Since the summer of 2010, ING – a global banking and financial services multinational based in the Netherlands – has been on a journey to adopt a new organizational model. The bank has been shifting its old ways of doing business to a startup-like model, mostly inspired by the successful digital players of the 21st century, including Google, Netflix and Spotify. With a strong focus on culture, HR, governance and IT, ING has been fully adopting « agile » practices to boost employee engagement, reduce their time to market, accelerate their innovation cycle and consequently, increase their ability to respond and adapt to rapid changes in their industry.
The vital necessity to shift away from its traditional model has been understood by ING but was highly underestimated by formerly successful companies such as Nokia, Kodak or Virgin Megastore. The rapid growth of digitalization and the fast changes in customer behaviors that followed, enabled by the advent of the web 2.0, shook many incumbents and disoriented multiple industries.
Social media platforms as the like of Facebook, Instagram or Twitter reshaped the way companies and customers interact, offering the possibly for anyone to easily, create, upload and share content. Information is now available immediately from a variety of platforms and can be diffused instantly without constraints. As a result, the spread of User-Generated Content impacted the understanding of companies over their customers, who are now more unpredictable than ever.
Other aspects of the problem rely internally and are profoundly embedded in the nature and size of these organizations. As a company grows in size and reaches critical mass, processes and procedures formalize, slowdown and sometimes freeze decision making. Conventionality becomes the norm and instability is perceived as a threat. The quest for efficiency replaces the reach of effectiveness leading to decision making which seeks stable financial results and positive cash flows, undermining game changing technological breakthroughs.
In a nutshell, the proliferation of customer channels and customer touch-points caused by the digitalization of the economy lead established organizations to lose control over the overall customer and user experience and the journey for consistency took away their momentum, reactivity and adaptability necessary to define, create and offer the right product or service. Innovation, when it occurs, is incremental and rarely disruptive or threatening.
“Companies rarely die from moving too fast, and they frequently die from moving too slowly.” Reed Hastings, CEO of Netflix
The dynamic capabilities of yesterday became the threshold capabilities of today’s successful companies. Once upon a time, before the digital era (before things started to get real) success was determined by how easily a company had access to capital, how robust and popular its brand was, the size of its customer database or how well a company managed to understand, build and strengthen its relationships with its customers. These elements still hold true today but don’t offer companies the competitive advantages necessary to thrive. In 2016, the most valuable companies by market capitalization, Apple, Alphabet, Microsoft, Amazon and Facebook, had very similar characteristics. They all thrived following one, clear, vision statement; they have highly performing digitized products or services; they take risks, experiment and pivot when necessary. They do this with an outstanding agility and much greater execution capabilities. On top for all, these powerful organisms are all glued by a set of values, principles and behaviors that are fundamental determinants of their successes.
The arrogant success of these digital players and the growth of highly agile, innovative and dynamic startups is perceived as a threat for established organizations accros industries. Maurice Levy, head of the global advertising group Publicis declared in an interview to the Financial Times « Everybody is starting to worry about being ubered » (Financial Times, 2014) and 57% of respondents from a pool of 1000 surveyed executives across 15 different industries see startups as a source of disruption for Media & entertainment incumbents. The perceived threat is, therefore, real.
But the battle isn’t over just yet. There are solutions to face and fight back disruption. Many established organizations as the like of ING are shifting their organizational model to agile and some see cooperation with startups, merging financial robustness with fast innovation capabilities, as a way to differentiate themselves and offer greater value to their customers and users. In both cases, cooperation is fundamental and probably the key to disruption.