Traps of growing big

Traps of growing big

And some questions / ideas of what to do.

Trap # 1 Big things grow slower

In business as in biology, big things grow slower.

http://blogs.wsj.com/management/2009/06/01/why-companies-fail-part-i/

For a $40 million company to grow 25%, it needs to find $10 million in new business the next year.

But a $40 billion company needs to find $10 billion in new business the next year to grow at that same rate. http://hbr.org/2000/03/meeting-the-challenge-of-disruptive-change/ar/3 http://blogs.hbr.org/2013/06/why-successful-companies-stop/

Large company

Small company

Low speed

High speed

Elephant.

Jaguar.

Need to step up.

Need to be alert.

Tortoise.

Rabbit.

Need to break through.

Need to reevaluate.

http://blogs.hbr.org/cs/2013/04/finding_your_place_in_the_comp.html

If you were an animal, which one would you be? http://www.pinterest.com/frankcalberg/beautiful-animals/

Trap # 2 Hold on to old products

http://www.slideshare.net/lionzshare/vijay-govindarajan-world-innovation-forum http://blogs.hbr.org/cs/2010/04/what_can_hinduism_teach_us_abo.html

Market growth

Question marks

Stars

Try out ideas with growth potential.

Develop great concept further.

Poor dogs

Cash cows

Fix, sell, or close down.

Look out for new “question marks� to invest in.

Market share

Adapted from the bcg matrix.

3 reasons why managers hold on to things that bring little value to users Reason # 1 Being on committees is a source of prestige.

Reason # 2 Some managers don’t want to admit they are doing low-value work.

Reason # 3 Managers become emotionally attached to whatever they do. http://blogs.hbr.org/2013/03/why-organizations-are-so-afraid-to-simplify/

Like trees that get too spindly, organizations also grow unnecessary branches that reduce the health of the overall enterprise.

These need to be cut back in order to allow new shoots to have the resources to flourish. http://blogs.hbr.org/2013/06/why-successful-companies-stop/

In a bureaucracy, it’s easier to make a

process more complex than to make it simpler, and easier to create a new burden than kill an old one. http://www.shirky.com/weblog/2010/04/the-collapse-of-complex-business-models/

When the big company neglects to pursue longterm opportunities, the company’s focus becomes increasingly short term

http://www.adizes.com/corporate_lifecycle.html

Further inspiration http://www.slideshare.net/frankcalberg/tips-to-help-a-person-through-a-change http://www.slideshare.net/frankcalberg/learning-strategies-11478939

Trap # 3 Success

I bet the fact that they [BP] had been successful so many times before, and because the financial pressures were so intense (the rig alone cost about $1,000,000 a day) that they compromised some on a lot of things, which lead to tragedy. http://www.sviokla.com/innovation/bp-misery-innovation/

Three factors eventually turn the lifecycle for organizations into a death cycle: Size, age, and success.

Success is the most dangerous factor, because success inevitably leads to self-satisfaction. The more successful organizations become, the happier they are with the way they currently do things.

Sources Kolind, Lars: The Second Cycle, p. 8-10. http://kolindkuren.dk/fra-bureaukrati-til-vaekst/

https://twitter.com/claychristensen/status/250880657352429568

http://www.imagebase.net/People/imagebase5_31

The success of their [disk drive companies’] past practices made it difficult to react effectively to new disruptive competitors.

Clayton Christensen

http://www.strategy-business.com/article/00170?pg=all

Further inspiration

http://www.slideshare.net/frankcalberg/power-to-the-people-34722633 http://www.scribd.com/doc/32211076/Power-distance

Trap # 4 From generalization to spezialization

http://janbosch.com/Jan_Bosch/Presentations_files/OOP2010-SPL-Bosch.pdf

Growth [at Nissan] also greatly increased

specialization and departmentalization, which encouraged sectionalism and parochial decision making.

Kotter, John P.: �Corporate culture and performance�, location 2125.

3 consequences of spezialization / silos # 1: Distrust People in 1 silo start distrusting people in other silos. # 2: Lack of communication People only communicate with the people directly around themselves or those at the same level. # 3: Complacency When people have little contact with people in other silos, they become inwardly focused and complacent with the status quo. http://blogs.forbes.com/johnkotter/2011/05/03/breaking-down-silos/

Further inspiration http://www.slideshare.net/frankcalberg/3-ways-of-organizing

Trap # 5 From creativity to efficiency

Fact is, most businesses were never built to change - they were built to do one

thing exceedingly well and highly efficiently - forever.

That’s why entire industries can get caught out by change - industries like big pharma, publishing, recorded music and the major U.S. airlines. http://blogs.wsj.com/management/2009/06/01/why-companies-fail-part-i/

Gary Hamel

Large organizations tend to make life uncomfortable for activists and rabblerousers – however constructive they may be.

In contrast, online communities frequently embrace those with strong anti-authoritarian views.

Gary Hamel

http://www.managementexchange.com/blog/facebook-generation-vs-fortune-500

http://www.imagebase.net/Concept/imagebase14_46

To be creative Think outside the box.

To be efficient Stick to your knitting.

Explore what you don’t know.

Exploit what you know.

Anticipate future customer needs.

Meet current customer needs.

Allow freedom and flexibility.

Demand accountability.

Let things emerge.

Plan.

Avoid process and encourage unstructured interaction.

Impose process and structure.

