Corporate StartUps | Corporate Innovation | Digital Transformation
Because for digital transformation, the optimal vessel choice is not a vessel.
Here is a bold forecast for the Corona After-Life: there will be even more buzz and urgency around corporate agility and how to adapt to the new world that emerged. And, you will hear the tale of tankers & speedboats a lot more again.
If you are somewhat interested in the innovation space, you might have heard the evergreen tale of tankers and speedboats. You might even have heard it so often that you cannot hear it anymore. If so, welcome to the club!
Before ditching that tale altogether though, let‘s dive into the hidden depths of this tale as it might reveal some surprising vantage points far beyond the black and white picture it suggests. So next time you hear that story, you might add a little bit more flavor to the evergreen conversation.
Chapter 1: The basics
Before we dive into the metaphor, lets quickly recap what tankers and speedboats are actually about:
This tale is mainly told in the startup and corporate innovation space and describes the different innovation capabilities of large enterprises (tankers) and small, upcoming businesses aka. Startups (speedboats). The main difference between these vessels? Speedboats are much easier to maneuver than tankers.
Similarly, startups can innovate much faster and iterate their whole business model than large corporations can. Tankers have a strong path-dependency and cannot nor want to constantly change their course. It mainly builds on the theoretical framework of Clayton Christensen’s Innovator‘s Dilemma and the thread of disruption for incumbents.
The digital transformation is additionally fueling that tale because the thread of disruption is significantly increasing. A simple but great example for that is this illustration: it shows all of FedEx business areas and its startup competition in each area:
That‘s the game of tankers in today‘s world: being overtaken by numerous speedboats. Or so the tale goes.
Chapter 2: The facts of hyper growth and tanker extinction
This thread of being overtaken is backed by countless studies. Here are just two illustrations that are capturing that notion pretty well:
In the digital age, speedboats can grow much quicker than ever before. If you look at the time needed for new companies/technologies to reach 50 million users, it took airline companies 68years while Pokemon Go just needed 19 days.
Obviously, this graphic is simplified and there are numerous reasons for that huge difference. But the point here is: speedboats nowadays can grow much quicker because of the opportunities of digitalization. Period.
At the same time, we observe another phenomenon: the extinction of tankers. If you look at the „life expectancy“ of a large corporation being listed on the S&P 500 index, companies from the 1950s stayed on the index for on average 61 years.
Now guess, how long they will stay on average when entering in 2015?Take a second and guess!
It is actually 17 years. On average. In other words: The big names of our times like Facebook, Amazon, Google, Apple, etc. will soon disappear from that index as well. If you follow that logic, at least. If they haven‘t found a cure against their extinction of course. But this is another topic altogether.
So the true picture is this: tankers are becoming more and more extinct. Speedboats are growing faster and faster. And with that, we enter the black and white picture of exciting startups and dull corporates.
Chapter 3: Reframing the hype
The stereotypical black and white picture is painted like this: the exciting world of startups and entrepreneurs offers the chance to become a millionaire, live a glamorous life in Silicon Valley and a perfect work-life full of table tennis, free meals and breaking things every single day for the sake of disruption.
The opposite side? Having a dull 9-to-5 life, dressed in a suit and tie of an undefinable color, building excel sheets while analyzing and debating if the new hole in the vessel‘s side is life-threatening or not while water is pouring through all the time.
A black and white picture, of course. Something like the picture above. With a grain of truth. Arguably.
Sadly, the effect of this tale, of this black and white picture, is often this: both sides are smiling at each other, feeling superior. There is no appreciation for the individual strengths nor is there a realization of the shortcomings of its own vessel. From personal experience, I do believe it’s a dangerous tale, as it is creating and leading to phenomena like „innovation theatre“.
So let‘s break things here and now and reframe the tale.
Chapter 4: Breaking the hype
The „job to be done“ of a tanker is to cross an ocean and deliver goods from one continent to another right? So, have you ever tried to cross an ocean with a speedboat? No?
Well, Richard Branson did. In 1986 he crossed the Atlantic with his powerboat The Virgin Atlantic Challenger and earned a world record for it. The other side of the story: this was actually his second attempt. The first attempt in 1985, his speedboat shipwrecked, the crew rescued.
Branson himself later said about that incident, in nearly cost his life. The second attempt was more successful, but when reading about it in his book „Losing my virginity“, it seemed not to be a pleasant ride after all. It reminds rather of an oceanic rollercoaster experience full of bruises and vomit.
I believe the same is true about startups. The ride of a startup is not that pleasant after all: in 9 out of 10 rides you will run out of fuel (aka failure rate) and negotiating about refueling can be very tough (aka startup financing rounds with investors).
From the outside, the world record of Richard Branson or unicorn successes might give the impression this is a rewarding and joyful ride. The truth, I believe, is far from it. We just do not see the hard work and the shipwrecks that accompany the world records.
Let‘s jump teams now. A ride on a tanker doesn‘t have to be pleasant either. It‘s not that shaky as a speedboat, the risk of running out of fuel not that big, one might even say, the tanker is unsinkable. But we all know the risk of seemingly unsinkable tankers: icebergs.
Not visible at first to the tanker‘s captain, it‘s actual thread hidden underwater, an iceberg sank the unsinkable. And while we still tell heroic tales about Leonardo and Kate, the true lesson here is another: be aware of icebergs.
I believe the same is true for large corporations. Clayton Christensen actually gave the iceberg a name that every tanker‘s captain fears:
Not visible at first, but highly destructive. The tales around disruptions are somewhat similar and numerous: the moment of a crash is called the „Kodak moment“, Blockbuster hitting the Netflix iceberg, etc. Nowadays, a tanker‘s ride seems not that pleasant, after all.
