How do young startups manage to take over the world at a dazzling pace while trusted, established companies are going bankrupt? What developments would an entrepreneur or director need to keep track of in order to act at the right moment and seize the opportunities? How radically do you have to change to still be relevant to the market? Very radically, says Danny Mekić, an entrepreneur, innovation expert and guest lecturer at the Nyenrode Masterclass Business Development. “To be truly innovative, you have to completely reinvent your organisation and the industry you operate in. Starting from scratch. Because just growing by 2% every year by doing just slightly less badly than the competition, like the business world used to do, doesn’t cut it any more now.”
A new foundation
“We live in interesting times. If you look at the world from a distance, you have to conclude that the foundation of our society, laid after the industrial revolution, is due for replacement. Everything we’ve built, invented and created before, it all has to go back to the drawing board. With the enormous power of modern day technology and our connected society, hardly anything meets our expectations any more, while the traditional approach to working is now needlessly expensive and limiting. A new society is forming. But established organisations still take their own history, products, services, business models and corporate culture as their starting point, rather than that new society. They try to become 2% better, or less bad, while the startup across the street is starting from scratch. The established organisations shouldn’t try to innovate from their established situation; they need to have the guts to start all over again, and ask themselves: ‘who are we, what do we represent, where do we contribute added value to society, and what would be the optimal way to do that in today’s world?’.”
The power of the masses
“Changes in the economy, in industries and in organisations used to concern only a limited number of people; scholars, directors, politicians, et cetera. Now, this new foundation has created a new power, the power of the masses. Using smartphones and online platforms, people easily connect to each other. It’s those platforms that are making the old structures and systems obsolete. There are young startups that take advantage of this, and they don’t need buildings or big investments any more. They take small concepts and develop them very rapidly using technology on a very large scale. The established companies haven’t found a good response to that yet.”
Hierarchy inhibits innovation
“The hierarchical organisation model, invented by the military, has a way of blocking innovation. In that traditional model, nobody really feels responsible for making a change. The director passes the buck to the innovation manager, who complains that he’s not in charge of budgeting and that his people won’t listen to him. The other staff complains about not being given enough time and freedom. Innovative ideas have to be stamped into a business case before anyone takes them seriously. And the worst part is that most of the organisation thinks: ‘no need to worry about innovation, we have an innovation manager’, and goes back to their daily routines. At the end of the week, everyone is frustrated and zero innovation has taken place.”
Crises can speed up innovation
“I’ve looked into the 25 most successful banks in the world. They’re spending only half a percent of their entire IT budget on innovation. Imagine you want to replace a building, and you spend only half a percent of the upkeep budget on that replacement — you can be sure of one thing: that’s not going to work. But the necessity of innovation often becomes visible during a crisis. The ash cloud that hung over Europe a few years ago caused an overload in the traditional communication channels of the Dutch airline company KLM, forcing them to start answering questions via social media. That’s how KLM’s webcare was born. And when Dutch telecommunications company KPN was under attack from hackers a while ago, they put together a super team and let it take care of the problem with an unlimited budget. This turned out to be a successful approach; the team had one clearly defined goal, no financial constraints, and full authorisation from the management. Microsoft is also working on a comeback now, having been passed left and right by Apple during the past years.”
Young staff members as a driving creative force
“It’s interesting to note that the average age of the staff at Facebook is 27, whereas the average employee in the Netherlands is 43 years old. I don’t mean to start a debate about age, but it’s striking that the foundations of the establishment are being shaken by a younger generation, which generally doesn’t have any personal obligations yet like home ownership, a family to support or a mortgage to pay off. Young technology startups from the USA seem to be appearing out of nowhere and exponentially growing into big companies that make billions.
So how come those twentysomethings, or even thirtysomethings for that matter, are nowhere to be found at the management level in our AEX companies? How come the youngest staff members still have to start all the way at the bottom of the ladder? The older managers, who still rely on the old models and infrastructure, are paid higher wages and get to call the shots to boot. You’d think doing it the other way around would be better: recruiting young employees and giving them the tools to make innovation possible within the organisation. By giving the most talented people ownership of a part of the product or service, you’ll generate creativity and pride within the team as well as a willingness to work overtime.”
Danny Mekić is a guest lecturer during Nyenrode Business University’s Business Development series. This article was published in Dutch on Nyenrode’s website.