Leading a Company Through Self-Disruption
“Predictions are difficult, especially about the future.” That is one of the many mind-benders attributed to the great Yogi Berra. However, one prediction has proven to be more certain by the hour – rivals are disrupting market leaders at a pace that is accelerating.
Research published in an article by the scholar Mark Perry affirmed that “nearly 9 of every 10 Fortune 500 companies in 1955 are now gone, merged, or contracted, demonstrating that there’s been a lot of market disruption, churning, and creative destruction over the last six decades.”
According to a 2016 report by Innosight (Corporate Longevity: Turbulence Ahead for Large Organizations), corporations in the S&P 500 Index in 1965 stayed in the index for an average of 33 years. By 1990, average tenure in the S&P 500 had narrowed to 20 years and is now forecast to shrink to 14 years by 2026. About half of today’s S&P 500 firms will be replaced over the next ten years at the current churn rate. We are entering “a period of heightened volatility for leading companies across a range of industries, with the next ten years shaping up to be the most potentially turbulent in modern history.”
As a leader, how do you increase the probability that the organization you lead will be on the “thriving and surviving” side of this trend? By systemically creating an environment where the company continuously disrupts and reinvents itself.
Over our 38 years as a company, Intuit has continuously sought to disrupt itself. We’ve navigated economic cycles and tectonic technology shifts from DOS to Windows, to the world wide web, to social, mobile and global derivatives, and ultimately to an AI-driven expert platform in our current incarnation.
We’ve managed to achieve this continuous transformation by falling in love with the customer problem and not our solutions, seeking outside-in inspiration, and adopting the best practices of those we admire while demonstrating the courage to drive change even when the business is performing well. In other words, “we sought to repair the roof when the sun was still shining.”
Over the years, we’ve codified a methodology that I’ll share in this article in hopes it is illustrative for others in this fast-changing environment.
Step 1: Inventory the range of questions and areas of uncertainty that you and your team feel you have the least confidence or ability to understand.
For example, in 2017, the list that kept me and our leadership team awake included questions pertaining to the developmental and social behaviors of children born after the invention of the iPhone, the emergence of AI and machine learning in our relevant categories, the adoption of voice and chatbots as a user interface, the implications of blockchain in fintech, the viability of independent software developers in a mega-platform world, the disruptive business models gaining the most significant traction, and the increasing digitization of government services across the globe. The challenge is to list the most pressing trends and questions most relevant to you and your organization.
Step 2: Frame the questions as organizational learning challenges.
Speak about these questions openly inside the company, acknowledge them as areas that must be better understood. Explain that the journey will begin by looking outside, seeking the best practices and wisdom of others who are further on their journey to understand these subjects. As we often say, “the best experiment to run is one that someone else has already conducted for you.”
Step 3: Make the learning journey a team sport.
In our case, we engaged our top 150 leaders, placed them into three-person “action learning teams,” assigned each team a single question, and challenged them to embark on a learning expedition. They were tasked with observing these trends firsthand and learning from the best wheelmakers. In doing so, they were challenged to run experiments and test their hypotheses along the way. In 2017, our top 150 leaders conducted 500 follow-me-home visits with future-leaning customers, benchmarked and shadowed 225 best practice companies who were further down the learning curve than us, conducted 100 experiments to test their various hypotheses, and did so across five continents. This work was completed in 100 days. It required 50% of the top 150 leaders’ time for the 100 days.
Step 4: Challenge each team to present their conclusions in the Amazon best practice of “six-page narratives.”
Much has been written about the best practice of narratives. We have found them to be transformative. Each team’s final proposal was supported by “facts-per-second,” demonstrating the team remained in love with the problem and not a particular solution by showcasing at least three alternatives they had explored for how the question could be answered. In the narrative, they were asked to explain why they had eliminated the 2nd and 3rd place options before presenting their final recommendation. This approach avoided groupthink and idea “lock-in”, fostering greater creativity and innovation.
Step 5: Debate and decide on the final choices as an executive team.
Given the number of leaders you choose to engage, you will often have several teams independently researching the same question. This approach provides a diverse set of options, all supported by a six-page narrative filled with facts-per-second and tangible in-market evidence. To narrow the various options to the critical few, assign each narrative’s pre-reading to your executive leadership team. Have them prepare their questions and prioritize which ideas resonated most and why. Convene a “protagonist/antagonist” working session to tee up each topic, and leaders debate the pros and cons. The team ultimately determines what must be prioritized going forward to capitalize on the future.
The end result has never failed to surprise us. Ultimately, this self-disruptive exercise is merely the beginning of the journey. The next steps require framing the change management journey, reallocating resources, and driving the necessary execution. However, the first step is to reimagine the future and set the course to reinvent yourself along the way. This process has proven invaluable in our company over the years, and I am hopeful it is useful for you as you reflect on similar challenges in your leadership journey.
What best practices have you learned to condition an organization to willingly disrupt itself?