Why Corporate Transformation Fails
Lessons that only startups can teach
By Peyton Ong | The rise of tech giants is proof that startups are just as, if not more capable than corporates when it comes to disrupting industries. While corporate leaders are aware of the need to keep up with the pace of such developments, a number of challenges stand in their way of creating an environment that’s conducive to innovation, which is why most have established internal transformation teams.
Transformation within the context of corporates can be understood as bringing about new value, growth, opportunities, and efficiencies to the company. Often, it serves as a response mechanism in the face of startup disruption, which means it’s essentially the art of thinking and working like a startup. Despite these efforts, their internal structure continues to present obstacles for innovation.
Corporates typically execute ideas and decisions made by c-suite executives, who often believe that as long as the company is carrying out new ideas, then the transformation is happening. But transformation is so much more, as it involves multiple variables (i.e., people, process, and technology) and various levels of risk.
An operational change poses the lowest level of risk, as the corporate continues to do what it does but in a more efficient way, such as digitizing processes. Changing the operational model is slightly riskier because while the corporate continues to do what it does, it must fundamentally change its methods of doing so. The riskiest type of transformation is a strategic transformation, which is fully pivoting the company’s value proposition.
Implementing digital transformation, which is the least risky, has been the go-to approach over the past few decades whenever there is pressure for change. Digitizing processes does improve efficiency in the short-term, but sustainable transformation involves a new vision or strategy altogether, making the riskiest option also the most effective.
Noticeable results from transformation efforts can take years for corporates to identify, which also allows mistakes to also go unnoticed amidst the rigid nature of their internal structure. Although there are efforts to adopt agile reinvention methodologies, it’s easier said than done. Opportunities to launch new ideas are often interjected by startups that are able to bring products to market faster.
Smaller project teams are also means for corporates to mimic the operational norms of a startup. But more often than not, ideas from these teams don’t bear fruit; they’re words of innovation rather than acts of innovation designed to appease stakeholders. It’s difficult for corporate leaders to justify putting their resources into new ideas when they must keep up with returns on investment and other targets. The ability to step away from the interest of stakeholders to prioritize structural change in the organization is, therefore, key to bringing about real transformation.
One example of successful transformation is Netflix; the company’s CEO Reed Hastings revolutionized entertainment consumption by asking the question: what if the entire industry did things differently? Just like that, he pivoted Netflix from DVD rental to online streaming and more recently, content production through Netflix Originals.
This mindset of building a culture of disruption where the possibility of failure is embraced is the driving force behind Netflix’s incredible success in reshaping the entertainment industry. Hence, corporate leaders must overcome the perception that they have ‘too much to lose’ and believe in paradigm-shifting change if they’re serious about imbuing more startup energy into their organizations.
The startup mindset, culture, and imagination, while at times flawed, offer valuable takeaways for corporates that are falling behind the technological innovations of the day. While they may be good at what they do, they’ll only be able to move from a defensive position to an offensive one if they fully understand transformation and implement it from the bottom up.
Peyton is Jumpstart’s Journalist in Residence based in Kuala Lumpur.