A few weeks ago I posted an entry inspired by an excellent article in The World in 2011, The Economist’s annual issue offering predictions for the following year and beyond. Another article in the same issue caught my attention, Multinationimbles, by Matthew Bishop, who is the US Business editor of The Economist.
The article is built around a somewhat provocative premise: “The business winners will be those that combine scale with agility.” It is provocative because people generally associate agility with entrepreneurial startups, and scale with more mature, established companies, although a few relatively young companies like Amazon, Google and Facebook have already achieved scale to complement their entrepreneurial agility.
But the potential oxymoron in the article’s premise is the notion that a large mature company can achieve this combination of scale and agility. Doesn’t this violate Schumpeter’s 70-year-old theory of creative destruction? Once large and successful, aren’t companies that once revolutionized their industries supposed to be too slow and locked into the sources of their past success to respond to the new waves of entrepreneurs now attacking them with innovative products and services?
Bishop’s article focuses primarily on the few mature companies that have achieved this important scale-agility combination: GE, Procter & Gamble, Wal-Mart, and especially IBM.
“In June 2011, with much fanfare, IBM will celebrate its 100th birthday. Big Blue is a rare example of corporate survival: few companies last that long, and at times it didn’t look as if IBM would either. Its secret is not resilience alone, but an ability to reinvent itself. As Lou Gerstner recounted in his bestseller, “Who Says Elephants Can’t Dance?”, he brought the firm back from the brink after he became its chief executive in 1993 by shifting its focus from selling hardware to selling services. Since Mr Gerstner left, IBM has reinvented itself again - this time in how it is run as much as in what it sells - with the result that it will mark its centenary as a role model for what a company needs to be to prosper in the second decade of the 21st century.”
Bishop predicts that in 2011, “the biggest winners will be companies that can combine the advantages of scale with the agility to respond to fast-changing market conditions.”