In this series, we interview a respected change leader to discuss the successes and hard lessons that made them who they are today. This month, it’s Paul Johnson, an executive who has a career that spans COO, CIO and Programme Directorship positions in leading strategic transformation initiatives. This includes significant stints at big international retail banks and their aspiring challengers.
Small is beautiful; it’s the business vogue. The young and nimble Davids of this world outpace, out-range and out-gun the lumbering Goliaths. So prevalent is this belief that the business press is awash with articles telling companies to adopt the virtues of the start-up. Think twice before drinking the Kool-Aid however. For every Netflix, Amazon and Dyson that puts pay to large corporate rivals, there are a hundred times as many others that began promisingly but fell afoul of big businesses able to out-manoeuvre them in a changing market.
“The truth,” says Transformation Director Paul Johnson, “is that scale can bring its own advantages for transformation. And start-ups will find that they too can have weaknesses when it comes to change.”
Paul should know. He has been a chief officer and transformation expert for both little and large companies for many years. From some of the biggest financial institutions in the world to enterprising start-ups looking to eat their lunch, Paul’s role has been to lead strategic change and transformation initiatives. He knows how hard it can be to make business change a source of strategic advantage, particularly with technology innovation and new products. The way he sees it: you need to play to the strengths of your size.
Lesson 1: The onus for getting it right first time is on the start-up
“First off,” says Paul. “There are some very obvious constraints in a start-up. They have budget sensitivities that mean there’s a higher risk that change is not carried through as well as it could be. Large organisations usually don’t have this issue and it means that they are at an advantage.
“In fact, in cases where the change programme outright fails, the advantage to big business is even greater. Big organisations can fund a new initiative. In a start-up, there may simply not be the money available even if the top executives are willing to give it another go. It makes the start-up more vulnerable.”
To continue the analogy from earlier, if David had stumbled and missed his first shot at Goliath, he may not have survived to take a second.
“When you’re a David,” says Paul, “you have to be very sure of the business case and the plan for delivering on it before embarking. As a professional in a big business, you may still feel that same personal pressure to get it right first time – your career may depend on it – but the material difference to the organisation as a whole is not the same. If anything, big organisations have greater latitude to innovate because they have the budget to take more risks and run new ideas in parallel with BAU.”
Lesson 2: The start-up has to be comfortable relying on third parties
In the story of David and Goliath, David is alone but Goliath is not. Goliath has his own retainer, a professional armour-bearer to advise him and help him prepare. Similarly, says Paul, “Most big organisations will have their own in-house specialists to support with change and transformation. Yes, they’ll use outside help to complement their own expertise but it’s just not the same degree of dependence on externals that a start-up faces.”
Paul believes start-ups require a very different management style, “Larger players can have more direct control of change in their organisation, and smaller players need to practice indirect control and building the foundations of successful relationships. Outsourcing means that another organisation’s agenda, policies and politics come into play. In my view, strong equal partnerships are critical to the success of smaller businesses. Insist on clarity. Ensure your expectations are in the contract. Ensure how you will work together is in the contract. And absolutely ensure you factor in their ambitions and expectations too.”
Lesson 3: Goliath’s technology is tailor-made, David’s is off-the-shelf
Goliath’s armour is tailor-made. David on the other hand, has no armour of his own and is offered some on loan, which turns out not to fit him.
“Larger organisations,” says Paul. “Find it easier to create a technology advantage, they’re less reliant on off-the-shelf technology and – because of their budgets and internal expertise – they can invest in a tailor-made fit.”
They need to be careful though as custom solutions can become problematic. As the story proves to show, what was perfect for Goliath in past battles did not match the situation he faced with David. “When self-built solutions become legacy,” continues Paul, “they can be more restrictive than off-the-shelf solutions because they were built on proprietary code and inside knowledge that may now have left the organisation. Goliath is slowed down by his heavy armour. Off-the-shelf solutions on the other hand tend to be more flexible because they are built to common standards and take account of a wider variety of scenarios. If you take the right approach, it’s easier to switch technology in and out as a start-up.”
Lesson 4: Less people doesn’t mean less politics
Perceived wisdom is that big organisations can be slow to adapt to the market because of the grand-scale of internal politics holding them back. There are certainly plenty of examples. But politics still exists within a small business and it can be just as dangerous believes Paul, “In smaller organisations, there are less people but what politics there is can be equally emotive. Senior managers are more visible and the temptation to act in the interests of their pride and reputation is that much greater. And because there are fewer senior managers, they tend to have a lot more power relative to the scale of the business. This means that the effect of politics can actually be magnified.
“To my mind, it’s most important that the CMO, COO and CIO get on well together in any business. That means more than being civil and attending meetings with each other. It’s about more than being constructive. I’d go so far as to say that they should actively enjoy each other’s company and get together often to understand and solve each other’s challenges. That provides a platform for joined-up thinking that will filter throughout the organisation. In a smaller business, it will filter faster. But one way that big organisations can expedite the effect – and actually this is quite good advice whatever your scale – is for the three of them to walk through the customer journey. The full and actual customer journey. If you’ve never done it as an executive team, you should, it’s enlightening – and you’ll remove all sorts of obstacles to effective change in the process.”
Lesson 5: Do not measure your future the way others measure their past
Start-ups are synonymous with young, energetic new thinkers. But what’s surprising to many is that the senior leadership team of a start-up can still have quite a high proportion of “old hands” – people recruited to their position by past successes and the quantity of their industry experience.
“They can be a strong steadying element,” says Paul. “However, these are people who have been in the industry for decades and who can be subconsciously invested in the old familiar ways of working. If too many senior management positions are held by the ‘old guard’, this can have a stifling effect on change or result in the adoption of old measures of success, such as your seniority being determined by the number of people in your team. All of this can be counter-productive to an efficient, agile and effective organisation. Efforts need to be made to keep the culture entrepreneurial and the mind-sets open to change.”
If David had listened to the old King Saul, he would have faced Goliath differently, weighed down by heavy armour and unfamiliar weapons. Against the giant, he would almost certainly have perished.
Here is Paul’s take away summary for succeeding as a change leader within a start-up:
- Ensure that the fundamentals of the business are clear and the technology implemented to support this is well-designed, flexible and built as far as possible in an agile and open way Have trusted partnerships with suppliers and, where possible, negotiate equitable models where you can both win together
- Allow innovation and a proportion of investment that can fail, avoid the ‘zero tolerance for failure’ culture
- Ensure both the business lines and functional areas (e.g. IT, Digital, Marketing, Procurement, Finance) are working as one, the visions are in alignment and that the behaviours and culture of the organisation do not lead to silos
- Embrace diversity in thinking, old and new, and celebrate the successes together!
Contact Paul Johnson – firstname.lastname@example.org