Coach’s Challenge for 7/8/12 “Second Company”

Good day, team.

This week’s challenge comes from the Harvard Business Review blog. It is written by Grant McKracken, a research affiliate at MIT and author of “Chief Culture Officer” and “Culturematic.”

In his blog post “Every Company Should Build a Second Corporation,” from Friday July 6, McKracken suggests that while companies need to keep doing what they’re doing to win business and be successful, they also need to create a second company that is always looking at worlds that may be in the future and designing ways to best survive different scenarios.  It’s like having a scout who’s out in front of you always looking for the best path ahead.

Here’s the post in its entirety:

“All winners lose. The market leader is a dead man walking. The incumbent is cursed with inevitable failure. That seems to be the prevailing sentiment among many in the investment and journalism worlds: The smart money, they argue, bets against the incumbent. Their surmise: The world will change. The reigning corporation will fail to adjust. The right thing to do? Short them (assume that their share price will fall). Short the winners. Bet against those who flourish. Because all winners must lose, and sooner than we think.

“I have heard this argument before, but for the first time I am hearing it argued as something unobjectionably and manifestly true. At some point in the past 10 years, ‘short the incumbent’ had gone from being a daring proposition to received wisdom. There is evidence, to be sure. Of the top 25 corporations listed in Fortune in 2000, only 12 were still there in 2010. Let’s put this another way: In the decade between 2000 to 2010, half the winners lost.

“And the structural factors are clear enough. The world is changing more quickly. Black swans are multiplying. Disruption is everywhere. The incumbent can end up failing dazed and confused.

“Success makes the corporation believe it has got things right. So change feels like self-betrayal. The competition forces a new business model. So change feels like a tumult. The new market often forces a move from a premium price position to a commodity one. So change feels like a giveaway. Adapting to change feels just plain wrong.

“But the market has spoken. It’s telling us we have a systematic problem. It’s time for a systematic solution. We cannot nickel and dime our way out of this one. We need a big, bold answer. Assuming, that is, that we want to escape the curse of the incumbent.

“My version of this answer — and I am sure there are others — is to build a second corporation and wrap it around the first. So now we have two. The first corporation is defined pretty much as it is now. And the second corporation is another creature altogether, with a different set of principles and processes.

“The first corporation exists to win. It exists to find, extract and capture available value. Leave this just as it is. But let’s acknowledge that this first corporation exposes us to risk. After all, it is designed to work with the world as it is. So it must be out of alignment with the worlds that may be. It makes us a prisoner of the moment. The second corporation is looking for those worlds that may be. Its task is not to win but survive.

“It’s counter-intuitive and I can hear you arguing: ‘Winning, surviving, this is a distinction without a difference!’ But look at it this way. If winning (and the first corporation) were enough, we wouldn’t see half the winners on the top of Fortune 500 fall like Icarus. If winning were enough, surviving would take care of itself. But it turns out, winning and surviving are different things. They take different mindsets. They take a different set of systems and instincts.

“Just to be crystal clear, I’m not saying that the corporation should stop struggling to win. It should keep hiring the best people, finding the best partners, devising the best strategies, squeezing out costs, innovating faster and smarter, clobbering the competition, etc. Winning is the deepest part of its DNA.

“I am merely saying that now that the incumbency comes with a curse, now that the smart money is betting against us, now that our death is nigh, we need something more. We need an exterior that is vigilant, experimental, assumption hunting. We need a bridge from which to spot those black swans. We need a way to prepare for worlds that are implausible.

“Everyone knows that we live in a world of tremendous change. But our response has been what Andy Grove calls ‘building a better firehouse.’ We are committing to getting faster and more agile. But there’s an absolute limit to how fast we can get. Many corporations run pretty good firehouses as it is. They can’t get a lot faster. The world doesn’t care. It’s going to get much, much faster. Time to rebuild the firehouse. Time to rethink firefighting.

“Indulge me a different metaphor. As the world gets more turbulent, the organization gets harder to ‘fly.’ What used to be simple acts of navigation now have a lot of guesswork. Simple acts of decision-making are no longer straightforward. Once as easy to fly as a 747 in light chop, the corporation can now feel like a Piper Cub in high winds. There are moments when the instruments go out and decision-making takes on a ‘hope and prayer’ quality. We are pretty sure those lights on the port side are Baltimore. Because, well, they could be Cuba.

“Now that the smart money assumes our demise, we need a system to ensure our survival. We need something that looks less like improv and more like engineering. We need a second corporation.”

Your challenge this week is to explore ways to be nimble and quick in the face of an ever-changing world. Maybe your processes are currently working, but if one part of your customer base suddenly changed, would you be able to stay on top of servicing them? How about creating a team of people within your organization who’s sole focus is on scenario planning — that is, creating strategic plans for a variety of possible outcomes? If you’re currently working on a team, what would it look like if your team got caught in firefight mode? Would it survive? And what can you do to help the team create the kind of skills that expert firefighters need to have?

As McKracken says, “We need a way to prepare for worlds that are implausible.” This week, try thinking outside the box and look at your job, your company and your team from a completely different perspective. What would it look like if the world changed?

Have a good week!

Kathleen

Kathleen Doyle-White

Pathfinder’s Coaching

(503) 296-9249

Note: Many thanks to my coaching associate Kate Dwyer for sending me this article. It’s just one more way that she’s helping me take a more expanded view of my business.

© Copyright 2012 Pathfinders Coaching, Scout Search Inc., all rights reserved.
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