A mid sized company had a nice growth in the market and has been coasting along nicely. A smaller startup started addressing low end use cases that had low margins. This is a segment of the market that was not attractive to sales team. But, CEO of the company recognizes the patterns and emerging threat. After much exec discussions, CEO decides that the company must respond.
CEO hand picks some of the smart people in the company to lead this effort. Everyone is given a copy of the book “Innovator’s Dilemma” and encouraged to understand the mechanics of disruption. The team is super excited and are unified behind the mission. After much deliberation, the leader of this team makes a bold recommendation to the CEO to form a new business unit. This recommendation is met with resistance from other execs who fear losing some of their staff to this new BU. They also fear that the company may not be able to afford the BU and this may take focus away from the core product of the company that has been selling well. CEO overrides the resistance from the executive team and approves formation of the new BU. This is what good leaders do.
New BU is formed and starts executing to the tune of “startup in a midsized company” concept. Some of the team members think that what they are doing is the most important thing for the company. This gets to their head and they start showing their superiority to other employees of the company. Some of them will upgrade their laptops and get fancier equipment against the guidelines of IT. The majority of the company now starts resenting the new BU.
The BU spends next 12 months and releases a decent MVP to take to the market. By this point, the field is frustrated that valuable resources are used on this new product when it could have been used to enhance the existing product. Despite that under the orders of VP of Sales, field team tries to push the new product. Customers tell them that the product quality is not up to par of what they have been selling. Sales team loses interest in the new product. They hear that even startup’s product also has bugs. Sales team thinks that the low end use case is not viable to sell into given not only low margins but also higher demands of customers there.
The BU guys put their heads together and vows to fix the bugs. Few of the people in the BU voice concern that they are losing focus on the disruption. Also, some of them have read lean startup and argue for sticking with MVP till product-market fit is achieved. An argument arises and the BU leader asks team to fix critical bugs while focusing on the larger prize at hand.
The field is still afraid to push the new product.
Couple of years in, the new product hasn’t had much success. Dissent grows in the company exec team that company can not afford the fragmentation or the quality issues of the new product. They believe that the existing processes of the company should apply to the new product too. After much discussion, CEO decides to merge the BU back into the company. This is what smart leaders do.
The new product team gets merged with the company and some of the leaders of the BU do not fit well into the main business and decide to leave. The new product gets branded as a failed experiment and made to supplement existing product.
An year later, the small startup that was selling into low end use cases takes over this mid sized company in revenue and valuation. Analysts say that the startup represents the future of the market and this mid sized company is now legacy.
In a future post, I will share my thoughts on what can be done different, but this is a story unfortunately many will see in the Cloud world. Think twice before you accept job leading a “startup in a profitable company” job.