Corporate lifespans are getting shorter. In ten years almost 50 per cent of companies on today’s s&p500 index will not be here. “They’ll be oblierated. We’re losing one company every two weeks,” that’s the doomsday scenario facing incombuents according to Karen Lawson CEO of Slingshot.
Speaking at this mornings Daze of Disruption conference at the Art Gallery of NSW, Lawson helped delegates understand the innovators dilemmma and how partnering with start-ups can help a company survive into the future.
Lawson name checked several past incumbents that had opportunities to disrupt and evolve but didn’t; including Yahoo, Monster and Nokia. “There’s a famous quote from Stephen Elop (Nokia CEO in 2013) about the burning platform which he shared with all of his staff. It’s famous because he talked about feeling like he’s on an oil rig and the flames are taking over; he had two choices to stay on the rig and burn or jump overboard into the darkness below.”
Part of the memo Elop sent to all Nokia staff:
“We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning.”
The problem is companies can jump into the unknown, but 85 per cent of new products fail. “How do you survive and innovate as a corporate when you know it’s really challenging?
“I recommend that people should work for that rare CEO, a CEO that has schizophrenia. What I mean is they need to be able to manage and sustain the business as it is today, but also be working on disrupting technologies that effectively make your business today redundant.”
Step one: Partner with start-ups.
Slingshot’s recommendation is you start devloping relationships and experiments with hundreds of start-ups. “The fact is corporates don’t have infinite resources, so you have to make sure you partnering with different start-ups so you run hundreds of expeiments at one time.
“Then like the X-Factor elminiation process, you take it down to 10 serious engagements with a number of start-ups and scale-ups. Then move down again to three to six investments, and one or two major acquistions. All of the companies that we work with from NRMA to ING have used this process.”
Once companies have gone through this process, which Lawson describes as ‘not an easy process’, a number of things start to happen within the company.
“First of all your employer brand starts to change, people see you as a brand that’s doing really cool things with start-ups and all of a sudden you start to attract new talent into the organisation. Second, the processes and agility inside the organisation changing. Lastly, you have more fun.”
Step two: invest in scale-ups
Scale-ups are high growth start-ups. “The terminology of scale-ups is consistent, it happens when a start-up has been growing 20 per cent year on year growth- revenue or people.
If you look across the globe, the companies that have been responsible for more jobs and job growth are actually scale-ups. Here in Australia 3.2 per cent of high growth start-up businesses are responsible for 73 per cent of all new job creation.
Not only do these scale-up businesses already have products to go in market, but they have a higher success rate. According to Lawson and Slingshot: “Normally start-ups have a failure rate of around 90 per cent, but scale-ups that have gone through programs and partnered with businesses have a succes rate of 81 per cent.”