In Order to Scale You Have to do Things That Don’t Scale

By | AgileBusiness, Culture, Customer Exprience, Leadership | No Comments

Airbnb and scale

Large organisations are pretty obsessed with scale, and naturally so in many instances. Ideas need to have big potential impact, returns need to be sizeable, programmes and projects need to work robustly across large numbers of employees or customers. It’s an inherent part of the mindset.

But what happens when you need to start small? And what happens when you need to do something that doesn’t scale? I loved the story that AirBnb founder Brian Chesky tells (in this Masters of Scale podcast) from the earliest days of the service when they were still part of the Y-Combinator programme. Paul Graham (founder of Y-Combinator) had asked him where they were getting traction with their idea. Brian told him that they didn’t actually have a lot of traction at the time, but they did have a few people in New York who had started using the service:

Graham: “So your users are in New York and you’re still inMountain View.”

Chesky: “Yeah.”

Graham: “What are you still doing here?”

Chesky: “What do you mean?”

Graham: “Go to your users. Get to know them. Get your customers one by one.”

Chesky: “But that won’t scale. If we’re huge and we have millions of customers we can’t meet every customer.”

Graham: “That’s exactly why you should do it now because this is the only time you’ll ever be small enough that you can meet all your customers, get to know them, and make something directly for them.”

So the founders literally commuted from Mountain View to New York, and went door-to-door meeting the Airbnb hosts in person. To give them a reason for visiting they personally offered to photograph the host places for the site. When they’d talk to the hosts they would get direct feedback that enabled them to start designing ‘touchpoint by touchpoint’ in order to handcraft the user experience and feed directly into their product roadmap (‘the roadmap often exists in the minds of the users you’re designing things for’). Almost all of the early features that would become critical to Airbnb’s success came from that early feedback.

As Airbnb grew, that habit of handcrafting the user experience stayed with them as they visualised what a truly exceptional experience might look like in order to challenge thinking, and work back from there to deliver a service that is truly remarkable:

‘The core thesis is if you want to build a massively successful company, you need to build something that people love so much they tell each other. Which means that you must build something worth talking about.’ (Chesky)

It’s too easy in large organisations to dismiss doing things that don’t scale. Like talking face-to-face with your earliest users to craft remarkable experiences. It’s too common for leaders, as they progress higher up the hierarchy, to become more and more distant from actual customers.

We need to challenge these conventions.

And that’s as much about culture and mindset as it is about process and practice.

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The Arrogance of Corporate Scale

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As companies grow larger it becomes ever more difficult for them to retain the right balance between ambition and humility, external curiosity and inward focus, restlessness and complacency.

Market dominance and scale can easily turn into corporate arrogance and lack of urgency. The pressures brought by demands for ever greater scale and efficiency are a catalyst for internal politics, bureaucracy, managing upwards, and internal focus. Hubris can cause poor listening and analysis, missed opportunities and kill the ability to reinvent.

The opposite, in other words, of the qualities of organisational longevity listed by Arie de Geus in his renowned book on The Living Company. Qualities like the ability to learn and adapt from being sensitive to your environment, showing tolerance for experimentation and different thinking, retaining a strong, cohesive sense of identity, to be adept at managing resources to enable flexibility.

A comprehensive study by the Telfer School of Management at the University of Ottawa into the implosion of Canadian Telecoms giant Nortel gives us some stark lessons. The researchers interviewed 48% of all the Nortel executives who were in charge of the company from 1997 through to 2009 when it filed for bankruptcy, and spoke to executives at 53 different companies that were customers of Nortel in that time.

In spite of the rapidity of Nortel’s decline, they found that corporate failure is a long and complicated process dependent on multiple accumulating factors. When asked about Nortel’s biggest management failure however, the study’s lead author, Jonathan Calof, said:

“There were three major factors that caused the failure. When Nortel was a market leader in the ’70s, it developed an arrogant culture, which led to poor financial discipline. Then in the ’90s, it focused so intensely on growth that it broke its ability to innovate and read the market. And after the tech bubble popped, it turned inward and cut costs to the point where it alienated customers.” (Calof, 2014)

Arrogance, pursuing growth at all costs, efficiency at the expense of innovation. Many of these problems were seemingly originating from a culture that became baked into the company long before it was in trouble, and served to reinforce the kind of toxic assumptions that can become powerful barriers to change. Assumptions which damaged the business and brought focus away from where it needed to be and created an internally facing company:

“It escalated into hubris to the extent of making it especially difficult to absorb acquisitions, to quickly respond to market needs, and to accept and understand what customers wanted (largely as result of the delusion of ‘we know better’).”

