While we write a lot about business models at Applico, there’s another important aspect of enterprise digital transformation: talent.
For transformative innovation to succeed, enterprises need to be able to attract top talent, from the executive level on down. This challenge is especially important for platform innovation initiatives, which often require an influx of tech talent. That means you’ll be competing with the likes of Amazon, Apple, Google, and Facebook for tech talent, as well as all the latest VC-backed startups offering the chance to work with the newest cutting-edge technology.
Cultural mismatch is a big challenge for large enterprises looking to attract tech talent. Tech entrepreneurs and developers used to working in an agile fashion and moving quickly can chafe at the layers of bureaucracy that come with working at larger companies. Similarly, the risk averse culture of large enterprises is at odds with the “fail fast, fail cheap” mindset of most tech companies. Amazon, for example, views experimentation and failure as a key part of its culture of innovation.
“It’s OK to be wrong, it’s OK to make mistakes — it’s OK to fail,” according to Paul Misener, Amazon’s VP of global innovation policy, in a speech he gave at a recent tech conference. “That’s the key part I want to communicate to you today is the importance of failure in any sort of innovation.”
This “fail fast” attitude is one that’s tough to embrace at many large companies. Walmart’s decade-long failure to combat Amazon’s growth is a case in point.
Walmart launched the Walmart.com Marketplace in 2009, just as Amazon was really starting to take off. However, Walmart’s marketplace was nothing like its competitor’s.
While Amazon’s marketplace was open and allowed almost anyone to join, Walmart selected sellers based on “reputation, sales projections, and alignment with Walmart’s values.” Walmart wasn’t ready to truly open up its marketplace to third parties. Still entrenched in a linear mindset, the company was afraid of brand dilution and outside competition, since third party sellers would be displayed alongside Walmart’s own inventory on the site.
Amazon, unencumbered by these concerns, embraced competition between its own sales divisions and third-party sellers. Whoever offered consumers the best price got prime real estate at the top of the page. Amazon very intentionally placed third-party sellers on equal footing with its own products. Amazon’s brand was all about providing the best value to the consumer, no matter who was providing the actual product. The marketplace model was the best way to make sure the company delivered on its promise.
It took nearly a decade for Walmart to finally realize its mistakes. It acquired Jet.com for $3.4 billion late last year. It empowered Jet CEO Marc Lore to run all of its marketplace and ecommerce initiatives, and it allowed Jet.com to remain a separate business.
Since then, Walmart has seen unprecedented ecommerce success. Its marketplace sales increased 67% in Q2 compared to the same period the prior year.
A big part of Walmart’s newfound success has been giving its marketplace initiative the autonomy it needs to thrive. Additionally, allowing Jet.com to remain independent and autonomous enables it to tap into Walmart’s infrastructure and resources while maintaining its tech culture.
Creating an autonomous, independent organization with its own brand, own cap table, and own leadership is the best way to enable corporate innovation to thrive. This is especially true with platform innovation initiatives, like Walmart’s marketplace, which are potentially disruptive to the company’s core business.
Autonomy enables an entrepreneurial culture to take route at a separate entity, unencumbered by the risk aversion of the traditional organization. Success starts with leadership, and autonomy enables corporative innovation initiatives to attract top tech leadership.
Entrepreneurs tend to be wary of corporate innovation, as they’ve seen too many broken promises in the past. A large company will promise one thing, but the reality on the ground for that entrepreneur will be very different. This is a key reason why corporate innovation initiatives struggle to attract and retain top talent.
Autonomy helps provide the assurance that the new initiative will get the space it needs to thrive. The new company will be able to experiment as needed to find product market fit without having to worry about damaging the core business’s brand or relationship with customers.
It also enables the new initiative to explore potentially disruptive paths to the company’s core business. When you have a large organization with thousands of employees oriented around the old business model, it becomes nearly impossible to radically change the mental models and financial incentive structures that support that business model.
Platform innovation often requires such a shift. So rather than trying to steer the Titanic, it’s much simpler to sidestep the problem and let the new business explore disruptive innovation on its own.
The core business will still own and control the upside of the new venture, but the new business will get the independence it needs to create a culture that enables agility and experimentation. With this structure in place, it’s much easier to attract tech talent and to retain the entrepreneurially minded executives you’ll need in order to succeed.
In a future post, I’ll look at some of the other benefits of autonomy, such as freeing it from the P&L expectations of a typical business unit.
Platform InnovationRead more
Platform InnovationRead more