they could build for themselves, in the pursuit of operating efficiently at scale, was based on rigid hierarchy and reinforced by a “stick-to-the-knitting” approach to process and strategy. As Gary Hamel, a leading business thinker and author, has observed, “There’s a great mismatch between the pace of change in the external environment [today] and the fastest possible pace of change at most organizations. If it were otherwise, we wouldn’t see so many incumbents struggling.”6
Fundamentally, new-era organizations—the ones that are nimble today—have no expectation that they will always be doing what they are currently doing. This is because they know that what they are doing today may not carry them to where they ultimately want to go. Their core mindset is that “fast is better than big” because they believe that they must be incredibly responsive to the changes of their external ecosystem in order to survive and be successful in the long term. Primarily, they are driven by their understanding of the customer, and what value they can deliver or provide. They base that value on what they do well, but they are willing and eager to discover new sources of value through innovation on every front.
Fundamentally, new-era organizations—the ones that are nimble today—have no expectation that they will always be doing what they are currently doing. This is because they know that what they are doing today may not carry them to where they ultimately want to go.
After all, the current value proposition of their goods and services can be eroded as successful strategies and approaches get copied or improved upon. Companies that are positioned to pivot structure their organization and employees so that these decisions to turn toward new opportunities are made quickly, innovation comes more easily, and leaders and employees take risks and play bold. They have the environment and infrastructure in place (including the company structure, processes, systems, resources, and people) to enable quick moves and experiments that may not pan out—while not breaking business operations. Their “How” enables them to have a quick and effective process to refine and change their “What.”
In this chapter let’s look at three strategies that large organizations have used to position themselves to pivot: learning from startups, spotting opportunities, and simultaneously exploring and exploiting.
THEY GO TO STARTUP BOOT CAMP
John Chambers led Cisco Systems from 1995 to 2015—a period of enormous disruptive change across every market and platform in the information-technology sector. Unlike so many other IT companies, Cisco has managed to stay on the forward edge of change and often leads its market as the disruptive innovator rather than the business struggling to catch up. As Chambers puts it, “I’ve watched iconic companies disappear—Compaq, Sun Microsystems, Wang, Digital Equipment—as they failed to anticipate where the market was headed . . . When you’re a large company with significant market share, it’s tempting to view market disruptions as a threat, but we view them as an opportunity.”7
To manage this, Cisco works to actively nurture a startup mentality. One of its most successful strategies for doing so, Cisco calls a “Spin-in.” A team of engineers and developers is formed to work on a specific project. But instead of keeping that team within the confines of the organization, it is actually moved outside the organization and “launched” as if it were a startup. One team that Chambers describes has 280 employees focused on a multi-billion-dollar business. The team members are incentivized with financial rewards just like the founders and early employees at a startup. They work long hours closely together, recruit the talent they need, and foster the cultural norms and processes necessary to make decisions and change direction quickly.
Cisco’s approach differs from a Skunk Works project (an innovation endeavor that is set off from the rest of an organization) in some fundamental ways. Rather than establishing a permanent off-site headquarters for a renegade culture devoted to mad-scientist projects, a Cisco Spin-in is a very deliberate, strategic approach to developing a specific project that is believed to be critical to the growth opportunities of the company. Even more important, Cisco’s team of engineers and developers are subsequently brought back into the organization proper, and the startup itself is absorbed into the business.
No doubt, Cisco could do just as well financially, and motivate talented employees to develop a startup mentality, if it assigned and spun-out its projects into stand-alone businesses. However, Cisco’s own culture would not receive the long-lasting benefit of that experience and learning. It would be a motivational tool to encourage talent to leave the organization, not lead it.
Instead, by spinning-in the startup project team once that project has become viable, Cisco gains immeasurably from the startup mindset and skills that have been learned. If you work for a large company, can you imagine going off-site to work in a startup for an intense eighteen months, tasting the glory, and then coming back to your old company? You would be a changed person, and you would find your company’s stifling processes and approaches intolerable. How many endless meetings or stale performance reviews could you sit through? How much dithering over decisions could you stand? In other words, once you’ve tasted what a startup is like, and experienced the exhilaration of a nimble culture, you are going to be driven to bring that energy back to your old place of work—and change it for the better. And that’s what John Chambers counted on when developing the muscles to pivot at Cisco.
GE takes a similar approach with its own twist. CEO Jeff Immelt says, “If the only common thread you have as an industrial company is that you’re well managed, you can still be a pretty good company, but you’re not going to be a dominant company, a competitive company over time.”8
Immelt took over GE four days before 9/11 and subsequently experienced the rocky markets that accompanied the downfall of many once high-flying internet startups. Even before the Great Recession of 2007 that brought the global economy into another nosedive, Immelt anticipated that industrial giants like GE would enter a period of tepid growth. He believed that GE’s relentless focus on operational excellence, market dominance, and the constant improvement of existing processes, while still critical, was no longer sufficient to ensure that the organization would continue to thrive in the future. A business-as-usual approach, even if it successfully protected GE against new competitors, would not position the company to take advantage of explosive growth opportunities going forward.
So Immelt, from his first days as CEO, began to institute a massive pivot in the company’s culture and focus: GE would continue to be exceptional at operational excellence, but it would also learn to seize opportunities for organic growth through innovation. The aim of the efforts would be, as Immelt put it in his shareholder letter of 2007, “to embed growth into the DNA of our company.”9
This began with a challenge to GE leaders to develop at least three “Imagination Breakthroughs” per year, designed to bring in at least $100 million in new business. These ideas would be put to review and receive billions in investment if deemed worthy bets, and the results were tied closely to bonuses. The essential message, however, was that making bets, being creative, and staying growth-focused was now critical for success at GE. This way of thinking about the business of GE was a developmental stretch for managers long steeped in Six Sigma, but in the new GE, as Immelt put it, “you’re not going to stick around this place and not take bets.”10
In support of this, GE developed a new curriculum for leadership development called “Leadership, Innovation, and Growth” (LIG). Participants visited Crotonville, the company’s management-training center north of New York City, to learn how to identify and overcome barriers to change, develop a better balance between short-term priorities and long-term opportunities, think about their businesses differently, and communicate in the language of change, growth, and innovation. Most important, they were guided in how to build an action plan for a concrete change agenda for their business. Then, these leaders were returned to their business units and set to work, their learnings, skills, and values reinforced by new measures in the performance-review
