THE FOUNDATION FORUM
19th September 2018. WRITTEN UP WITH THE HELP OF SIMON CAULKIN
To download a PDF of this write up, please click here: How to Digitally Disrupt an Industry – The Foundation Forum Write Up
Progress. It’s relentless. And positive. But boy it is painful too.
One assumes it’s always been this way, but a bit like childbirth or running a marathon the pain fades and only the memory of euphoria remains. The ‘never’ falls off ‘never again’ so easily. But you can’t say never again to progress.
Back in September 1963 Harold Wilson sounded like he was in a similar place… ‘The Britain that is going to be forged in the white heat of this scientific revolution will be no place for restrictive practices or outdated methods. We shall need a totally new attitude to the problems of apprenticeship, training and re-training for skill.’
You can hear the grinding of wheels and clashing of interests as society faced its version of the innovator’s dilemma – the new world promises much but not enough yet to see how whole industries, workforces and livelihoods might be replaced. Just that they are being threatened. And yet they work perfectly well at the moment, thank you, so why all the fuss?
Later on the challenge shifts, from Canute-like resistance to herd-like not wanting to be left behind. Both groups have to face up to the next difficult part of their respective journeys:
- For incumbents, how do you learn freely enough to really take advantage of the new and fast enough to avoid the invisible ‘Kodak cliff-edge’ that you are hurtling towards?
- For the newbies, how do you grow up so your scaling is sustainable and you don’t just fall back into being a troubled large organisation – Uber or Tesla’s manufacturing challenges or Facebook’s malpractice or Google’s ‘do good’ doubts or Apple and Chinese workers or lots of them and tax… plenty spring to mind
We know so many people wrestling with aspects of this that we thought it deserved a platform and some intelligent exploration…
- First to understand more about what it’s like being in the white heat and how hard it is simply to succeed when with hindsight it all looked so obvious.
- And then, on reflection, where it’s taking us – as customers or colleagues. Or the effects on competitors. Or the unintended side-effects on parts of the world that might be struggling as a result. Or even a dark side that emerges like a cloud doggedly attached to a silver lining.
So when we gathered in mid-September, we came to listen to three perspectives from different stages in the journey
We had a view from what feels like a while back, the digital music battles and the response of the establishment, with Barney Wragg, SVP for Universal’s eLabs from 2000 to 2006 and then Global Head of Digital at EMI to the end of 2007. He was originally one of the first employees at ARM as a bright-eyed Physics graduate and when he joined Universal he was plonked in the corner to fiddle with this digital distraction while the main work was done by the main people. He saw first-hand how digital became a great deal more than a distraction and found himself front and centre as the organisation took responding seriously. Having done a good job he took on a more influential role at another of the majors, EMI. He’s done some very interesting things since too, but this is the most immediately obvious element that relates to our story.
We had Deliveroo in the form of wonderful Foundation alumnus, Lisa McDowell, Head of Brand Strategy and Insight and part of their team since June 2016. She describes the journey, from a proper customer insight about an un-met need at the start, a clear-sighted view of a different strategy to meet it (one that’s different from Just Eat, Dominos and the like, not just the establishment), the scale and pace of global expansion that is breathtaking, and the intensity of the competitive battles that lead to continual innovation and evolution of the model. Alongside the survive and thrive cut and thrust they have had their share of ethical contemplation to consider too, most notably around the gig economy. Are they really a force for good not just for good food? How do they win well not just win big?
And we had one you might not have heard of yet, Truphone, and the irrepressible Sarah Speake who has just left as their Global CMO. Truphone are poised to turn the world of mobile telephony upside-down, for example with SIM cards that are profiled remotely and NOT run by a network operator. She also spent time at Google in the London office as the company grew at a furious pace, and she ultimately became Strategic Marketing Director looking after B2B customers and agencies across the Google portfolio of advertising & tools (so this meant teaching them how to use the rapidly evolving service too). She’s been in the more traditional camp too, most notably at Clear Channel Outdoor as CMO where they set about the wholesale digitisation of what used to be called posters, reinventing outdoor media before it was reinvented by somebody else.
A Disruptive Influence. The discussion that followed, summed up by Simon Caulkin
‘Disruption’ may currently be the most overused word in business, attributed indiscriminately to almost anything vaguely new. Yet, ironically – blame it on fear, denial, attachment to doing things the way they’ve always been done (a recurring theme) – we may if anything be underestimating the full impact of the present wave of data and platform-driven disruptions.
