Signs of a Corporate Immune System designed to Kill Innovation
when a client tells you that more than 50% of their revenue is in danger in the next 5 years because of development in external markets, there are 2 possibilities: you are either talking to a FMCG player operating in a rapidly growing market or you are facing a B2B client who for at least 5 years back has been actively trying to ignore the changes that have been taking place in their market environment. This article is about the latter and the crippling Corporate Immune System that is rarely in focus when designing a transformation programme.
I have worked with clients at different moments in their process of decline. In the FMCG markets, losing 50% of your revenue is relatively easy: getting product features wrong, missing a market launch window or misallocating marketing budgets can easily lead to such a rapid fall. The story of the decline of HTC is a good example. The more interesing however is looking at a B2B player that has developed the discipline of ignoring external changes in the market.
As a company, ignoring external market change is not easy. A corporate immune system needs to be in place that muffles external impulses that have the potential to redirect the course of the company. When an organisation loses track of the external reality, it is often about failing to innovate or failing to act on opportunities that are presented. Over time, I have identified 5 signs that serve as indicator of such a toxic corporate immune system. Without an exeption, all the organisations that have served as a basis for this analysis have meanwhile disappeared from the radar / been taken over by a competitor.
Ownership and Acountability: external impulses trigger some kind of activity in the organisation ideally bringing it on the radar. By combining high decision making velocity (data driven) with ownership and accountability, activities should be able develop enough momentum as to change the course of the company. In order to facilitate this process, a forum needs to be put in place that can delegate ownership and follow trough on the results. The absense of such a forum takes the power out of the impulses / early activities and leaves initiative taking to the crazy fool willing to waste his/her time at own risk. Indicators: Organisations that lack focus on ownership and accountability usually create heavy reporting overhead structures generated by staff functions that are not aligned with the companies objectives and are unable to differentiate between high priority strategic relevant topics and topics that have the potential to deliver only incremental improvement.
Family Culture : family culture is a good, some family owned companies I have worked with display strength by giving a feeling of beloning to their employees leading to empowerment and resulting in better products and happier customers. Where family culture becomes toxic is when it only applies to a part of the organisation, a select group of people, a line within the organisation beyond which the feeling of belonging is not extended. Indicators: A high employee turnover rate of good people in the periphery of this "golden circle" is a good indicator for this toxic family culture.
Transparency: transparency starts with an org chart, extends to a clearly comunicated framework for decision making and includes a financial reporting that is designed to support the business at all levels in the organisation. Indicators: In organisations where the org chart is a 12 page word ducument, decision making is done in the ally and behind closed doors, financial reporting at sub business unit level is not available, effectively a maze is created that muffles any initiative from gaining visibility.
Leadership: a side effect of not wanting to be challenged and creating a golden circle of people at the core of the organisation, is a layer of weak middle manager that feel happy with not challenging the status quo. This reinforces the organisational inability to respond to changes in the external environment and paralises its ability to attract the right talent. Indicators: a high turnover rate in entry level positions and difficulties to attract top talent is a good indication. Good employees usually leave when the environment they work in is not inspiring.
Strategy: a well communicated strategy and purpose statement gives orientation and guidance to all levels in the organisation. The absense of such an orientation leaves the front end of the organisation numb, a feeling that is translated 1:1 into the customer dialogue. Indicators: the innovativeness of the organisation should be measured at the customer front instead of a survey between peers. Customer will give direct feedback, and are a good indicator on whether the organisation is aligned (both people and products) with what the market is demanding.
Many of these factors reinforce each others in a destructive downward spiral. An effectively executed change management program can initiate the turnaround. Needless to say that such a turnaround programme can only be initiated at the top of the organisation as it is more about cultural change than anything else.
The rapidely changing market environment is the main driver behind starting a Digital Transformation programme. Organisations that maintain a corporate immune system that muffles any response to external change should have a real fear being extinct in the next 5 years. In designing a digital transformation project, cultural change needs to be part of the transformation path. Starting with understanding the status quo, a set of indicators can be determined to measure the sustainability of the transformation that is in progress and indicate the organisational ability to respond to external change.
The result of a well executed digital transformation programme leads to organisational agility and ultimately sustainable competitive advantage in a digital age. Within an endangered industry segment, it is exactly this organisational agility that can make the difference between failure or survival.
Peter Van Overmeir - The Mobile Project - www.themobileproject.net
