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What Keeps Companies Up at Night
We’re not always the smartest people in the world.
--Steve Ellis, head of the Innovation Group at Wells Fargo
The idea for this book began percolating a decade ago.
A couple of years before I left Procter & Gamble in 2008 as its global marketing officer, I was attending Google Zeitgeist, the annual thought leadership event at the tech giant’s headquarters in Mountain View, California. I was there with other Fortune 500 company leaders, the kinds of people Google was courting to experiment with its search capabilities and its newly acquired video platform, YouTube.
On an unusually warm September evening in Silicon Valley, I had a revelation while dining under the stars with Google founders Sergey Brin and Larry Page. I already knew that this brash and growing technology giant would lean heavily on companies such as P&G. Of course it would: Google, or Alphabet, as it is now known, is able to poke into all those potentially life-altering innovations--from self-driving cars to balloon-powered Internet access--only by selling lots and lots of ads. So, obviously, it needed large advertisers. My cross-current thought was that we at P&G couldn’t survive without Google, as well as an exaltation of startups bent on changing the world. And that was probably true of other large, mature companies.
Why did we need startups? Not just because they offered indispensable products and services to P&G--but because they did business in a radically different way. They were engines of continual creativity; they engaged passionately with their audiences and customers; they hired the best and the brightest people, people who loved working there. In fact, they were sparking a dangerous talent drain away from mature companies like ours. They didn’t have to poach skilled, smart young people because the choice between working for an established company and an exciting upstart with endless potential to become the next Facebook or Uber was really no choice at all.
Exuberance. Passion. Excitement. Audacity. Intensity. These were the words I would use to describe Google and companies like it. These were also things I hadn’t felt as intensely at P&G for many years.
Upstarts such as Google in its early days reminded me of what life must have been like in the earliest days at the biggest and oldest corporations. Every venerable established company--P&G, IBM, Levi Strauss, Target, Toyota, Wells Fargo, GE, Motorola Solutions--started with a dynamic founder, a brilliant idea, and a determination to deliver something extraordinary and transformative. But as companies grow--acquiring more customers, developing more products and services, bringing on more investors and strategic partners--those companies lose their original excitement, purpose, and drive as the years grind by. They become more concerned about how to maintain market share or survive in their space than about how to transform the world. In a word, they go from bold to old.
If we at P&G, a 170-year-old company at the time, didn’t start to learn from these companies and adopt their agility and speed--retrofitting our own operations to restore some of the charisma and fast-paced performance of startups--we would lose relevance with our employees and with consumers. Is this fossilization among mature companies reversible? I wondered.
On the flight back to Cincinnati, I started to scratch out a plan to learn from these new companies whose energy was garnering so much attention. Step one was to reconnect with Tim Armstrong, president of Google’s Americas operation, and invite his group to P&G’s headquarters in Cincinnati. (Since 2009 Tim has been CEO of AOL, now part of Oath, a division of Verizon.) Could our very different teams and cultures push beyond the ad-selling commercial relationship?
Imagine my excitement when, a few weeks after my visit to Google, Armstrong and his Google team descended on Cincinnati. We agreed that the best way to mix with and fully understand each other’s culture was to do a brief employee exchange. We sent leaders from a few of our largest brands, including Tide, to work at Google for a month. And Tim dispatched Google people to work in the daily rituals and rhythms of brand management at P&G. Both sides wrote up what they had learned and presented it broadly within each organization. (The Wall Street Journal got wind of the idea and put the story on its front page in November 2008.)
What did Procter get out of it? Google got us to loosen up a bit during a spoof campaign of Tide to Go, a stain-removing pen, and gave us a taste of user-generated content. Tim’s Google squad also persuaded us to wade ankle-deep into online marketing by empowering so-called mommy bloggers to write about Pampers.
And what did Google get out of it? Google learned that a big, established company like P&G could teach them a few things about brand management. As we taught Tim how P&G worked with leading retailers such as Walmart and Target, he came to realize that the sales organization he’d built at Google didn’t work for big clients. Why not set Google up along the lines that P&G had--focused on dominant customers and categories, instead of on geography?