Fed by Moore’s Law, network effects and the exponential increase in personal data gathered by our devices, what began by upturning music and publishing will eventually transform every industry, including public services. The pattern is clear – a tech firm arrives, finds a way of digitising the master element of the value chain and for the first time delivering individual service to avid consumers. Hello Apple, Google, Amazon (and Netflix, Uber, Deliveroo…); goodbye music, newspapers, bookselling (and television, taxis and restaurants…) as the mass-production industries of old.
Yet this description of disruption in the abstract bears no relation to the heat and smoke engendered at the point where the rubber hits the road. Here, as an attentive September Forum heard from some of those in the thick of it, aggression, panic, bewilderment and exhaustion are often the order of the day, offset by short-lived periods of exhilaration and euphoria before the lurching shape-shifts begin again.
One of the most striking things to emerge from the evening was the degree to which disruption was, well, disruptive. Business in periods like today is almost comically unlike the rational, planned and predictable activity of the textbooks. It doesn’t matter much whether a company is doing well or badly, leading or lagging, none of the normal calculus applies.
So for those in the eye of the storm, the only way to really know whether what they are doing is sensible is to wait for actual events to prove them right or wrong.
‘The thing about disruption is that everyone thinks you have a plan, or that you can refit a plan – but the reality is that you can’t ever foresee the variables’, says Sarah Speake, currently running her own consultancy but previously at Clear Channel and Google Europe. She was speaking of her experience at an incumbent changing to catch up, but even when things were going swimmingly at Google, there were moments of sudden reversal – as when a new leader’s fresh eyes, perhaps surprisingly, saw the company’s recruitment process was too homogeneous, focused only on millennials at the expense of greyer hairs. And Speake apologised to other companies for the expensive and, she now feels, over-generous working conditions pioneered by the search company, which, while great for retention, gave new hires ‘a sense of entitlement that that wasn’t necessarily so smart in the long term’.
For his part, Barney Wragg, now out doing his own start-up after a career taking in ARM, two music business ‘Majors’ and The Really Useful Company owned by Andrew Lloyd Webber, delivered a compelling portrayal of the complacency he found when, in 1999, he was pitched as a digital geek into a record industry flush with a decade’s extravagant CD profits. The leaders had literally no conception of what the internet was about to do to it and when at a Board meeting Wragg demonstrated how pirate site Napster worked, he was met first by denial because it sounded awful (‘It’s all bollocks anyway, isn’t it!’) followed, once he plugged the new-fangled laptop into the room’s main speakers, by utter panic (‘Christ alive, we’re all doomed!’)
But initial shock was just the start. Noted Wragg: ‘What I realised with the level of disruption we were facing was, even when we thought we’d got to an equilibrium, it changed on us before we knew it. So we had these layers of people doing what they’d previously done that you were trying to unpick. You’re talking to people and you say yes, I know you used to make CDs like that 15 years ago, but it just doesn’t work like that any more’. Then to other people a bit more with the programme you’d say ‘yes, we worked that out a month ago but it’s no longer right’.
He described the rollercoaster flips vividly – from having no business to having a multi-hundred-million-pound ringtones business to having no business again when smartphones took over, It wasn’t just that everything was wrong: it was wrong in multiple layers, time-scales and dimensions.
The 1990s music industry was way behind the curve. But the picture painted by Lisa McDowell, head of brand strategy at Deliveroo (reportedly Europe’s fastest-growing start-up), was one of a life that was no easier and sometimes more lonely than that of those they are disrupting. Even for a disrupter-in-chief in super-growth mode!
Deliveroo was born in 2013 of a London-based New York investment banker’s irritation at being surrounded by good restaurants that he was too busy to eat at, with alternatives being a Tesco sandwich or a low grade local takeaway. A mere five years later Will Shu’s baby is earning revenues of more than £277m (that being the 2017 figure, the latest available as we write late in 2018) through 50,000 riders in 500 cities and 13 countries from over 50,000 restaurants with no more than 30 minutes from order to receipt.
Less happily, along with competitor Uber, Deliveroo has found itself at the heart of debates about one of today’s most contentious business issues, the gig economy and the future of work. McDowell described their aim to lead by negotiating with governments to improve legal frameworks on behalf of riders who want a blend of flexibility and protection not currently allowed. It’s bold and it sounds good, but an awful lot of people are waiting to be convinced. On another front she showed how data is used to spot underserved areas, where local customers lack access to cuisines Deliveroo can see are popular in similar locations. Of course they are re-writing more rules in response. They now have ‘dark kitchens’ where chefs from affiliated restaurants cook up dishes for delivery in converted shipping containers, and this has also brewed controversy.
