I came across this HBR post by Grant McCracken today. It’s short, but offers a sound framework for thinking about structural innovation in corporations. As I’ve mentioned before, as small businesses grow into national corporations and into global corporations, their capacity for innovation scales SUB–LINEARLY. At each point of growth a company produces 25% less innovation (among other things) than they previously did. And in this fast paced world where, as Ray Kurzweil has shown, the pace of technological change itself is increasingly exponentially. Historical (and current) corporate structures just can’t compete. Every 5 years is a whole new business context that company just can’t change with. To this point, Grant cites the top 25 corporations listed in Fortune in 2000 In 2010 only 12 were still listed. Let’s put this another way: in the decade between 2000 to 2010, half the winners lost. That means if, as a company, you’re still doing what you did 5 years ago, stop.
Grants advises that “we have a systematic problem. It’s time for a systematic solution. We cannot nickle and dime our way out of this one. We need a big, bold answer. ”
He urges corporations to build a second corporation—one that may eventually wrap itself around the first one. The second can still operate in the same industry, but it should have a different structure, a different set of principles, and different processes. What a great strategic framework! It’s stuff like this that is so valuable to helping organizations understand how to adopt P2P operating principles. Companies need to be more networked in their processes and with their consumer communities. That can often be easier said than done. However, starting a second corporation is a great way to begin that process. Given the way networked activity scales, a successful second corporation could become the dominate corporation in 7 years. At that time, it should start looking at creating its own “second” corporation.
Thanks for a great idea, Grant!