Weighing 90,000 tons with a top speed of about 26 knots (only 30 mph), one would not describe the USS Gerald R. Ford aircraft carrier as ‘nimble’. Its sheer size leaves the ship vulnerable to attack from smaller and more maneuverable ships. That’s why it always sails with several other warships and supply vessels. Similarly, large enterprises are often unable to quickly change course, even when they realize they are losing market share to smaller competitors. Under pressure from investors and Wall Street, large enterprises can become too focused on short-term results rather than pursuing long-term strategies. These same companies are often saddled with legacy IT systems and applications, making it much more difficult to implement the new technologies that increase performance, reduce risk and drive true innovation. This creates a material gap between corporate strategy and day-to-day execution. Closing this gap requires adopting a startup’s mentality while still leveraging the advantages of scale (i.e., people, resources, customer base, etc.) unique to large enterprise.
The Challenge of Scale
The ability to quickly analyze opportunity, create a plan and execute quickly is an advantage startups have over any Fortune 500 company. Startups can build network infrastructure, systems, processes and applications from the ground up. That’s generally not possible for large enterprises already overburdened with the weight of legacy infrastructure and applications. To make matters worse, they often suffer from limited visibility across legacy infrastructure.
While sometimes difficult to admit, it’s not uncommon to find that large enterprises lack detailed visibility regarding their systems and underlying infrastructure. Details have been aggregated and summarized, and records have not been adequately preserved over time. Often tools and systems purchased to solve this problem have not been adequately deployed, and large gaps in information remain. Without knowing where applications “live” or what system dependencies exist across the entire infrastructure, enterprises can’t possibly know how to optimally leverage new technologies to transform and modernize their business; nor can they even frame the business case to secure investment for that change. The result can be the latest technologies layered on top of legacy infrastructure and systems, leading to broken solutions and wasted investment.
In addition, driving successful change programs requires cross organizational cooperation and alignment, and that doesn’t come naturally within large organizations. Large organizations just aren’t built for this purpose, as individual organizations have their own targets and objectives, and large-scale change programs often create competing interests across different organizations (e.g., competing for constrained resources across different projects, or targeting key locations for closure). Furthermore, there are often teams of individuals with long tenures, some of whom will fight any change and impede progress.
The Gap between Strategy and Execution
At the top of that organization lies another key issue: a lack of strategic vision among the senior leadership team, or at least an inability to articulate that vision enterprise-wide.
Earlier this year, I participated on a MIT Sloan CIO Symposium panel discussion moderated by MIT Sloan Management Review Editor-in-Chief Paul Michelman entitled “Closing the Gap Between Strategy and Execution”. The goal was to examine the disconnect between strategy and day-to-day operational execution in large enterprises.
In launching the discussion, Paul shared his theory for why the strategy-execution gap is so pervasive among the largest companies: too often senior executives are unable to effectively communicate strategy down through the entire organization. He then shared several surprising (and disappointing) findings from a series of reports recently published by MIT Sloan Management Review as part of its “The Strategic Agility Project” series.
MIT researchers interviewed 11 senior executives at a “large technology company”, asking each one to list the company’s top five strategic objectives. Notably, all five of the objectives were published and publicly available. Yet, only four senior executives were able to correctly recall the top strategic objectives for the firm.[1]
Senior executives must be responsible for both creating the company’s strategy, and regularly communicating and demonstrating that strategy so all employees understand how their work aligns with the company’s overall business objectives. Too often, however, the senior leadership team forgets long-term strategy because they’re focusing on something else: short term results, cross organizational politics or perhaps one of many other potential internal or external distractions that permeate day-to-day reality.
This lack of communication and shared focus can create a stagnant and fearful culture where everyone focuses on the immediate tasks in front of them. As renowned management guru Peter Drucker famously said, “culture eats strategy for breakfast.” A culture of fear will quickly kill the very best of strategies, especially when employees are afraid to ask questions, or propose “outside the box” ideas because they know the person who rocks the boat is the first one to get tossed overboard.
Think Small, Act Big
Technology is driving business change, altering just about everything we thought we knew about how to build and grow a large-scale enterprise. For example, Netflix was once a small company that delivered DVDs by mail, disrupting the DVD rental business and putting Blockbuster, a former Fortune 500 company, out of business. Now Netflix’s video streaming service and apps are disrupting the traditional behemoths in the television and movie industries, as Netflix has successfully transitioned to producing its own content.
Indeed, none of that growth through innovation and transformation would have been possible without a uniquely strong culture. Netflix’s culture is well studied; this unique culture defines a company that values freedom and responsibility[2], achieved through strong alignment between all divisions and organizations and alignment with the business’s overall strategy and goals, which are clear and broadly understood.
Just like the aircraft carrier, today’s large enterprises have the power, scale and resources to aggressively defend their markets by driving transformation built on a strong foundation of modern infrastructure and encouraging innovation with a culture that embraces a spirit of change.
So how can large enterprises be more effective in driving innovation through change? Based on working with today’s largest enterprises, here are a few suggestions:
- Consider creating a dedicated “playground” space. Remove all business constraints and limitations and challenge teams to be creative. This works well for technology organizations (think innovation lab) but the practice should be welcomed in all functional areas across the business. Why not challenge disruption from within? Once innovative ideas have surfaced, give them the space to take root. Then deployment on a larger scale can be mapped across the organization.
- Build a solid foundation to support technology change. If you’re saddled with legacy systems and applications, make modernizing infrastructure a priority. Identify the target end state, with an eye towards flexibility and scalability, so the business can adapt quickly to new market threats and opportunities, just like startups do. With the target end state identified, create a plan for infrastructure transformation to lay the foundation for future business innovation.
- Don’t let sunk cost sink the ship. Consider the possibility of re-inventing from the ground up, outside of those legacy technology investments. The business case to write off legacy technology investment may not be attractive, but the short- and long-term revenue and growth potential associated with starting over may be quite compelling. If that doesn’t make sense, leverage technology transformation to drive realization of cost-efficiencies. With visibility, creativity and discipline, large companies can finance infrastructure modernization by capturing short term efficiencies through targeted and focused optimization efforts.
- Quantify the cost of risk management. While large enterprises have become quite good at identifying, navigating and eliminating risk, perhaps they have also become a little too good at-risk management, especially since companies do not routinely quantify the lost value associated with inaction. Today’s large enterprises should be asking “what is the risk of not doing something, what is the opportunity cost of NOT moving ahead with that initiative?”. Large companies would be well served to balance the scales of risk evaluation by weighing the consequences of inaction and recognizing that coming to no decision is still a decision.
[1] Donald Sull, Charles Sull, James Yoder, “No One Knows Your Strategy — Not Even Your Top Leaders”, MIT Sloan Management Review, February 12, 2018
[2] Knowledge@Wharton, “Learning from Netflix: How to Build a Culture of Freedom and Responsibility”, May 29, 2018