Neither of these was anywhere near the Deliveroo management team’s radar at the start – and nor was this year’s sudden need to pre-empt a Just Eat launch by creating news of their own. They developed a brand new service linking 1,000 independent restaurants, this time with their own delivery fleets so changing the Deliveroo model, and then created three apps to make the various parts of it function, all from a standing start in eight weeks.
McDowell said the company got by on aggression and adrenalin – in an organisation already growing at 650 per cent a year, the job simply wouldn’t have got done without it.
In this kind of business, going full tilt and then some, there’s not much room for management niceties: left hand down a bit; careful – dangerous bend ahead; or just occasionally whoa, STOP!
All the speakers agreed on the need to maintain momentum, which in practice meant a constant battle with the strong human desire to retreat to the comfort zone. In a business environment like today’s, ‘you have to be comfortable with being out of your depth for 50 per cent of the time,’ said McDowell – or, as race driver Mario Andretti once put it in automotive terms, ‘feeling in control just means you aren’t going fast enough.’
A casualty of speed and chaos can be keeping everyone on the bus (or bike). ‘Unless you bring the people with you, unless top down everybody is genuinely an advocate and understands their individual role in the disruptive journey, you’ll screw up quite speedily. It’s not a box-ticking exercise,’ warned Speake.
Deliveroo learned this the hard way. Because it was moving so fast, McDowell acknowledged it sometimes left people behind. This was the case in 2015 when riders didn’t just object to being moved from a system of payment by the hour to payment per delivery, they went on strike.
Riders are genuinely at the heart of everything, McDowell insisted: Shu himself was the first Deliveroo rider, and every new hire has to ride, or at least deliver, as a condition of employment. ‘In big cities like London, riders make more on average with payment per delivery. We knew that. What we didn’t do a good job of was telling them’.
Wragg agreed, emphasizing the positive role of ARM’s cute growth mantra, ‘an ARM in every pocket’, in keeping the Cambridge company focused in the early days as it sought to make its IP-based business model work. He added caution that the desperate recourse to mandating certain behaviour or action simply didn’t work. Even when he technically had that power, in a ‘pants-on-fire’ crisis at record company EMI, ‘I didn’t build enough consensus. The idea that a great leader can come in and just get it done is crap’.
Yet as the stories showed disruption isn’t entirely about chaos (just partly). Lessons are being learned. Disruption itself is evolving. Speake pointed to emerging ideas around ‘collaborative advantage’, in which firms combine to build ecosystems that can work for many players as well as customers, without a competitive fight to the death. And when the dust of battle has settled, the basics of business and marketing haven’t changed, she noted, although the means of delivery and the division of the spoils certainly has: a firm has to make money at some stage, and this means keeping very close to feedback from customers and employees.
Of course the wider narrative continues. In his introduction, chair Charlie Dawson observed that as well as turning the business landscape upside down, disruption has consequences that are wide, deep and often unintended for communities and society at large.
We know already that the main beneficiaries of the current phase of digital transformation are us, as consumers. And for now at least the tech titans who have gratefully hoovered up the personal data that we have all too willingly surrendered.
But viewed from the perspective of producers, citizens and the communities we live in (which are also us of course), maybe not so much.
How will this play out in the longer term? Who knows. Certainly not the disrupters, despite the illusion of control. Their intense urge to reinvent is truly a force of nature – but whether it’s a good idea…? They just don’t have the bandwidth to deal with that as well, so it sounds like if it gets done at all then it’s addressed in the ways we respond. We need to be more than self-interested customers and maybe that’s what’s emerging now. A push-back has begun? One for another Foundation Forum perhaps.
The Foundation’s view
Intense as a double espresso, it was a visceral evening. The smarts of disruptive ideas were elbowed aside by the energy, drive, aggression and ruthlessness to make them win. We had two lasting impressions and they weren’t what we’d been anticipating.
- Disruption only happens when something’s burning. And by burning we mean any of pain, fear or ambition, in descending order of effectiveness. Pain means it’s going wrong now, fear that it’s fine now but you can see it’s going wrong soon, and ambition suggests it’s fine but that you want or need to get to somewhere better.
