A successful enterprise in the post-pandemic age is not a new operating model, organizational structure, or a software platform. It is a different kind of company that is rooted in the tenets discussed here.
To be successful, the new age organization needs to be:
A purpose-driven company is very clear on the “Why” and it is typically customer-centric. The company takes a stand on something that is bigger than profits. In 2014, CVS stopped selling tobacco in its pharmacy losing a staggering $2Bn in revenues. Selling tobacco didn’t align with CVS’ purpose of “helping people on their path to better health”.[i]
While the traditional large-companies played an important role in creating townships and communities, today there are entire startups that are solely founded on purpose. Virta health for example was found on the sole purpose of reversing type 2 diabetes in 100Mn people by 2025. That relentless focus helped them solve one of the biggest challenges of modern human race that is reversing chronic diabetes[ii]. Beyond Meat is yet another example where their purpose of finding better ways to feed humans and there by solving human health, climate change, animal welfare and constraints on natural resource helped them create the future of protein.
Take Delta Airlines for example the vision is to be the world’s most trusted airline. I am sure there is a very good reason and numerous billable consulting hours of really smart brains who very deliberately chose the word “trusted”. After all you want to trust the airline when you are 37000 ft up in the skies. The word trust in the case of an airline is a loaded one! A purpose-driven Delta would talk about helping people get from one-place or bringing to life’s key moments in people’s lives in a timely, cost-effective, comfortably, and safe manner. That would lead them to look at the workforce, activities, and products and services with a very different view.
Purpose-driven companies attract the right talent-base, simplifies the things that a company needs to do to achieve that purpose, and serves as a guide for people to wake up every morning to show up with a “why”.
Unlike vision and mission statements, purpose is customer-centric and outcome-driven. It allows a company to take a very different approach to the products and services.
At the 2020 CEO Summit, Elon Musk advised CEOs to spend less time in boardrooms and presentations and spending more time in improving the product or service.[iii] Today, the way the traditional companies operate is everything but that. A hierarchy of managers get their insight and intelligence from PowerPoint presentations, outsource customer connections sometimes 5–6 levels deep.
You don’t have to go too far to understand how this works. Think about the last friend or relative you stopped connecting with due to busy schedules, and totally lost track of them, their problems, key moments in life, and so on. It is very easy to do that with customers.
Heeding to the Elon Musk advice would require the leadership to better understand their customers, look at the problems, the hacks that people are doing on a day-to-day basis, build empathy, and reimagine products or services with simplicity, scalability, and accessibility.
It requires a company to be design-led in solving customer’s problems. While there are approaches such as Design Thinking to help facilitate it, the end-goal requires the company’s to be in the muck with their customers day-in and day-out to build the right empathy. It requires adoption of disciplines such as Product Management, User Experience wherein the focus is on making the product simple, and an overall leadership that is visionary enough to understand what is possible with the current state of technology.
The employees of such customer-centric companies get the product out faster, gather feedback, and iterate instead of first delivering a financial projection full of false precision and a fully baked product that is at odds with what a customer wants.
Marc Andreessen — a highly respected Silicon Valley visionary once said, “ Software is eating the world “ and quoted how the world’s most successful book seller is a software company referencing Amazon and even as the traditional stores like Borders were going out of business, Amazon moved ahead to create Kindle and now even the books themselves are software.
The emergence of cloud, reduced storage and processing costs, open sourcing of complex coding libraries like TensorFlow backed by Google have all lowered the barrier on Artificial Intelligence (AI). Businesses, Countries, and economies are now chasing this race to win.
A digitally-powered enterprise is all about Augmented Intelligence where software ruthlessly eliminates processes that require human intervention and empowers the humans with the intelligence needed to accomplish outcomes. Both software and humans work in unison.
The fourth industrial revolution (Industry 4.0) is a prime example of augmented intelligence where large scale machines talk with each other via sensors and Internet also known as Internet of Things (IoT). Smart Software typically powered by artificial intelligence enables that conversation, learns the context, decisions, and slowly and steadily makes them for humans. Humans move onto higher-order work.
Seven of the 10 most valuable companies globally are now businesses based on a platform based model. A platform-based business model refers to creation of digital communities and marketplaces to allow people to interact and transact. These companies become the mainstay by connecting customers with suppliers.
According to a McKinsey report, more than 30% of global economic activity — some $60 trillion — could be mediated by digital platforms in six years’ time, according to a McKinsey research report, and yet experts estimate only 3% of established companies have adopted an effective platform strategy.[iv]
The platform businesses are typically great aggregators meaning they bring myriad of data sources and make discovery personal, easy, and transactional. They are all social platforms in a way where people can interact, communicate, and find a reason to come back-again and again. They build on their products and services to mobilize people to accomplish something such as a task or learn.
