The classic corporate business approach for devising a business strategy is to allow a vice president of the company to put forward a plan – complete with financial projections and a slide show; then throw money at it to see what will happen. The plan would then play out for several quarters, and then would either fail, meet, or exceed expectations. What startups nowadays would call a “pivot” was classically accomplished by firing the VP when his or her particular strategy failed. As startup mentor Steve Blank shared with me one sunny afternoon in Menlo Park:
“We thought that appendix A was given from God. Now we fire the plan. Not that business plans are stupid, but it is not good to do them first.”
As the world becomes more complex and markets less predictable, the willingness to try things and to fail – while once the feared career-ending bogey-man of the executive suite – is now a necessary component of success. Take a moment to reflect on how much more complex the world is today than 20 years ago. What about compared to 50, or 150 years ago? We see the complexity ratcheting up year-by-year, and only accelerating into greater uncertainty in the future.
Peter Brabeck-Letmathe, Chairman of the Board, Nestle, Michael S. Dell, Chairman and Chief Executive Officer, Dell, USA; (Photo credit: Wikipedia)
With this trend of increasing complexity in mind, we can also see that corporate strategy – and more exactly the process by which companies determine what to do – should be evolving at the same time. We now know that the strategy that wins is the strategy that acknowledges complexity and acts accordingly, deploying an active portfolio of activities which are designed to gain insight quickly and at low cost – like a startup. Even in large businesses that have established business models, the interface between their product offering and the various consumer segments should now be seen as a portfolio of startups – each with the mandate to discover insights into the Truth of the Market as it evolves over time.
The true challenge of business is not the building of products- it is in figuring out the contours of the hidden, ever changing the Truth of your marketplace. It is in answering the questions “what can we do today (and tomorrow) to create even more value for our customers? And what new customers have we not yet discovered?” A company – regardless of size- that is vigorously asking these questions will end up acting very much like a startup.
Look at Dell Computer: 20 years ago they were a dominating force in the technology space – offering computers with a value proposition that upset an industry and made them huge profits. In the years since, with dwindling market share, Dell is now actively back into Startup Mode – searching for market opportunities to pivot into new niches where it can leverage its advantages at scale. The new world of corporate survival requires companies to be exploring opportunities on all sides, all the time. This continuing process of market exploration is required for survival – as the world today is quickly moving to even greater complexity. To be clear, this is not just about profit maximization, but survival, and it applies to every area where a company touches its markets: Which sales channels to use, what messaging to use with each market segment, what products to produce, what niches to build product for, what features resonate with customers, what countries to sell in – When looked at from a Startup perspective, every one of these areas (and a universe of others) is ripe with opportunity to fail, learn, adapt, and earn success that can be repeated. With each success, then moving from uncertainty to the enviable position of maximization of profit.
This new world in which we celebrate failure as valuable learning comes from a fundamental reworking of the expectations of executive teams. The old model was to expect omniscience (which when it worked was most often simple luck). You were expected to put your career on the line by endorsing a plan. The new model values a multi-faceted process of experimentation and a humble approach to the uncertainties of the market:
“We don’t know for sure what is going to work, but we have a process where we will find out.”
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