You know that feeling you get when you’ve decided it’s time to buy a new computer or tablet?
Maybe it’s starting up too slowly, the touchscreen isn’t responsive enough anymore, or it won’t run the newest software properly. Unfortunately, when I speak with many of America’s senior executives across industries as part of my own work, they say something similar: “Things are just running too slowly.”
Our company occupies a rare perch within the realm of business services. Over time, we have earned the opportunity to work with the overwhelming majority of the world’s largest companies. To put a fine point on it, we currently support every member of the Fortune 100 and 90% of the Fortune 500, along with a similar proportion of major firms across the globe.
I don’t list these statistics to brag about the great work that our teams do in building our business. (OK, I don’t list these statistics only to brag about the great work that our teams do building the business.) What’s important about our customer list is not just that we have the opportunity to help the world’s largest companies perform to their potential, but that we can see across the world’s great companies and discern patterns that affect them all.
Usually, this takes the form of aggregating data from executives in the same function at the different companies (e.g. what problems do all internal auditors at different companies confront in common?). But sometimes we spot a problem that cuts across functions, companies, and industries.
And as I mentioned, over the past 12 months, one theme has popped up again and again – from executives across industries and around the corporate suite: “It seems harder to get stuff done; we just feel really slow.”
On first glance, this doesn’t appear to be a new problem: it almost stands to reason that corporate executives would be perpetually impatient with the pace and progress that their teams make on any initiative. But this is a new, urgent flavor of this perennial problem. Companies – and larger companies in particular – face a set of dynamics that are simply making it harder to execute:
First off, big companies are, well, bigger than they have ever been. Our landmark Stall Points research, first outlined the trend that companies were using advances in management and communications to grow larger and larger.
And this has changed the nature of what it means to be big: in 1990, in nominal dollar terms, the 500th company in the US Fortune 500 had $543 million in revenue. In 2014, the 500th company had $5 billion in revenue. In nominal dollar terms, the threshold for being “big” has gone up by nearly 10 times and even adjusting for inflation, it has gone up nearly five times.
Second, within these big companies, collaboration has exploded. CEB research on the “new work environment” found that two-thirds of knowledge workers report a significant increase in the amount of collaboration required to do their job, and estimate that they interacted with upwards of 10 different people each day to do their job.
Third, huge advances in connectivity and IT have more than tripled the information flow to the average worker each day. And mobile technology has put the computing power of the Apollo moon mission into each of our pockets.
Why It’s Happening
So far, so good: bigger companies would seem to be enjoying the cost advantages of scale and the innovation advantages of their collaborative employees solving hard problems together. What could go wrong?
Plenty of things, in fact. It turns out that managers aren’t quite as good at converting the collective intellect of their knowledge workers into tangible business success. In fact, it seems that – at this stage – collaboration is the enemy of both speed and better outcomes.
CEB research shows that increases in information actually reduce the ability of managers to make decisions and act. Across the past year, we’ve seen evidence pop up all over the executive suite that – at this point – the new work environment is all too often the slow work environment.
Examples of collaboration and consensus slowing pace and reducing ambition abound. A few notes from some of CEB’s data bases:
As major purchasing decisions become increasingly collaborative, the cycle time to make a decision slows and – more worryingly – the desire to pursue an innovative solution shrinks measurably. When more than five buyers influence a purchase decision, the likelihood of a purchase being completed is only 31%, compared to a better than even chance when presenting to five or fewer buyers.
This is obviously a problem for the sellers – but it is an equally big problem for the buyers, who often settle for lowest common denominator choices that don’t move the business forward.
As more future colleagues are consulted in a hiring decision, the cycle times of recruiting departments slow to a crawl. Time to fill increases exponentially every time that an additional interviewer is consulted about a candidate. Even if an interview process expands from including three people to five, the amount of time to fill actually doubles.
Corporate IT has been the epicenter of this paradox. At the same time that agile development and standardized cloud platforms have slashed the time necessary for development, multiplying demands from business partners have actually increased the timelines to deliver new capabilities.
Time for a New (Business) Model
I could go on. But it is clear – at this point – that the potential economies of scale and scope from increased information flow, size, and collaboration are being gobbled up by the cost of consensus and collective action.
We obviously can’t give Prometheus back the fire. (I’m pretty sure that somewhere a Luddite CEO is declaring, “Put down your devices and stop engaging your colleagues!”… and I’m also pretty sure that won’t end well). The most advanced corporate leaders we talk with, however, are increasingly focused on increasing “corporate clock speed” by creating conditions where size, collaboration, and abundance of information help companies hit the gas pedal rather than the brake.
The goal is not to turn back time, but instead to adapt corporate processes, decisions and – most importantly – leadership behaviors to this new reality. Increasingly, the high performing leaders of today are the corporate drummers – in Buddy Rich’s words “sitting back there and swinging the band” by both inviting collaboration and setting pace.
While these dynamics have implications for all industries, they have particular urgency for my own. To the extent that my company is in an industry, we live in the technology and management intelligence space. And these dynamics will and should require the advice and software businesses to change.
Most firms in our spaces (software, consulting, legal and marketing services) create revenue by billing out hours or requiring large-scale, multi-year corporate change to process and technology. Slow and complex is all too often good for business. And in this model, a real misalignment has emerged between customers’ interests and those who serve them.
An upgrade isn’t sufficient this time; like the frustrated computer owner, it’s time to change models.