This article is part of a series which considers the good and bad sides of management, and business culture. The first article looks at startup culture, the second at scaling a company. This one focuses on more mature and performance-driven businesses.
These companies want to gain market IQ and not only measure ‘everything’ but use the insight to recalibrate their strategies and tactics, and identify new business opportunities. Amazon is one of the few bigger players who have mastered this modus operandi.
In this article, we explore how key elements like strategy development, roles and responsibilities, conflict management, leadership and decision-making styles can support or hinder performance. It is the right basis – we call it ‘orange’ – for generating the highest ROI when selling your business.
Many mature VCs operate at this level and they usually invest most in companies that speak their language.
Be brave – take a different approach
The company we interviewed for this article is Digital Shadows [DS]. Let’s start with James Chappell, CTO and co- founder. Chappell followed a typical corporate career path in tech companies. He was in Silicon Valley when the dotcom bubble burst in 2001.
“Being in Silicon Valley during the bust and going through a downsizing from 185,000 to 35,000 employees is nothing I want to experience again but I learnt a lot during that time,” says Chappell.
People with an entrepreneurial spirit can learn a lot from the two founders, Chappell and Alistair Paterson. They had corporate careers in their 40s, wanted to start their own company but weren’t sure where to begin. They reviewed over 120 technology-driven business ideas before starting a winner in 2011 - a venture providing insight into an organisation’s digital footprint, external digital risks and threats to their data.
The initial journey was shaped by accelerator programmes called SWIFT InnoTribe in 2012, followed by the Cisco British Innovation Gateway Awards, where they managed to secure seed funding, and finally FinTech Innovation Lab in 2013, which led to their first customer. James emphasises how helpful these accelerator programmes were with:
- Rationalising financial planning and investment plans
- Developing sales materials, value propositions and additional ideas
- Generating contacts that will often lead to your first clients and valuable feedback
Six years later, after an exciting roller coaster and various setbacks, DS boasts 117 employees. Their offices in the UK and the US have a truly positive outlook and an employee turnover rate of less than 4% per year.
Plan of action to achieve long-term goals
Many scaled-up businesses focus on developing products and services from the inside out; efficiency is key. Chappell and his team work the other way round, at least partially. They truly engage with investors and clients. For example, they have a customer advisory board which acts like NEDs, meets twice a year and helps with critical decisions and future direction. They regularly gain qualitative and customer-led feedback from up to 100 clients which is then analysed, reviewed and acted upon.
They brought in an experienced executive from Forrester Research to head their strategy. Being based in the US turned out to be an advantage - although strategy facilitation is challenging, that makes for a more balanced approach.
The one thing Chappell says is a constant struggle, which is very common, is communication – getting strategy and tactics across is “challenging as you grow, especially internationally,” he says. They work hard to get everyone to understand the strategic goals by holding weekly video conferences, and regular lunch and learn sessions. All this helps to relate strategic goals to individual objectives and monitor progress.
Leading the way with culture
It may be down to having two experienced founders, but culture certainly takes centre stage at Digital Shadows. After all, they have both seen the good, the bad and the ugly.
DS is currently updating its values from version 1.0 to 2.0 whilst already thinking ahead by creating a file 3.0. The documents clearly indicate which departments need to implement these values (eg. hiring), which creates dialogue and turns values into behaviours and practices. This is much more effective than displaying nice sounding values on your walls or business cards.
Chappell and his colleagues are a good example of providing guidance in two ways:
1. From the outside
Everything should start with the customer in mind. This is not the usual clichés you read on most corporate websites. Employees engage with key customers through different channels to understand what they think and want.
People get to agree on measurable goals that boost their performance. In addition, there is a high level of transparency and access to data, which enables them to make more entrepreneurial decisions. Using data-driven analytics is an asset for DS, many businesses are so disconnected and silo-oriented that they waste their own potential.
2. From the inside
Spell out your value sets and set them as guidelines. Providing leaders and employees with clearly defined values, helping them understand how these translate into behaviours and obtaining their true buy-in enables them to make judgment calls when facing a dilemma. It doesn’t make leading and decision-making any easier but you are at least moving forward.