Govindarajan, Vijay & Trimble, Chris: 10 Rules for Strategic Innovators, p. 3-5.

Further inspiration http://www.slideshare.net/frankcalberg/creativity-exercises

Trap # 6 From task focus to rule focus

Hierarchies and standard managerial processes are risk-averse and resistant to change. Part of the problem is political: Managers are loath to take chances without permission from superiors. Part of the problem is cultural: People cling to their habits and fear loss of power and stature - two essential elements of hierarchies.

And part of the problem is that all hierarchies, with their

specialized units, rules, and optimized processes, crave stability and default to doing what they already know how to do. http://hbr.org/2012/11/accelerate/ar/2

To keep the increasingly large organization under control, the personnel department came up with elaborate rules and regulations, which buried employees in an organizational structure that often drained their willingness and readiness to work hard.

Source Kotter, John P.: �Corporate culture and performance�, location 2125.

Further inspiration

http://www.scribd.com/doc/35046140/How-do-people-handle-the-unknown

Trap # 7 From curiosity to complacency

We are wired to follow routines.

When something is working for us, we will continue to do it.

Deb Seidmann http://www.mixhackathon.org/hackathon/contribution/habits-0 http://www.mixhackathon.org/hackathon/contribution/12-enemies-organizational-adaptability

In most systems (societies, corporations, whatever) needing renewal, people are satisfied with things as they are, and the leaders are satisfied too.

Gardner, John W.: On leadership, p. 126.

Once a company becomes an industry leader, its employees, from top to bottom, start thinking defensively.

Gary Hamel

http://blogs.wsj.com/management/2009/06/08/why-success-often-sows-the-seeds-of-failure/

Start-ups hire A-type personalities where entrepreneurship and risk taking is wired into their DNA. But, as companies get bigger, they build more formal human resources departments. Human resources directors are typically risk averse in their hiring practices. There tends to be a “shift towards the middle,” hiring people that won’t “ruffle a lot of feathers” within the organization.

This creates two problems 1. you typically lose a lot of the A-type personalities who are more innovative leaders.

2. you hire a bunch of people who all think and act exactly the same, with people not encouraged or rewarded for thinking outside the box. http://thenextweb.com/entrepreneur/2014/08/22/big-companies-struggle-innovation/

3 stages of collapse

Stage # 1 Failure to anticipate a problem before it arrives.

Stage # 2 Failure to perceive a problem after it arrives, for example because managers are too far away to detect signals, or because of ”creeping normalcy” that makes the problem seem like ”the new norm.”

Stage # 3 Failure to attempt to solve a problem after becoming aware of it, for example because of groupthink and broad denial. http://rulesofthumbbook.blogspot.com/2012/01/jared-diamonds-stages-of-collapse.html

Stage # 1 Hubris. Success leads to arrogance.

Stage # 2 Undisciplined pursuit of more.

5 stages of falling

Stage # 3 Denial of risk.

Stage # 4 Grasping for salvation.

Stage # 5 Capitulation. Irrelevance.

http://youtu.be/ryK8BpX4zSo

The Titanic received 6 warnings of ice on the day of the collision. They were all ignored by the wireless operator, who was preoccupied with transmitting passenger messages and by the crew, who were focused on breaking the speed record. http://blogs.hbr.org/cs/2012/04/3d_business_lessons_from_the_t.html

http://www.imagebase.net/Concept/IMG_5231-copy

A management-driven hierarchy, built for reliability and efficiency now, leans against significant change because its silos, levels, rules, short-term plans, and narrow jobs systematically create complacency.

Complacent people see no reason why they should do anything much different.

John Kotter: Accelerate: Building strategic agility for a faster moving world, chapter 6.

Further inspiration http://www.slideshare.net/frankcalberg/5-reasons-why-people-resist-change http://www.slideshare.net/frankcalberg/rethinking-recruitment-8077077

Trap # 8 From external focus to internal focus

Graham Duncan You indicate that small and large corporations have different motivations for using social media. Why is big business so slow to catch on to social media?

Paul Gillin There are lots of reasons, including bureaucracy, conservatism, shareholder pressure, regulatory requirements, legal concerns, internal politics, and brand equity. http://www.ideaconnection.com/articles/00121-Influencing-Innovation.html?ref=nl060909

As a company matures, executives often end up focusing more on internal needs than on those of the market.

Before long, that focus can turn a corporation into its own worst enemy. http://www.businessweek.com/innovate/content/jun2010/id2010063_908184.htm

Further inspiration http://www.slideshare.net/frankcalberg/pestel http://www.slideshare.net/frankcalberg/customer-needs

Trap # 9 From helping each other to central control

In large organizations, resources get allocated top-down, in a politicized, Soviet-style budget wrangle.

Gary Hamel http://blogs.wsj.com/management/2009/03/24/the-facebook-generation-vs-the-fortune-500/

Low complex environment

Stable environment

Dynamic environment

Complex environment

Machine Bureaucracy Business environment today

As the firm’s [Nissan’s] extraordinary growth continued in the 1970’s, it began to suffer from what future Nissan President Yutaka Kume has called ”the big corporation disease”.

With growth came additional layers in the chain of command which prevented issues from coming to the attention of top management quickly and efficiently.

This reduced the efficiency and accuracy of decision making at the board level.

Kotter, John P.: Corporate culture and performance, location 2125.

Thank you for your interest. For further inspiration and personalized services, feel welcome to visit http://frankcalberg.com/ Have a great day.