Washington Post: Large companies need to disrupt themselves or be disrupted
“If you owned Salesforce.com’s shares today would you sell them,” asked journalist Dennis Kneale. In response, I said that if I owned the company, I would make its chief executive Marc Benioff the chief technology officer to get him back in the visionary role. That’s because it needs someone like him driving it forward and reinventing itself — while it is in flight. If it doesn’t disrupt itself, Salesforce.com will be disrupted.
This was at the Milken Institute Global Conference on April 29, where AOL co-founder Steve Case, Benioff, and I debated the impact of advancing technologies. Kneale was the moderator.
I wasn’t serious when I suggested Benioff change roles—he is exactly the leader that Salesforce.com needs. I wanted to emphasize the threat. Technologies are advancing so rapidly that most industry leaders will be fighting for survival before they know it. The challengers will come out of nowhere, possibly from start-ups in other industries. Note how Amazon.com, a technology company, disrupted bookstores; how Apple shook up the music industry; and how mapping apps on cellphones have displaced GPS devices.
The technology industry is increasingly disrupting itself. Fifteen years ago, Salesforce.com shook up the enterprise software industry by offering “software as a service.” It allowed software to be purchased on an as-needed and per-user basis rather than as an expensive monolithic. This start-up mocked industry leaders such as Oracle and IBM with a marketing campaign that declared the “end of software.” Salesforce.com today generates more than $4 billion in yearly sales. It is the leader in its market.
Cloud computing and cheap apps now threaten Salesforce.com dominance. To Benioff’s credit, his company has embraced cloud computing and is busy reinventing itself in this space. But apps that are practically free and provide better functionality could still disrupt it, just as its own software once disrupted the established market leaders.
As I said to Benioff, his department heads don’t lose sleep over being the incumbent. Instead, they worry about their own jobs; making their numbers; and defending their products’ market share. As managers do in practically every industry, they worry more about their own political survival than about the reinvention of their business.
Companies under pressure from technological change need for their CEOs to be visionaries who can see the big picture and cause change, company wide. Benioff was right in what he said in response to my comment on the role of a CEO: “you have to be the leader, you have to take responsibility for all the operational and visionary aspects, you have to have the ability to do both and that is what a technology CEO does….and you can’t say that somebody else is going to do vision — that is why CEOs fail.”
We discussed the example of Larry Page of Google, who also does both jobs. “He is the operator and he is the innovator … things like Android and robotics — their big initiatives are coming from him under his leadership,” Benioff said.
Most companies don’t have visionary CEOs. Their leaders often have operational and financial experience. For every company, “it is hard to fight a two-front war, it is hard to keep growing your main business as you are then taking your very best people who grew your main business and trying to do this new stuff that hasn’t come in yet,” Kneale said. “That is why very very few companies in the history of our industry have ever been able to do that successfully,” Benioff added.
So what can such companies do for their survival? First, they must understand the threat and realize that they may not have as much time as they think. They need to invest in “moonshots” such as Google does, ambitious and risky projects that are in new domains and acquire promising start-ups that can take them into new growth markets. They must encourage and enable their employees to take risks and become like entrepreneurs. When they find a new market opportunity, they must do what it takes to win.
Case noted that large companies usually have a sense of where their market is going; that their mistake is not putting enough resources or their best people to go after the new opportunities. He said companies such as Google and Amazon succeed because “when they identify a new opportunity, they attack it with vigour… big companies dabble too often.” Case said that companies need to use the same war doctrine as Colin Powell: overwhelming force. He said their reinvention needs to be a focused, energetic, resource intensive battle that is fought to prevail.
What is certain is that we are in an era of profound technological advancement. The winners will be the ones who realize the change and take the risks necessary to keep reinventing themselves.