But the fun didn’t last. That innovative experiment was never repeated. Not long afterward, I retired from P&G after twenty-five years and started my own business, The Jim Stengel Company, helping enterprises large and small work through challenges of activating their brand’s purpose, developing their organizational culture, and renewing brand strategy and positioning. Still, those stimulating weeks of Google/P&G cross-pollination have never been far from my mind.
Over the last nine years, as I’ve dealt with scores of clients, given hundreds of talks, and had meetings with countless executives, I’ve sensed a growing anxiety--sometimes bordering on panic--throughout the business community. Why? Increasing global competition has had a hand in it. So has rapidly evolving technology, along with the tilt of resources and media attention to anything digital. The Great Recession was a punishing gut punch, delivering a fatal blow to some businesses. There’s residual angst. Everyone worries constantly about survival, about who or what’s around the corner, about how they’re going to deal with it, outlive it, prosper again.
Let’s be blunt: many legacy companies are in trouble because their brands don’t mean as much to consumers anymore. Women really don’t obsess about Tide’s latest line extension. Budweiser and its new stepbrother, Miller, are no longer the top choices of millennials, who probably live or work near a craft brewpub that makes more innovative beer. In a world of Tesla and Uber, who identifies as much with Chevy and Ford anymore? Older brands need to acknowledge that the world has changed--and start acting more like startups. And not just try to buy them, the way GM put the moves on Lyft.
And startups can learn something valuable from legacy companies as well. Most startups need a little parental supervision. Failure rates for young companies are abysmally high. They often lack discipline, structure, the ability to scale up without losing their core culture or mission--in short, the wisdom of an experienced organization. Some young entrepreneur superstars could use a dose of corporate humility. It might forestall their sudden fall. We’ve all seen more than a few unicorns, those upstarts supposedly worth $1 billion or more, turn into donkeys.
Companies--large and small, old and young--don’t need to go it alone anymore. They’re beginning to interact with each other, establishing powerful new kinds of alliances. Those that don’t, that struggle on their own, repeating the same bad habits, are gambling with their future. Unsuccessful startups will die off quickly. Older businesses, larded with resources but continuing their traditional ways of doing business, risk suffering a protracted, painful death.
In my work as an executive at P&G and later as an entrepreneur, I began to see that the distinct species of startups and legacy companies actually share a lot of the same DNA. By working together, they can learn a great deal from each other. The impossible energy and drive of a startup company can help rejuvenate an established firm, injecting some of its mojo, innovation, agility, and commitment.
Startups can teach older companies how to move faster, take more risks, learn from failure. On the flipside, established companies have much to offer startups in terms of growth, distribution, capability development, and longevity. They can teach startups how to create a brand that fosters a lasting emotional bond; how to build an organization to support global expansion; how to deal with multiple constituents, from board members and shareholders to giant corporate customers and joint ventures. Bridging the different worlds of young and old may turn out to be key to surviving in a swiftly changing and increasingly complex and dynamic world.
Few leaders from established companies would disagree. This book is designed primarily for them, for the executives and managers and aspiring managers of legacy companies who realize their organizations have grown sclerotic, defensive, and less responsive to their constituents, and who feel an urgent imperative to change. The key question for them is: How?
Cross-pollinations, like the brief embrace of P&G and Google back in 2008, are taking place at forward-looking enterprises. Motorola Solutions, for example, the public safety technology company created in 2011 when Motorola split in two, is partnering with a gaggle of startups on ventures that sometimes sync with its strategic focus but are often outside its orbit of expertise. It recently started the process to set up an incubator in Israel to stay abreast of the latest tech trends.
GE has been teaming up with new companies to transform its 125-year-old company into a lean and mean machine to bring products to market faster. At Wells Fargo, established 165 years ago, an accelerator culls dynamic young financial technology companies, in groups of three twice a year, and teases out products that push the bank out to the frontiers of greater financial security and better customer service. “We’re smart enough to know that we’re not always the smartest people in the world,” says Steve Ellis, who oversees the bank’s Innovation Group. “Some of the best ideas come from startups.”
