How can established companies avoid falling prey to disruption?

Summary

The transcript discusses the paradox of successful companies failing at an increasing rate despite their resources. It identifies organizational complacency and resistance to change as key issues. The example of Blockbuster vs. Netflix illustrates this. The speaker introduces the concept of 'ambidexterity', balancing exploitation of current business models with exploration of new opportunities. IBM's emerging business opportunity process is highlighted as a successful model, emphasizing the need for a clear strategy, shared vision, and tolerance for the tensions arising from managing both exploration and exploitation within an organization.

Takeaways

• 📈 **Success Trap**: Successful companies often fail because they cling to past strategies and processes, even when market conditions change.
• 🎥 **Blockbuster vs. Netflix**: Blockbuster's failure to adapt to digital streaming led to bankruptcy, while Netflix evolved from mail rentals to streaming and now content production.
• 🔄 **Exploit and Explore**: Companies must balance exploiting existing business models with exploring new opportunities to stay relevant.
• 🤝 **IBM's EBOP Process**: IBM's Emerging Business Opportunity Process exemplifies how to nurture new ventures within a large corporation.
• 🚀 **Venture Capitalist Approach**: IBM funds new business ideas like a venture capitalist, scaling successful ones and discontinuing the rest.
• 🧭 **Leadership for Ambidexterity**: Leaders must provide a clear strategy and vision to manage the dual focus on exploitation and exploration.
• 🌐 **Common Identity**: A shared identity helps align teams working on different aspects of the business.
• 🛠️ **Different Alignments**: Exploitative and exploratory units require different cultures, metrics, and evaluation methods.
• 💡 **Google's Ambidexterity**: Google, now Alphabet, separates exploratory and exploitative businesses, allowing for innovation while maintaining core revenue streams.
• 🤔 **Tolerance for Tension**: Leaders must be willing to tolerate the tensions that arise from managing contradictory business strategies.

Q & A

What phenomenon did the speaker and Mike Tishner observe in successful companies?

They observed that big successful companies are failing at an ever-increasing rate, which is puzzling because these companies have all the resources.

What is the main reason successful organizations struggle to adapt to change?

Successful organizations often try to hang on to their past processes, metrics, rewards, and cultures even when strategies and technologies change.

What example does the speaker give to illustrate how successful companies can fail?

The speaker uses Blockbuster, which was a five billion dollar company in 2002, as an example. Blockbuster failed to adapt to the changing market and was eventually bankrupt, while Netflix evolved from renting videos by mail to streaming and is now even producing content.

What does the speaker suggest is necessary for organizations to succeed over long periods?

Organizations need to be able to both exploit their existing businesses and explore into the future, which requires running a very different type of business.

What is the IBM process mentioned in the script for exploring and exploiting new business opportunities?

IBM's process is called the emerging business opportunity process, where they annually ask for ideas that might lead to big new businesses, do due diligence, fund a number of new businesses, and either scale them if successful or kill them if not.

What term does the speaker use to describe the ability to compete in a mature business while also exploring the future?

The speaker refers to this ability as 'ambidexterity'.

What are the four things a leader must do to implement an ambidextrous strategy?

A leader must provide a compelling strategic intent, an overarching vision, align the team around the ambidextrous strategy, and be prepared to run very different alignments with different cultures, metrics, and values.

Why is it important for a leader to provide a compelling strategic intent?

A compelling strategic intent is necessary to convince people throughout the organization to help each other and share expertise.

What does the speaker mean by 'consistently inconsistent'?

The speaker means that leaders must be prepared to have different cultures, metrics, and values for different parts of the business to accommodate both exploratory and exploitative strategies.

How does the speaker describe Google's approach to being ambidextrous?

Google is trying to be ambidextrous by running very different organizations for exploration and exploitation, as evidenced by their creation of Alphabet, which separates their core business from their experimental ventures.