Looking at the death rate of tankers (see above), one can only wonder: there must be more and more icebergs coming along. Or: are we still in the Atlantic or are we entering the Arctic Sea?
Chapter 5: Vessel follows Ocean
Approximately 100 years ago a genius named Frederic Taylor invented the assembly line and the academic field of scientific management that paved our way to productivity and wealth.
Fun fact: do you know the gains of productivity resulting from his methods? Guess! 50%? Doubling? Tripling?
The answer: his methods were 5 times more productive than the status quo. That is indeed impressive. But the reason for his success is more related to his environment: vast, unmet markets for standardized products.
Nobody had a car at this time, so the T-model was highly successful with no color choice nor any extra packages or interior upgrades at all. Taylor‘s world was a calm blue ocean, the vessel of choice hence: a tanker!
Nowadays, our environment has changed dramatically. The model of the „Taylor bathtub“ describes exactly that: globalization has led to numerous blue oceans worldwide and therefore numerous successful tankers.
According to the bathtub theory, the era of tankers is about to end. No more calm blue oceans; we are entering the Arctic sea full of icebergs. The vessel of choice: speedboats?
Chapter 6: The optimal vessel choice is not a vessel
Every market and business environment has unique characteristics and different levels of differentiation, competition and disruption levels. Simply speaking: there is not just a Taylor ocean and the Arctic sea. There is so much in between.
In other words: there is not just a tanker and a speedboat. There is so much in between.
And to make it even worse: every ocean is changing its dynamics faster and faster. Even if you know that you are still shipping on a Taylor ocean, the risk of unknowingly entering a new ocean is very high. You will not know that you entered a new world until you see the first iceberg. And that might already be too late.
In our metaphor the optimal vessel choice is not a vessel at all.
It‘s a fleet.
It‘s a unique combination of tankers and speedboats in varying sizes. In business terms: it‘s a conglomerate of different business units in different life cycles.
The challenge of managing a fleet rather than managing a vessel is radically different though. The focus point of management is radically different: it‘s not optimization and Taylor-like communication from bottom to top anymore.
It‘s balancing a fleet, steering through the Arctic sea, keeping communication with all other vessel captains and finding a joint way around all those icebergs.
You will lose vessels on the way, but just as Branson you will have the luck of rescuing your crews. Because you have more than one vessel.
Chapter 7: The fleet challenges
Beware though of declaring the fleet as the new paradise: something like Table tennis 2.0. or Silicon Valley 2.0. Because it’s not paradise! It’s just different.
Fleets have their own challenges, especially for management, even more so for leadership. Harvard Business Review published an article on the three biggest challenges of autonomy, that describe the challenge of fleets as well:
1. Autonomous Teams vs Control
In a fleet, most decision power needs to be decentralized to the vessels. Vessels will spot an iceberg first and need to act accordingly. They cannot ping the fleet management and wait for a response. That might be too late. But with decentralized decision power and autonomous vessel teams, there is the challenge of control.
How to control those decisions? Do they need to be controlled at all? From experience, the answer is close to values and purpose. „Mission is the [new] boss“ or Spotify are interesting follow-up reads on that challenge.
2. Self-Organized vs Coordination
Another challenge for fleets, especially for former tanker crew members, is the loss of efficiency in a fleet. As a fleet, you will always „reinvent the wheel“ in decentralized fleet locations. Because the vessels have to act quickly and might not have the time to communicate with other fleet members whether they faced a similar problem and developed a solution already.
The hard truth for fleets: get over it!
This is the price you will pay as a fleet. However, the gain is much higher: you will survive the next iceberg. Because you were able to act quickly. In business terms: Revenue gains due to user centeredness is bigger than redundancy costs.
Bureaucracy costs > redundancy costs.
Note: this only applies to the Arctic Sea, not for Taylor oceans. Obviously 🙂 This challenge demands new forms of communication and coordination to minimize the costs of redundancy, but these costs will always be higher than on an efficiency-driven, singular tanker. If you want to transform into a fleet: get over it!
3. Freedom to Innovate vs. Efficiency
This is the famous dilemma of ambidextrous organizations. As a fleet, you need to set up new vessels and optimize the tankers in your fleet at the same time. The challenge? These two tasks need radically different alignments, mindsets, and cultures.
As fleet leadership, this needs to be balanced. Even more important: all vessels need to understand this symbiosis of tankers and speedboats. No We vs. Us, no Lego-Lovers vs. Excel-Geeks. We are all sitting in the same boat. I mean — fleet. This is especially hard as the cultures of speedboats and cultures are very different and sometimes oppose each other (e.g. failure culture).
In essence, this challenge is not only an asset allocation challenge, it is a cultural challenge for leadership.
Chapter 8: The emerging field of Fleet Design
All these perspectives lead to a new overall challenge, which we call „fleet design“ at Dark Horse. Fleet Design per definition is situational, it all depends on your situation, on your individual ocean.
Therefore, there are no best practices. Yes, there are elements, that you can borrow from other fleets, but you still need to create your own fleet puzzle. Finding your puzzle, finding that sweet spot, that is the holy grail of fleet design.
All in all, Fleet Design tries to address these questions:
- Which ocean are you shipping?
- How to transform a tanker into a fleet?
- How to create a speedboat culture and link it to an existing tanker?
- How to create a joint identity and culture as a fleet?
- How to design fleet communication and coordination?
- How to develop existing and new crew members for a fleet?
- How to support leadership to become fleet leaders?
Difficult questions, indeed, challenging they are, fun they will be!
How do you design your fleet? We are super curious to hear your perspectives and takes on „Tankers & Speedboats“. Thanks for reading 🤗