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From Kodak to Nokia, why do so many great companies end up failing?

Ranjay Gulati is studying Business Administration at Harvard Business School. Speaking to Srijana Mitra Das, he discussed the key strategies that can revitalize businesses:

What is the core of your research?

My general topic examines how companies unlock growth or find ways to grow profitably and sustainably. Initially, this had two aspects, understanding how the company developed a great strategy with a unique market opportunity and then implementing or building an organizational culture with teams, etc. Then I figured out another element. We were looking at the story of Microsoft’s transformation and as Satya Nadella told us, Microsoft changed by understanding its purpose. This meant discussing and explaining Microsoft’s raison d’etre – thinking about it allowed the company to consider what its strategy should be and build new momentum around execution. Microsoft leaders spent about nine months discussing the company’s purpose, identity, worldview, and motivations. Then they created an online manifesto that helped focus the company’s innovation and energies.

I’ve interviewed more than 200 people across 18 companies and found purpose can be a great springboard for growth. My book Deep Purpose argues that when companies invest in the idea of ​​their purpose, it brings them directional, motivational, relational, and reputational gains.

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Can you share your findings on what you call “agility tricks”?
I was perplexed why so many great companies fail – is it due to inertia and complacency

Or tapers to innovation? For example, Sears, Roebuck & Co. retail, Kodak designed photography, Motorola developed mobile phones while Nokia created smartphones – however, all of these have lost their leading position. Through my study of them, I realized that they created a silo structure. This is part of the division of labor, but more importantly, it’s not bridged—no person can collaborate or link information across it. “Agility Superhero” is one way to do this.

For example, companies like Sony and Novartis have enabled what they saw as entrepreneurs within their company to run on the system. This is very different from the traditional agility approach where companies think they need to turn the whole company around – this can take years. But some companies enable individuals within the organization to form small cross-functional teams and “breakthrough” problems or provide quick solutions using prototyping, customer feedback, and adaptation.

Sony was innovating, but by the early 2000s it had entered a slow fading state, missing out on the iPod revolution, cell phones, etc. Innovations that go from lab to market because they don’t fit within existing business sectors. He then set up a special unit – Innovative Breakthrough – that was intended to pursue concepts outside of existing product categories. This team has been told to explore how digitization is transforming the field, to think about products in the cloud world first, and to pursue interoperability both within and outside Sony. Most importantly, this unit will report directly to the CEO, bypassing significant budgeting and decision-making bureaucracy and quickly accessing required resources. Practically treated as an incubator and given the cap, this team has created several innovative products, including smart home systems and appliances, a 4K home projector and a glass speaker system.

There are many ways to manage a breach of agility or tap into the entrepreneurial spirit of employees – some companies hold competitions within the organization where the parent company gives the best innovators seed capital and time to work on an idea that belongs to the company. Aware of the risk of innovation becoming too much, Novartis, for example, has run competitions among its scientists.

Can you discuss the Netflix culture that you think promotes agility?
Every organization has a culture that has grown on purpose or developed on its own. Culture can become quite inflexible – it can actually make or break a company. Netflix understood this from the word go, and so they intentionally planned their culture to be one that would drive the organization to keep changing. When it started in the late 1990s, traditional DVD rental services were on the wane. The entire culture has been about change – besides streaming, Netflix aims to get into content development and explore international markets. Therefore, they established cultural underpinnings such as “Freedom and Responsibility” and “Context Not Control” as part of the Business Culture Platform. Key strategic components included hiring and competitively paying high-performing individuals or ‘players’, encouraging innovation through ‘noble bets’ that might fail, and applying relatively few restrictive HR practices aside from barriers around harassment, etc., giving employees freedom. to experiment and make their own decisions. This culture is based on trust, openness, collaboration regarding information sharing, feedback, etc., curiosity, innovation, and flexibility. This has helped Netflix expand content production, understand global markets, and continue to harness technology to their advantage.