There was a recent article in the Wall Street Journal about how the “blue chips” are blue because of poor sales and earnings growth and little stock market appreciation. The article includes examples of industry and category leaders like Caterpillar, Proctor & Gamble, IBM, General Electric, AT&T, Coca-Cola and DuPont.
I have been arguing for years that this should be no surprise, because
society and business fail to recognize old paradigms and structures are failing:
Large corporate structures, like print publications, big banks, and brick and mortar retailers, are all gradual losers, or even worse.
Companies and society continue to do what they have done in the past, often with poor results. Despite massive economic and political efforts, issues like income inequality, healthcare, and infrastructure investment will continue to hold back our economy.
With little real attention to these changing trends and other factors, poor performance of many organizations is
virtually a given.
What is even more distressing is that it is the structure of these organizations that produces much of the results,
rather than the typical financial discussions. For instance, the long held propositions that bigness advantages, like
economies of scale and utilizing expertise and marketing synergies, are simply false in many cases.
Rather, these and other blue chips are seeing blue because of the following limitations:
a. First, many large companies have tunnel vision, organizational constraints, etc., and
ignore emerging technologies and opportunities.
b. Second, they lack the flexibility to respond to the needs of the market and use
outdated solutions to new problems.
c. Third, they fail to allow the vision, entrepreneurship, and risk necessary to succeed,
while heaping huge income growth on unproductive leaders.
What is even more perplexing is that we continue to ignore some proven models of
success. Specifically, I just read a book by Walter
Isaacson called The Innovators, about the digital, computer and internet
revolution. One of the most interesting themes is the commitment, diversity, collaboration,
and even friction, among diverse participants in almost every phase of the
revolution, such as Jobs and Wozniak or Gates and Allen.
This is in direct contrast to the hierarchical structure of most
traditional organizations (and especially Wall Street) whose priorities are
primarily money and greed. For example, I read books on Goldman Sachs and McKinsey
a few months ago. The contrast, in terms of their hierarchy, elitism, and
closed environment, was clearly evident. This was also confirmed by the head of Alibaba
(which recently went public) who said the customer, employees, and then investors were his priorities.
I do not need to review the stock price growth of companies like Google, Facebook, Apple, etc., compared to the “blue chips” to demonstrate the success of a new model. And, remember, IBM and Xerox virtually gave everything away to Apple and Microsoft.
The technology examples provide numerous opportunities for change:·
The success of smaller, more innovative companies shows that many organizations should get smaller, or act smaller, in order to effectively deal with today’s environment.
o Reducing layers and creating professional cultures are a start. Boards and management need to split up organizations, spin offs, or create more independent groups. That may be what’s really
necessary to maximize the potential of both individuals and organizations.
o Large organizations say they want excellence, entrepreneurship, innovation, risk
takers, etc., but, really, they tend to encourage mediocrity. For example,
short term goals and reviews for both organizations and individuals actually
inhibit the development of more positive cultural characteristics, rather than
spur them on.
o Testing and failure, which are critical parts of innovation, are punished more than
rewarded. Even sound risk taking is reduced, because of the fear of
repercussions within the organization.
In short, organizations frequently ignore the advice “you can’t score if
you don’t take a shot.”
Organizations need to be open to measurement and feedback.
o Looking, understanding, and sharing financials, operations reports, and sales reports
are the first step. Simple research studies, social media, and other devices are additional tools.
o Simple management involvement through tools, which might include just walking around
or “how am I doing?” also work.
o You need a commitment to open communication. One of the investors on the “Shark Tank” TV program had simple advice for an entrepreneur who wouldn’t stop talking: Stop talking and listen!
Open systems and collaboration are like winning the trifecta at the horse track
o What is emerging today as a potential solution is the acceptance and reliance upon open systems and collaboration. Open systems have been around for a long time, but are becoming the norm for success. They reject bureaucracy, authority, hierarchy, and closed decision making processes. They encourage participation, diversity, new rules, and to some extent, chaos.
o Google, the Internet, Facebook, LinkedIn, smartphones, tablets, etc., are examples of enablers through open systems. Facebook and iPad may seem like play toys to some, but their inherent potential is just in its infancy. The ability to quickly find information, engage participants, communicate, and see spontaneous actions and decisions,
are all results of these new phenomena.
o One of the biggest outcomes from open systems is the collaborative decision model. As decisions become more complex, the need for diversity, internationalism, innovation, and expertise are expanded. Again, collaboration, and things like “open source” programming, are among the key factors in the success of the digital revolution.
New paradigms for success
These new paradigms: cooperation, smaller can be better, and open collaborative systems, offer great hope for
organizations. While they involve new approaches to problems, the solutions are readily available. What’s needed is
to allow our organizations to be effective. To do so involves providing opportunity and education.
I strenuously argue that if we do not learn to accept and accommodate innovation and deviant behavior within and outside organizations, we cannot achieve excellence or change.