hypothesis, let’s go test it, see if it’s valid, ask how quickly can we validate it.’ And if it’s not valid, move on to the next one.” This approach and the company’s underlying push to shift its collective mindset from “know it all” to “learn it all” is emblematic of a learning organization.
Experiment-and-learn environments encourage accelerated personal growth and improvement for employees. They can fuel beneficial innovation, as evidenced by Google’s famous “20% time” policy that encourages employees to work on their own ideas for Google 20% of the time (this approach contributed to the creation of Gmail and Google Maps, among others). The real value in such programs is that they signal to the organization that learning, experimentation, and innovation are part of everyone’s day job, not something that gets done in a “skunkworks” or another specialized group.
Image By: StartupStockPhotos from Pixabay
A time intensive process
Gary Player, one of South Africa’s most famous sportsmen, is renowned for being a straight shooter with journalists. After winning one of his three Masters titles, a journalist commented on how lucky he was. Player’s response was: you know, it’s funny how the more I practice, the luckier I become. Perfection doesn’t come automatically; it is cultivated over time.
The transition to becoming a future-fit company will take a lot of time and practice in specific business areas to refine the skills necessary for success. Action, no matter how flawed and stuttered, is better than inaction. It is a case of looking before you leap. Starting with culture will allow businesses to be confident enough to press the accelerator regarding speed. Ending with scale will give a business a good sense of its future outlook and the value that it can provide to shareholders.