Things are only truly burning when the feeling is so strong and so visceral that all of the conventional approaches simply won’t work. This means all of the mad things you could possibly do, that truly upset the apple-cart and for which the costs are clear but the benefits are hopeful, are the only possible courses of action. It gives you courage because it takes away any alternative!
Usually this works in favour of a start-up – the ambition has been enough to burn bridges and take a leap, then fear fuels the work needed to make the idea take off. Even so the stories from Deliveroo and Google were startling in the energy and pace of movement – these weren’t just start-ups but organisations on a path to somewhere altogether bigger and more substantive.
Barney meanwhile brought to life what it takes to shake a comfortable incumbent out of its zone of complacency – and the music industry sounded pretty well entrenched. The initial Boardroom dismissals of Napster were hilarious yet chillingly real. As he said, you had to persuade people it’s not going to be alright when they’ve been very successful for years previously. And then keep on doing it every time it looked like there might be light at the end of the tunnel, because every time the market moved away from them again. In the end the industry was rescued by Apple and Steve Jobs’ brilliantly simplifying vision, but the record companies only bought into it because by then, they had truly stared into the abyss.
- To survive AND thrive AND contribute to society requires speeding up or slowing down, depending on where you’re standing. Having just spent a couple of days helping run a global conference for the asset management group in a large bank, the issue of pace is front of mind. They could see themselves that they needed to speed up, but that meant shaking off years of steering carefully, where any downside seemed far bigger than rewards for trying something new.
Contrast this with Google’s recruitment – Sarah was spending 25% of every day interviewing streams of people, then learning with hindsight that the Millennial-heavy outcome was not nearly balanced enough to do the job. Or with Deliveroo’s rush to update their riders’ remuneration approach, when they changed from hourly to ‘per delivery’ payments they had a two day strike on their hands and a march on their Headquarters in Soho.
In both cases the issues were resolved when a bit more time was taken, or available. It was a new CEO at Google that helped the team pause and see what was happening, and at Deliveroo the response at HQ was helpful – to sit down and listen to the views of their riders, and then much more carefully respond.
This didn’t come naturally. There is clearly an aggression to the pace of things and to the character of the businesses. You can see why too. You start and the challenge is trying to survive. You get further and the challenge is changing the world, fulfilling the potential of your bold ideas. And then you find simply MASSIVE unintended consequences with no time to spot them or tune things in response.
No wonder we have the issues we’ve seen from disruption – somehow the organisations involved have to find a balance, to go fast and go carefully, to put people back into the mix. Easily said. But somehow, it must be done.
About The Foundation
We are a management consultancy working with all kinds of organisations to achieve customer-led success. This means tackling big organic growth challenges; growing faster, growing into new markets or fending off threats to growth by starting with what matters to customers and then making it work for the business as well.
The aim is to influence customer behaviour, but this is inherently tough. Why? Because people in any organisation naturally see the world from the inside-out, with colleagues close and customers distant, and lots of assumptions about how things work that aren’t challenged
We help clients look from the outside-in, re-connecting them with what customers really value (the problem they want to solve, not usually what the client sells), then finding new and better ways to create this value
This means working both as expert advisors and facilitators. The issue with simply gathering outside-in information is that it lacks impact to get senior teams to tackle inconvenient truths in what customers want, and to believe their own organisation can be different
By using ‘Immersion’, personal conversations with customers and leaders of organisations in other sectors who have tackled parts of their challenge, we help teams get around the natural and limiting inside-out beliefs that stand in their way. This helps them develop better answers for customers and new ways of achieving lasting success
We answer three sizes of question:
- Small – a new proposition or an improved customer experience
- Medium-size – growing value per customer or improving retention (a sub-set of the former)
- Large – creating customer-led business success, often by uncovering a true outward-looking purpose and the genuine belief needed for it to be acted on
Our clients include HSBC, JLR, O2, M&S and Ebay, with achievements including helping create Plan A at M&S, adding £100m of value to a Travelex travel money proposition, and giving Morrisons a competitive direction contributing to their return to growth
Behind our work our most distinctive characteristic is our team and their outlook. Each individual is motivated to and experienced in crossing the border between the worlds of customers and business which often resist mixing well
This link will take you to more information about us and our Forum events: http://www.the-foundation.com
Charlie Dawson (Founding Partner):
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Charlie Sim (Director)
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Anna Miley (Director)
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John Sills (Managing Director)
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