Big companies must learn to use digital technologies for better customer interactions
Company managers must learn to think like start ups, learn from their entrepreneurial culture and embrace digital disruption
Many corporates – not just in Hong Kong or China, but around the world – have always looked askance at their staff using the Internet in work time – and with good reason. Spending hours browsing for a good restaurant in Wan Chai or Facebooking images taken from the top of Lantau Island may not seem very productive.
However, managers in new start-ups are doing the opposite – and embracing the digital world, along with a totally different way of thinking. By doing so, they could soon find they turn into the next big company.
The reality is, corporates are not start-ups. However, what they can do is take the lessons from the entrepreneurs and the entrepreneurial way of thinking and apply that.
The pace of change at board level and executive level to come up with a solution or basket of solutions that empowers the start-up to innovate, to think entrepreneurially, to think like a start-up, is becoming ever more present, and high on every chairman’s and CEO’s agenda.
Companies are launching field trips, for example, to incubators and accelerators. They see people wearing jeans and beads and interacting with their customers and suppliers on social media, with low costs, and high returns, and they go back and say, “Oh, well, that’s fantastic. How do we become like them?”
One of the methodologies that is we believe at the leading edge of innovation is something that at UNSW Australia we call the Lean Start-Up. What our research is focussed on is thinking like a start-up and using validation techniques that start-ups need to use.
To take one example, if I’m a start-up, I have just got some investment, I’ve got half a million dollars, I’ve got US$1 million. I’ve got a runway of six to nine months. In six to nine months, after six to nine months, the lights get turned off – I have no business. So I have to get what is known as product market fit, I have to get traction, I have to deliver revenue in that six to nine months window.
In the large corporates, things drag out to ... for years. We have more and more meetings, we run some more business models, we run some financial spreadsheets. So organisations are now saying, “Look, if what got us here won’t get us there, if our customers are saying we’re too slow, we’re too siloed, we’re too complacent, we’re too arrogant, how do we change that?”
Corporates are starting to say, “Well, if it’s working ... if this Lean Start-Up methodology’s working in the start-up space, how can we start to bring some of that into our organisation?” And they can.
The issue is, if you’re are a start-up organisation you have two choices. You can either be passionate about the product or the service that you’re offering and go for it and say, “I’ve got the best product and the best service. The market out there doesn’t know I exist but I’m going to convince them.” Or you can take another approach that says, “What is the problem to be solved? And if I understand that there’s a problem to be solved, what’s my solution and how do I actively validate that solution before launch? And if I validate or invalidate some of the components of my business model before I launch, I’ll actually have a much better chance of survival.”
The corporate space is now starting to pick this up and say, “What’s this fast failure bit that I hear that comes out of the start-up space? Failure’s ... we’re not going to fail as a corporate. We can’t fail.” But the tone of language goes like this: if I have a business model and I can actually test and validate some hypotheses out of that business model early, and I know that some of the elements of my business model will fail, and I can change my business model early before my runway runs out and the lights get turned off, I’ve got a much better chance of success than just ploughing ahead with a really great idea – which may in fact fail!. So the big learning out of the start-up space is this concept of fail fast, fail early, validate every element of the business model really early through real customer discovery and customer experiments.
Big companies aren’t used to this, and it is costing them dearly in terms of missed opportunities.
And how do you carry out experiments with customers? Well, that takes us back to my original point about the internet.
You remember when the internet first came on the scene, and organisations were saying, “Well, we’re going to ban browsers.” Do you remember that? “No, we’re not going to have a browser on your computer because you might spend some time on the internet, and that wouldn’t be productive.” We’re almost at that point where still organisations are saying, “Oh, no. We’re going to ban Facebook and we’re going to ban YouTube, and you can’t use social media at work because you might be unproductive.” Mind you, everyone has the internet in their pocket, so whether they ban it on the computer, it’s almost laughable. But many organisations still do, which is really equivalent to where we were when people were thinking of the internet, “That thing is going to waste time.”
But smart new startups are embracing the digital economy. They’re saying, “How do we empower our staff to use social media for the benefit of the business?” So I think the key is for boards and CEOs to think realise ... the digital economy is here. It’s not going away. We need to be not only immersed in it, we need to embrace it. How should we do that for the benefit of our organisation, our staff members? These days, employees when they go for a job, are interviewing the employer around their social media capabilities. “Can we have Facebook in the organisation? How do you use social media in your organisation?” So in fact, we’ve now got the up-and-coming millennials deciding which organisation they want to work with based on the social media capability of that employer.
I’ll just give you a quick example. I had a discussion with someone out of mining and the mining industry a couple of weeks ago. And they said, “Well, we don’t need this social media digital world. We just dig stuff out of the ground, we put it in a truck, we put it in a ship and send it overseas. And guess what? There’s a lot of stuff still in the ground. What’s the problem?” Now, if you stand back and think about what they are saying, one can only shudder about where that industry will progress over the next few years, or indeed not progress at all.
If there is one lesson a large company needs to learn now, it’s to think like a start up, learn from their entrepreneurial culture and embrace digital disruption. Time to think like a disruptor!
Jeffrey Tobias is an adjunct professor and AGSM fellow at the Australian Graduate School of Management at the UNSW Business School