None of those ideas can take root, much less flourish, without unqualified support from the CEO. “I really do think a lot of it starts at the top of an organization and flows down through the staff,” says Reese Schroeder, the executive who runs the venture capital arm of Motorola Solutions. I heard a version of that truism every time I talked to a legacy company engaged in partnerships with startups. And not just a drive-by blessing of these efforts, but a shoulder-to-the-wheel, get-your-hands-dirty engagement in the work, cheering on the efforts and galvanizing the entire company around the idea of innovation and change. Involvement by the C-suite is such a strong theme--along with humility, learning, planning for success, and embracing experimentation--that leadership is the subject of Chapter 10.
In this book I will examine some of these partnerships, showcasing how aging established enterprises are gaining new strength and relearning old skills from the most imaginative and innovative up-and-comers, learning to sweep clean even the darkest, most cobwebbed corners of the organization with the stiffest of brushes. It will serve as a practical guide for legacy companies considering such partnerships, showing what works, what doesn’t, and why--a playbook brought to life through storytelling.
To buttress these conclusions I commissioned what we call the Global Partnership Study, a first-of-its-kind global study of 201 established companies and startups from OgilvyRED, a research-based consultancy. It adds quantitative underpinnings to a qualitative investigation (my team and I traveled to fifteen cities to interview more than one hundred leaders of fifty legacy companies and startups). Leading the OgilvyRED group was Joanna Seddon, Ogilvy’s president of global brand consulting, whom I first worked with when she made a gripping presentation in 2007 to our senior management at P&G, challenging many of the ways we did business. I admired her keen intellect--Joanna has a BA, an MA, and a doctorate from Oxford--and her chops as an entrepreneur, having launched consultancies within FutureBrand and Millward Brown (a part of WPP) and founded the BrandZ Top 100 Global Brands annual study. She saw around the corner that research was moving from data dumps to sharp analytics that made sense of all the information--and she knew how to build great teams. So I tapped her talents again in 2011 to help me with my first book, Grow, while studying the link between brand purpose and financial value creation. This time around, she is laying an important foundation for the storytelling, helping to pinpoint the opportunities and chokepoints of these new partnerships, as well as emerging trends. You’ll see references to the Global Partnership Study throughout the book.
Collaborations can be tough, and sometimes downright frustrating, for both parties. More than a few of them end in divorce. Consider, for example, the mixed record of GE, which has done as much as any major corporation to shake itself up in order to become a more nimble giant, more sensitive to what its customers want and need.
One of its notable partnerships started as a love affair. But it ended up in divorce court. In 2013, GE partnered with Quirky, a startup with a novel platform for developing consumer products on an ultra-fast track. GE wanted to coproduce some new appliances, like smart air conditioners and Wi-Fi-enabled lightbulbs. But it also wanted mightily to rejuvenate itself, and hoped Quirky and its founder, Ben Kaufman, could help its people and its culture learn to take more risks, live with failure, and generate new products that it could get to market a lot quicker. In essence, it wanted to rediscover its youth. “Ben is just fearless,” Beth Comstock, the vice chair of GE and the president and CEO of GE Business Innovations, told me. “He trained some of our guys to just think faster and figure it out as you’re going forward.” But she also had her doubts. “It may end up being a black eye for GE that we backed something that’s not going to work.”
Six months later, Quirky was bankrupt. Customers were furious at the lack of support for the products the two companies had introduced. Forced to step in and deal with those complaints, GE had a few of its own. Quirky’s collapse, it charged in court papers, “caused substantial damage to the reputation of GE and to its trademark.” Not just a black eye--a complete orbital blowout.
Still, GE Ventures, the company’s innovation and disruption arm, isn’t giving up on startups. It is backing dozens and dozens of new ventures in such areas as energy, healthcare, advanced manufacturing, and software. One of them, Airware, is a drone technology company that built an operating system integrating the many different software systems that run unmanned aerial vehicles with the cloud, analyzing, storing, and distributing the data. GE is collaborating with Airware to send out drones that can monitor power lines, oil pipelines, and wind turbines--with the hope of transforming the services it provides to customers, increasing safety, and reducing downtime. To date, GE is thrilled with the venture.
(Continues…)
Excerpted from "Unleashing the Innovators"
by .
Copyright © 2017 Jim Stengel.
Excerpted by permission of The Crown Publishing Group.
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