How Profitable Manufacturers Win By Failing
Disruption is often associated with innovation, risk taking, speed, agility and a willingness to question the norms and disrupt the business itself to enter new markets and categories. These are certainly all characteristics of smaller, younger digital companies and can be the first type we think of when we consider disruptive organizations. Of course, some of these startups are scaling up and becoming Amazon, Apple, or Netflix: huge, successful companies that have a disruptive culture in everything they do.
Jeff Bezos’ annual letters to Amazon shareholders are often worth reading. In 2016 the founder and CEO of Amazon outlined his now legendary “Day 1” philosophy. The focus of “Day 1” is the principle of always focusing on results rather than results: on results, not on processes. The idea that his company will ever get to Day 2 is unthinkable. For Bezos, the generally larger and more established “Day 2” organizations represent a stasis in which decisions are made, but slowly and with an emphasis on whether the process was followed correctly rather than whether the intended outcome was achieved.
“The outside world can push you into day two if you can’t or can’t quickly embrace strong trends,” wrote Bezos. “If you fight them, you are probably fighting the future. Hug her and you have a tailwind. “
It’s a neat summary of what building a disruptive culture looks like: First, the acceptance that change is exponential and accelerating; Second, to avoid “fighting the future,” you need to build an organization that is restless, curious, outward-looking, and in constant beta. Constant beta is the self-imposed regime where progress is valued more than perfection. Progress builds faith; Perfection (or at least an artificial sense of perfection) creates complacency.
When building a business from day one, it’s easier for a founder CEO to steer the culture in the direction they want to go. Trying to lead a 100-year-old retailer through a storm of change, move to a more disruptive organization, identify the products you want to improve and change organizational structures and behaviors over time.
When you disrupt yourself, it means changing your focus on the products and services you produce and creating new systems and ways of working that can lead to a good disruption to make your business move faster.
Winning by failure
In a now famous letter to shareholders in 2018, Amazon’s Jeff Bezos wrote:
As a business grows everything has to scale, including the size of your failed experiments. Unless the size of your flaws increases, you are not going to invent with a size that can actually move the needle. Amazon will experiment at the right scale for a company our size when we occasionally have billions of dollars in downtime. Of course, we will not carry out such experiments carelessly. We will work hard to make good bets, but not all good bets will ultimately pay off. This kind of risk taking on a large scale is part of the service that we as a large company can provide to our customers and society. The good news for shareholders is that a single big winning bet can more than cover the cost of many losers.
He pointed out that the Fire phone was a bug, but it speeded up the launch of Echo and Alexa in 2014. Since then, Alexa has grown in technological capabilities and reach, with the number of devices powered by Alexa “in the hundreds of millions,” the company said.
Like all good companies, Amazon does everything it can to avoid failure. Anything but not trying, trying slowly, or thinking small. The likelihood of failure is only one it is willing to accept as it follows a product management process that enables a disruptive culture, continuous improvement, and test-and-learn approach. It is important for potential disruptive organizations to have this process in place. Failure is only an option, an occasional, necessary evil.
Moving at the speed of disruptive change
It is also true that speed does not necessarily have to come at the expense of quality. Instead, successful digital companies expect and plan to learn and continually improve what they build.
Business leaders have recognized that their company’s success lies in how quickly and effectively they are able to meet rapidly changing customer expectations and disruptions to competition – something startups instinctively but that incumbents need to be upgraded.
And this retrofitting is evident today in all companies that pursue iterative approaches to improve the customer experience. One of the world’s largest quick service restaurants does this every day, using data from your mobile and drive-through activity to determine how to optimize those experiences more effectively. As we’ve seen, the shift here is from a historical focus on time, scope, and cost to a focus on speed, that is, how quickly you can get an idea out into the world. The shift is how you do it with quality so that the risk of breaking things while they are there is minimized. The shift is how to make sure that not only are you meeting the scope of a project, but that you are delivering a product of value to the customer and the company.
When you move to speed, quality, and value, you can move at the speed of disruptive change in the face of uncertainty. Essentially, you get the ability to move at the speed of a start.
It’s pretty easy to read through these traits, nod your head, and move on. But here’s the thing: for 99% of established businesses, living these traits requires massive cultural and behavioral changes. And guess what? Changing people’s behavior is much harder than acquiring a new skill. Just like you, they built careers out of a series of behaviors that made you and your company successful. They have built relationships and loyalties within the silos in which they operated. And many will have built up expertise that needs to evolve. That’s a lot of change.
To master this change with clarity and empathy, while modeling the behaviors you want to create, it takes clarity of vision, commitment, and persistence.
Contribution to Branding Strategy Insider by: Nigel Vaz, excerpt from his book Digital Business Transformation with permission from Wiley. Copyright © 2021 by Nigel Vaz.
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