The leadership style in performance-oriented, what we call ‘orange’, organisations is nicely captured by two of William Torbert’s Seven Transformations of Leadership. You would typically deal with Opportunists or Individualists.
From the above table, you can easily pick out healthy and unhealthy behaviours.
Chappell states that operating in a dynamic market is never simple when scaling up, but openness, trust and having “no politics” does help. As leaders, they try to manage by objectives, delegate as much as possible, push back and engage mentors to keep employees on track.
“Openness is very important to us. It can be quite challenging and frustrating at times but we truly believe it helps in the long run,” says Chappell
In unhealthy ‘orange’ environments, companies focus on numbers too much. These are often set by the leadership teams and meant to be achieved at any cost. Companies like consulting firm McKinsey have turned their ‘orange’ slogan “up or out” into a mantra. This might lead to higher profits but carries a people cost and fosters negative behaviour.
Who is responsible for what?
People at DS work in a classical organisational set-up. It is interesting to note that Chappell and Paterson have formed an intelligence team responsible for identifying new risks and opportunities. There is also a board of directors and an advisory team made up of stakeholders. This clearly shows that the founders haven’t given up on internal and external support and enjoy being challenged to improve their venture.
Chappell talks about managing two dynamic teams with very different roles:
- Service delivery who engage with customers (outside in)
- Product delivery (inside out).
Companies which manage these two opposing drivers effectively will be able to continuously drive progress. After all, one or the other will always push forward.
Over time, it is only natural for cracks to show up in such a volatile market, especially in a fast growing company. That is why there is a ‘sweeper’, someone who coordinates tasks that may not be owned by anyone. The person in that role gets them done if they are one-off or temporary, or finds a way to hand over emergent ones to operations.
In a dynamic business, you cannot organise and plan to perfection. This outdated belief comes from Taylorism and corporates trying to avoid uncertainty and to strive for ultimate efficiency. Like Chappell, you need to prepare for the unknown and ensure people work collaboratively to identify and cover unassigned tasks.
It is useful for everyone to have defined roles and responsibilities, as is the case at DS. However, business goals should take precedence as and when necessary.
Customer led and data-supported decision making
As pointed out previously, the two founders make executive decisions but they liaise with and are supported by defined groups.
Like Wendy Jephson in the first article, Chappell has a genuine interest in cognitive bias. We might think of ourselves as rational beings but all credible research shows we tend to use logic to justify our subconscious, emotionally-triggered decisions.
People naturally create their own subjective social reality from their perceptions and interests. It was interesting to see how engaged Chappell was when he broached the subject. He confirmed that there was no silver bullet but it seems he will continue to explore and learn from the process.
"We try to overcome cognitive bias by creating and using rigorous data,” says Chappell.
Chappell is guided by clear priorities. At DS, data is king and decision-making systematic, considered and priorities-based. One of Chappell’s recurring statements was “no politics”. It is vital to promote openness and transparency.
People represent different functions and will naturally defend their corner. Sales and production will always have different viewpoints on budgets etc. This is reinforced by the calibre of people ‘orange’ organisations attract. These are often ambitious, entrepreneurial goal-getters, who see the bigger picture, compete and work with a team, but like to be autonomous and enjoy public recognition of their achievements.
In unhealthy businesses, this leads to silo mentality and defence tactics. Sadly, most middle managers I have met in unhealthy companies and in most corporates put personal power and perks before company performance. So, focussing on clarity and constructive discussions are two key aspects to avoid politics and manipulation.
How to manage differences of opinion
Chappell believes in addressing conflict quickly, remaining pragmatic and ensuring differences are seen as joint learning opportunities.
"The bigger the company gets, the more people you have in the business, the more conflict you will have to deal with,” he says.
DS has appointed internal and external arbiters. These are people who settle disputes and may have authority in particular areas. Whenever possible, Chappell and Paterson allow people to experiment with data and review their findings to come to a joint conclusion. I believe that, in a positive environment, people don’t necessarily want to be right but are genuinely interested in finding out what is best. Let them experiment and jointly learn from the exercise.
Don’t avoid conflict, which is only a symptom. Many leaders and employees shy away from confrontation, which may be conditioned behaviour and can foster an unhealthy workplace. I have experienced discrimination and bullying after a difference of opinion – it won’t happen again!