There are many reasons that founder-led companies are so good at disrupting industries and making life miserable for slow-moving incumbents. But perhaps the most powerful is that founders create great insurgencies. They ignore established industry rules and boundaries. They create better ways to solve old problems. They disdain anything that blurs their focus on the front line. From top to bottom, they are at war against the industry leaders on behalf of underserved customers.
Our research on what we call the “founder’s mentality” shows that maintaining a strong insurgent mission is critical to long-term, sustainable growth. But to compete long term, insurgent companies also need to develop scale and scope, which very often dulls their insurgent’s zeal. In many ways, this is because their perspective on the future slowly changes. Insurgents see the days ahead—both long and short term—as ripe with opportunity. They embrace change and chaos. They invest in whatever it takes to innovate new solutions for customers. Incumbents, on the other hand, very often see the future as a threat: As leaders invested heavily in the status quo, innovation and disruption are not good for them. Turbulence erodes profitability, innovation marginalizes their current product offerings. The future is not better.
The companies that find a way to achieve scale without losing their insurgent mission—we call them “Scale Insurgents”—remain acutely alert to this difference in perspective. They actively fight back against the very natural tendency to retreat behind the castle walls to avoid future change and turbulence. Instead, they do what in some companies might seem like heresy—they commit to disrupting their own insurgency. They know that acquiring the benefits of scale requires ruthless focus on a well-defined core business and a commitment to building the systems and processes to support it. But they aren’t wedded to their business model—they are wedded to what will serve their customers best. Rather than erecting defenses against the future, they embrace the notion of limitless horizons—the idea that a company can intelligently extend the boundaries of its core ever outward.
This is, of course, easier said than done. But it begins by recognizing that large companies face an organic challenge. Of course, fighting the future is never a stated goal. It happens gradually over a period of years and is the sum of thousands of little acts—refusing to respond to a price war, trying to ignore an innovation from an insurgent competitor, coddling a slow-growing brand, etc. Seen in isolation, through the lens of the income statement, these acts are understandable—even clever. But their accumulation can destroy a company in a number of ways.
First, employees catch on quickly. They begin to understand that their main mission is to protect incumbency economics, not continue the insurgency of their forgotten founders. They see too many examples in which the company doesn’t do the right thing for customers, communities or the employees themselves.
Second, customers find out. They are loyal to brands and have often grown up with the incumbent. But the insurgents keep knocking on their door, with new and wonderful offers at better prices or better quality.
Third, insurgents find out. They bring the battle closer, convinced the incumbent will stay behind its moat. By not responding aggressively to their early hit-and-run tactics, the incumbent allows them to grow and to become bolder.
In our experience, embracing the future as you scale requires solving what we call the Engine 1 vs. Engine 2 problem. Engine 1 is your core business, the engine that got you here. Engine 2 is the one you will eventually need to power your company’s future. Developing both, side-by-side, forces the organization to keep its head up and eyes forward even as it wrestles with the day-to-day challenges of executing its core strategy.
Chief Analytics Officer Spring 2017
15% off with code MP15
Big Data and Analytics for Healthcare Philadelphia
$200 off with code DATA200
10% off with code 7WDATASMX
Data Science Congress 2017
20% off with code 7wdata_DSC2017
20% off with code AIP17-7WDATA-20