In the post-pandemic era, a new type of platform will emerge which fundamentally offers a way for consumers and customers to interact with your company. The best example is the co-existence of UberEats and DoorDash along side your ability to place a pick-up order on a restaurant’s website. In fact many restaurants in our neighborhood very humbly request its customers to place pick-up orders online and use the aggregators for delivery orders. I have actually seen customer’s oblige (including me).
The data generated by a platform business allows them to be more targeted, very quickly understand emerging trends, and proactively respond with solutions. Given that platform companies are natively technology-driven they simply extend with speed.
A traditional company is usually a participant in the platforms paying the platform company to win in the short term and lose in the long term.
Traditional company’s struggle to adopt because mostly driven by leadership’s inability to comprehend, infighting on kingdoms, multiple and disparate brands, and ability to create a platform without the wrath of existing businesses. All this leads to an inertia and tendency to spend hours building financial models instead of actually testing products in the marketplace.
Early-on in Amazon, Jeff Bezos instituted the two-pizza rule. If all the participants in a meeting wouldn’t get a couple of slices of pie, too many people are coming[v].
In this article[vi], Lansiti and Lakhani who are both distinguished authors of the book Competing in the Age of AI, tell a compelling story of two companies — Marriott and AirBnB. Marriott and AirBnB are fundamentally different kind of companies. Marriott was built around the traditional system of people and processes with systems sprinkled around. AirBnB is fundamentally digital that means every human bottleneck is pushed out. Marriott’s operating model is built around traditional human resources and AirBnB has software solving for consumer-centricity with a bunch of managers who are designers and quality specialists and small empowered teams that go after solving a solution.
They further state that every job can be done through machine learning and it will cut across the economy and everyone is going to feel it. For entrepreneurs it is like a holiday season finding opportunities under rock. For a traditional firm, there is an entire generation of opportunities, the challenge is making sure that the infrastructure is open to it.
The quote below sums-up what it takes to win.
It is not a disruption. Rather, it’s a different kind of firm. This hasn’t happened in more than 100 years. ~Lansiti and Lakhani — Authors, Competing in the Age of AI
Big corporations are setup for economies of scale and be a guardian. They love to innovate by following rigid processes forgetting the fact that they got to where they are by being purpose-driven, risk-taking, focusing on customer, and relentlessly busting through obstacles.
Ironically, a change like this requires a measured reorganization without breaking what makes a company tick! The leaders to relinquish their control and be in service, with clear visibility into portfolio of problems and a disciplined rigor to empower small teams led by a product owner to be focused on doing the right thing. Much like Spotify, where the leadership played the role of rallying around the vision, set clear objectives, empower the product owners to make the right call and be in service of the teams to “Think It, build it, ship it, tweak it” by adopting Lean Startup Principles such as Minimum Viable Product (MVP).
The biggest revolutions in the world succeeded because of a network of people connecting around a purpose and everyone playing their part in it and a leader orchestrated it. It didn’t occur because of a clearly organized hierarchy where every act was approved by “someone”. Yet almost all enterprises are organized in a hierarchy.
In the book Team of Teams, Stan McChrystal describes his experience with the U.S. Task Force in Iraq in the early 2000s. Basically a command and control drive military was failing against a network of terrorists and on the fly, Stan McChrystal had to create a network of task force members against different “problems”, cultivate chaos, encourage interaction between employees irrespective of the organizational chart, and let information flow freely. He put himself in the middle to have a pulse and orchestrate the outcomes. This drastically changed the outcomes.
Spotify one of the early pioneers of small teams and a success story on how to best orchestrate them takes it even step further as a way of doing the work. Spotify was born out of passion of Daniel Ek a failed musician himself with a vision that disrupts the existing norms. Spotify teams organized into squads (also called pods) around a specific opportunity and is often orchestrated by a Product Owner (PO). A tribe is a collection of squads that work in related areas (e.g., music player or backend infrastructure). The tribes are usually below the Dunbar Number Threshold which is 100. Dunbar Number which says that most people cannot maintain a social relationship with more than 100 people or so.
A chapter is a collection of people with similar skills primarily focused on economies of scale and growing the community. A guild is inorganic view of teams (e.g., people who love to cycle to work).
In his book The Age of Agile, Stephen Denning states that today’s hierarchical organizations were designed to deliver steady results and not upset the applecart. That is just not how the new age works. It is more network driven where people are organized around an outcome.
Opinions are my own and not the views of my employer
Key References[i] https://www.salesforce.org/blog/what-does-a-purpose-driven-company-look-like/[ii] https://www.virtahealth.com/[iii] https://www.wsj.com/video/watch-elon-musk-on-regulators-silicon-valley-and-innovation/6C4A0D24-3F89-42F8-94B6-F51F4020A9D4.html[iv] https://innovator.news/the-platform-economy-3c09439b56[v] https://www.fastcompany.com/3037542/productivity-hack-of-the-week-the-two-pizza-approach-to-productive-teamwork
Originally published at https://www.digitallymani.com on January 18, 2021.