Companies have to innovate fast or die, and we’re not just talking about technology.
“Innovation has to bubble across the whole company because business models are innovating,” said Red Hat CEO Jim Whitehurst in an interview with Business Insider.
That means change across all levels, especially management, and a lot of dynasty companies won’t make it.
“If you’re one of the traditional, large incumbent winners in the last generation of technology, you not only have a technology transition to make, you have a culture transition to make and you’ve got to bring investors along and protect from activists in the process, and that’s an extraordinary feat to pull off,” Whitehurst said. “I’m not saying some won’t do it, but it’s really hard.”
When Whitehurst came to Red Hat in 2008 after leaving his job at Delta, he wanted to implement a top-down approach, like most companies, but realised that didn’t fit. Now, he sits in a cube surrounded by people, answers every employee email, and keeps dialogue about the organisation open with all hands meetings.
Not every company may need to go that far or anywhere near Tony Hsieh’s Holacracy, where there are no managers at all, but Whitehurst argued that there needs to be a shift from managing employees as resources t0 managing them as people.
Whitehurst used the auto industry as an example where the old brands must change, or else face trouble ahead. Automakers have been focused for the last 100 years on how to make cars more cheaply, and management has been the same way, focused on how to control employees most effectively, Whitehurst said.
“If you’re Ford, Zipcar and Uber and autonomous driving are all things that have to be on their radar screen, and that’s a different set of a capabilities than making a car three per cent cheaper,” Whitehurst said. “You now need to build more innovation throughout your entire company and not just your R&D department.”
Ford was just an example, and Whitehurst actually applauded the automaker’s work (along with GE) at trying to find new ways to survive. Starbucks is another example since it’s moved beyond the basic coffee shop experience to experimenting with adding Wi-fi, phone charging and in-store beacons.
It takes changing management, though, to allow some of these older companies to innovate — and they need to do it simultaneously or be left behind.
“Frankly a large percentage of the Fortune 500 will be left behind. Change is hard,” Whitehurst said. “I think the majority will be left behind and be replaced by new companies. It will be the few great companies that are actually able to change.”