As businesses become leaders in their market it’s very easy for them to become blinded by conceit. For the language of leadership to slip into the language of arrogance. As they become overly focused on growth it’s very easy for them to become parochial and lose sight of what really matters. As they pursue efficiency gain over forward thinking it’s very easy for them to become internally focused. For informal reward systems (such senior management attention and recognition) to subtly put a premium on inward-looking management. The potential for rapid disruption that digital has brought to so many markets serves only to amplify the impact of such misaligned corporate culture.

Be bold, be proud, be ambitious, but never be too arrogant.

This extract is taken from our book, Building The Agile Business (Kogan Page). Do join our community to access exclusive content related to the book.

Leading Teams Through Uncertain Times

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When the environment is volatile and complex we need a different kind of leadership

We hear so much about the accelerated rate of change that so many businesses are struggling to deal with right now and the need to lead teams through periods of high volatility and uncertainty. The Kübler-Ross Grief Cycle is a relatively well-known way of thinking about the more emotive responses to high levels of change and unpredictability.

Our initial response may well be founded in shock and even denial that the change is even happening. The leadership response to this should be founded in clear messaging and signals about the reality of the need to change.

We then may react with anger and frustration, which calls for understanding but also communication and information.

Some may feel overwhelmed by change, and even slightly lost, in which case coaching and support will help.

The importance of storytelling, shared experiences, guidance and direction to help people to find their own meaning in the change and eventually to accept and move on.

It’s a great way of thinking about the stages of change but of-course the reality of the transformation that many organisations are undergoing is less of transition from A to B and more of a journey to become a business that in itself is characterised by continuous change. So the point that many miss is that a leader trying to navigate this process will likely find that they need to deal with these reactions from many different sources and all at once.

The real skill in leading through times of high uncertainty is being highly tuned to the emotive context of our surroundings. To have empathy. Sure, we need clear direction, continuous communication, shared learning, accountability, openness and transparency, and a bias towards action, but we also need the emotional intelligence to understand the support that people really need to come on the journey with us.

Workplace Culture

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Workplace culture is intriguing, a few seem to have an opinion on it or trying to build it, maintain it or redefine it. Further below is a link to survey for some research we’re doing into Workplace Culture if you’d like to contribute and get the report findings.

It’s a long game, it’s not like you can change your culture in a few months …even years.

Michael Sahota listed the following key points about culture whilst referencing the Schneider Culture Model:

  • Management guru Peter Drucker says “Culture … is singularly persistent … In fact, changing behaviour works only if it is based on the existing ‘culture’”
  • No one culture type is better than another.
  • Depending on the type of work, one type of culture may be a better fit.
  • Companies typically have a dominant culture with aspects from other cultures. This is fine as long as those aspects serve the dominant culture.
  • Different departments or groups may have different cultures. (e.g. development vs. operations)
  • Differences can lead to conflict.

It’s those last three that caught my attention.

Culture comes from a combined set of behaviours, from people ‘in’ the business. Often it’s driven by the founder (not always a CEO) or a change agent, an ambassador for change, who has a strong vision and purpose that everyone else buys into because it fits with some of their own needs and ambitions. That’s what creates the ‘energy’ in a work environment that electrical vibe that people describe they can feel, drive, passion, teamwork, whatever you want to call it, you can feel it. Can you feel it now? Have you felt it this week? Month? Year? If you haven’t then you have a problem, maybe you have or are developing different cultures in different groups and moving to conflict, which by the way slows you down.

We’re now seeing businesses wanting to move faster, have teams that come together and then break away after a relatively short time. We’re going to see more resource coming in to the organisation that’s far more temporary, new technologies, new processes, to serve short and long term purposes. Every company needs to become more adaptive, iterative and emergent, which means mixing skills it doesn’t have or can’t afford to hire full time (yes you can partner but that’s not for everyone), and as Nigel Bogle once said,

‘Big is a collection of smalls’ 

and that’s a team dynamic. How do we cope when we have mixed cultures and does it matter? Does it lead to conflict? How do we recognise that and the ‘energy’ and more importantly how do we build or maintain it?

Knowing the culture(s) you have and the culture(s) you want to keep (because it drives growth) should be primary, especially during a merger or change programme, it’s your people stupid, the foundation of what you build.

What’s your experience? It still feels like the elephant in the room.


Responsible or interested in Workplace Culture?

I’ve been working with London Research and Rare: Consultancy developing a report looking at the impact of the working environment on staff morale and performance, with a particular focus on the impact of a merger or acquisition on culture.
Those taking part in the survey will get a free copy of the research when it is published in the spring.

Take part in the Survey here. (closes March 9th)


You can read more about culture and business agility in the book.

For MORE exclusive content related to our book on Building the Agile Business, you can sign up here.

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