For time immemorial, we have been reminded that change is the only constant. We have seen evidence through history that those who adapt to changes are likely to not only survive but thrive, and those who are not able to adapt will perish.
Dinosaurs, as we know, were large creatures who dominated the planet earth for several million years and then were extinct due to the same reasons that they were dominant. They were ‘too big to fail’, but were wiped out.
We see a similar trend evolving in the industry today. A study of the S&P 500 Index shows that the average tenure of companies in 1964 was 33 years, which narrowed to 24 years by 2016 and is forecast to shrink to just 12 years by 2027. This underlines the changing times for businesses today, the toughest period since the recession a decade ago.
Dinosaur is a metaphor for large traditional companies which are not making significant efforts to transform themselves.
On the other hand, we are seeing startups and new-age companies known as unicorns largely disrupting the market and seriously challenging large enterprises with their work and valuation. Some examples include Uber, Airbnb, SpaceX (Tesla), Alibaba (Alipay), etc. There is a steady rise in their numbers that have grown from 82 in 2015 to around 279 now, with a combined value of $1 trillion. The ultimate unicorns like Google, Amazon, Facebook, Netflix, and Alibaba may have scaled up and become public companies, but have characteristics similar to these startups.
Today, Facebook, Amazon, Apple, Netflix, and Google account for a large percentage of the S&P 500. If Tesla was amongst the S&P 500, it would be the 85th biggest company by market cap, according to FactSet. It has already surpassed traditional auto companies like General Motors Co. and Ford Motor Co. Successful new enterprises are challenging the accepted norms with new concepts and in doing so, they’re transforming the entire industry.
Three years ago, the world’s largest automotive company, Toyota, publicly doubted the real potential of electric cars. To everybody’s surprise, more than 276,000 people signed up to buy the Tesla Motors Model 3. That year, Tesla’s annual sales figure matched up with some of the most popular car models in the U.S.
Large banks have been sceptical of cryptocurrencies like Bitcoin and the underlying blockchain technology until recently. But now almost every bank has blockchain as one of the top five strategic priorities. Unicorns like OMG and Qtum are also using blockchain to revolutionize banking by using cryptocurrencies for payments, securities, fundraising, loans, and credit. Slowly but surely, these unicorns are taking on the dinosaurs and not only challenging them but making them fight for their survival.
Amongst others, the key driver for this disruptive change has been the rapid advancement in technology with easy and relatively cheap access to technology backed by the availability of private funding through Venture Capitalists and PEs. Setting up a technology business has never been easier in this age.
The common characteristics of these unicorns are that they are agile, flexible, and fast in adapting to the market, and have technology at the core of their business. They not only use technology to add value to their business model but also have the mindset of constantly experimenting, and know when it’s time to change direction or pivot the business model and truly focus on being customer-centric. While the dinosaurs are more hierarchical, centralized, closed, and top-down companies, the unicorns, on the other hand, are flat organizations, with self-organizing, multi-disciplinary teams and decentralized authority.
Myth or reality
Some would argue that the valuations of the unicorns are heavily bloated and that it’s a bubble ready to burst anytime. Even if they are successful, they are a drop in the ocean as far as the world economy is concerned. While the jury may be out to decide on the true impact, it is clear is that dinosaurs need to wake up and take notice of the disruptive innovation these unicorns can cause, else history is bound to repeat itself. A thing we know about disruptive innovation is that it’s stealthy and you do not see it coming.
So what can dinosaurs do?
Although the situation may look bleak, the game is not over for these large enterprises. They need to accept changing realities and transform themselves not only to survive but possibly thrive. While a whole lot of these companies have started running programmes to transform their organizations, they are completely unaware of how to run them. These programmes are often run as Digital or Agile Transformation programmes and their main theme is around newer ways of working and building digital capabilities. Transformations are tough, and what adds to the challenge is that it needs to be done without stalling the current business.
It’s easier to build something new than transforming what’s already running. As a result, these transformations more often fail than succeed. Companies need help from their partners and vendors to guide them through this transformation journey. Although there is no formula to success, dinosaurs can improve their chances of being successful by focussing on the change in culture/mindset, people aspects, processes, and underlying technologies.
Dinosaurs could have reinvented themselves as unicorns had these transformations been successfully done before. There are many examples, but to state a few – Apple as a company has reinvented and moulded itself into the culture of unicorns. Another example is Lego, often called “the Apple of toys”, which was almost written off and later became a successful digital company by building on the strengths of a strong enterprise digital platform.
While the dinosaurs can transform and become unicorns, the unicorns cannot become complacent. As unicorns scale up to become large enterprises and the industry changes at a speed never experienced before, they need to maintain their culture of innovation and constantly reinvent themselves. Else over a period they too will turn into dinosaurs.