Complacency is the number one reason boards find themselves gazumped by disruption. Directors become so accustomed to success that it seems impossible for them to imagine how their empires can come tumbling down. This inevitably results in them failing to react as a market changes.
For all the cautionary tales about Airbnb and Netflix, disruption continues to be a challenge for larger organisations. Research conducted by Criticaleye at our CEO Retreat shows that 93 percent of respondents are experiencing it in some shape or form, and yet only 25 percent are fully confident they have the right executive team in place to address the problem.
According to Amy Francis, Relationship Manager at Criticaleye, business leaders have to find a way to be more at ease with uncertainty and volatility. “In the current environment, CEOs and senior executives cannot afford to grow too accustomed to the idea of business as usual.
“They need to be flexible on strategy, retaining a healthy degree of curiosity so they are looking outside of their own organisation and sector, particularly in regards to the impact of technology on consumer behaviour.”
Dealing with large-scale transformation is, however, a highly complex undertaking. Lawrence Hutter, Co-head of Corporate Performance Improvement for Europe at Alvarez & Marsal, says: “The accepted wisdom that most large corporates find it quite hard to deal with rapid change is clearly right. If the business of today is doing well, it’s hard to create a sense of urgency for fundamental change.
“Innovation processes are often very staid and serial, so even when the imperative to change is established, the process of then making that change happen and bringing the next generation of products to market is longwinded. Big corporates have to find a way to be more agile. Smaller companies, by contrast, can usually move much faster and are not held back by legacy systems and processes.”
Of course, it doesn’t necessarily play out in this fashion. Paul McNamara’s experience in financial services means he’s had the privilege of seeing how both the ‘disruptor’ and the ‘disrupted’ approach change. He is currently Chief Executive of EValue, a technology and solutions provider in FS, but he has also held senior roles at Barclays, Standard Life, HBOS and AXA UK.
“Bigger companies adapt to disruption at a pace that is slower than the best smaller companies,” he comments. “But, on the flipside, if there is a disruptive change in the way you must compete in an industry, what you may not notice is that some smaller companies evaporate and fold. Smaller companies may be able to move faster and adapt their businesses more easily, but it’s not always the case.
“The best larger companies anticipate the change required. They will allow their core business to continue while they experiment with new approaches, as well as thinking through how they transition to a new business model.”
In the fast lane
A certain mindset is required to lead a disruptive business. Martyn Oakton, Group Managing Director at waste management and sustainability consultancy Helistrat, says: “Disruption is more readily achieved in smaller, flexible organisations. For corporates, it is often down to legacy investment and the large structures they have behind them. Equally, they have thought processes that are driven by maintaining the status quo.”
At Helistrat, Martyn is looking to reverse the market by moving away from standardised, scheduled waste collection, to customers driving demand as and when required via an app. “Disruption by its very nature is going against the grain of not only the model that exists, but also the organisation that is currently looking to make it flourish and grow. So, I set up a spin-off venture, placing the disruptive capability outside of the existing organisation.
“This alleviated some of the pressure on the senior leadership team and allowed me to actually put the individuals with the right mindset in that area.”
Martyn describes the requisite qualities in a team spearheading disruption as clarity of vision, combined with drive and determination to make a future state a reality. “In that respect, the individuals concerned have to be quite brave; they have to drive a model which by its very nature will require a complete transformation of approach. The mantra should be: ‘Keep it simple and question everything,’” he adds.
A different leadership style will also be required, often going hand-in-hand with a rethink of organisational design and reporting lines. At EValue, Paul says that the company is trying to drive business innovation in financial services. “If our impact is at scale, we can be seen as a positive disruptive force,” he comments.
Paul notes that it's essential to ensure everyone understands the purpose of the business and its objectives.“You need a strategy that is firmly grounded in where future demand will come from, so it is not just innovation for its own sake. The most important thing is to be really clear what that future business looks like.
“Secondly, it is moving early to shift the key priorities of the organisation, the resources that are working on critical initiatives for success, and the types of conversations that are being held with business partners. Often, small companies work with others to collaborate so that the agenda can move to the new paradigm, or shift to a new way of working.”
The relationship between organisational structure and performance continues to be a growing area of interest for businesses. Paul goes on: “In an old business model, when the world seemed pretty stable, you may succeed with a hierarchical approach, where everything is decided at the top. If you are in a business in a changing industry or acting as a change agent, then everyone in the organisation needs to engage in the disruptive strategy and to interpret that for their own individual roles.
“There will always be senior leaders that ‘get it’ and are accepting of change and, in some cases, are change agents themselves. There will be others who are either fearful or protective of the status quo because of personal reasons, or to protect existing margins and infrastructure.”
This must be combined with experimentation and agility, which entails devolved decision-making to allow a buisness to move faster, as well as rethinking how to retain accountability. “This requires greater flexibility in your planning and budgeting,” explains Paul.
“You will need to put some new standards in place when creating this dynamic environment. This includes common ways to describe performance, along with policies to ensure execution is safe even when hierarchy is less important to decision-making.”
Disruption may sound anarchic, but those companies that get it right are obsessed by the details.
By Robert Leeming, Editor, Criticaleye
Interested in reading more? Check out Criticaleye Thought Leader Julian Birkinshaw's article on debunking the myths around disruption
For articles on new ways of working, check out How to Adopt Agile and How to Build a Collaborative Company