What can legacy enterprises learn from the startup world? Are there any practical lessons that can help them reanimate, supercharge their growth, stay agile at scale?
My book, From Incremental to Exponential, contains a wealth of insight on what it takes for large companies to rethink innovation, but little beats a first-hand view from a renowned giant maker. During London Tech Week, I had the privilege of talking to Dame Jayne-Anne Gadhia, former CEO of Salesforce UK & Ireland and Virgin Money, and now founder of fintech startup Snoop.
Our chat turned up some interesting perspectives.
Today, innovative new businesses and offerings are everywhere. Many legacy enterprises are being disrupted. They don’t need to be. I believe they have a lot to learn from startups or, as Jayne-Anne suggests, relearn.
Does it take a crisis?
2020 will forever be synonymous with Covid-19. The global pandemic has induced massive shifts among people and business, illustrating the rapid, radical change that business and humanity are capable of when the stakes are high. But is this really what it takes to drive innovation?
For many it does, says Jayne-Anne. People generally dislike change, so real change is often driven by a crisis. People adapted so quickly, powerfully and positively through the Covid-19 pandemic because they had to. What’s interesting is that people did this as a collective, working toward a common goal for the greater good. On a smaller scale, that’s also how many start-ups and innovations get off the ground—by identifying a particular problem and being moved to find the will to solve that problem. That’s business with purpose.
I believe that Covid-driven business pivots mimic the approach of innovation leaders, big and small. Businesses had to think and act fast to repurpose assets, talent, resources, distribution channels and offerings. That’s what successful businesses do – every day. But it’s not just about the bottom line. The right processes and technology do not guarantee success. Culture plays an enormous role.
Purpose, as Jayne-Anne emphasises, is a profound motivator.
Covid-19 united communities, but it also underlined something else: business is not just about livelihoods, it’s about lives. Covid-19 compelled businesses to take care of their people, their workforce, and it has shone a bright light on the role of business being broader than just providing customer value.
Purpose unseats incumbents
Virgin Money’s purpose was to make everyone better off. It was a powerful motivator of innovation, and possibly the company’s single most important differentiator. Snoop, Jayne-Anne’s new venture, has a similar goal.
Snoop is a fintech. The app analyses people’s spending data, providing insight that helps them live, spend and save smarter. The start-up’s goal is to drive change across the financial landscape to benefit consumers. Is it possible to unseat such a powerful, established sector?
There is very little innovation to be had in retail banking, suggests Jayne-Anne, but – and here’s why purpose matters – there’s great opportunity in innovation to help people get more value from using existing banking platforms.
Unlocking value for customers unlocks value for the business. It illustrates the change in the role of society and communities in company formation and growth, and the increasing role that ‘open’ business models—like Xiaomi’s, built on user demand—are playing.
What’s captured people’s imaginations about Snoop is that it helps people understand their finances and achieve better outcomes. By sharing their data, they get to see where they’re overspending, and how to gear to meet goals and responsibilities. This has created a community – people who love to know where to get cheaper coffee on the subway on Tuesdays, or how to save on a fare, or how not to get ripped off by legacy banking offerings that are vague and difficult to navigate.
Previously, business with purpose was a soft thing, now it resonates, she says. I agree.
Shifts in perception can be hard to understand when you are legacy. It can cost your business dearly, especially in terms of new talent. The drive to increase diversity in business illustrates the issue.
Jayne-Anne told me she once undertook a survey to understand why women did not progress professionally in banking environments. The overwhelming answer from women was ‘culture’. While diversity in business is recognised as important to drive meaningful, creative outputs, this change needs to occur in an authentically progressive environment – one in which diversity is celebrated, not tolerated.
So why is it that some large businesses, like Virgin Money and Salesforce, continue to grow, while others get labelled ‘legacy’ and seemingly stall?
Every business starts from nothing. As Jayne-Anne has seen at Snoop, Salesforce and Virgin Money, growth is about keeping the spirit of entrepreneurship alive. Entrepreneurship brings agility, innovation, change, focus and excitement. It gives businesses a special kind of momentum. Other companies, once they reach this size, lose that excitement.
While they have solid purpose, they’ve been sucked into process, and that’s when they lose momentum. So while legacy companies often have all the assets they need to succeed – huge stores of customer data, decades of brand equity, robust distribution channels, enormous financial clout – they lack the mindset and business culture needed to power out of stagnation.
There is no ‘shrinking to greatness’
Another common error, suggests Jayne-Anne, is that legacy businesses begin to cut costs when they get into trouble. Of course, they must manage, but very few have managed to ‘shrink to greatness’. To accelerate out of failure, a new mindset is needed, one with a focus on how the business can use its assets and resources to do something new, different, more relevant.
Partnering with a startup can help legacy organisations explore new areas of value too.
This can work well when legacy organisations give smaller, more agile partners the opportunity to do what they do best, while offering them the guidance, expertise and governance in areas they may be lacking. It worked well for Virgin Money on Jayne-Anne’s watch, when RBS’ George Mattison gave the then startup the opportunity to design and introduce a progressive product to the market—now known as the Virgin One Account.
So, what’s next for Snoop?
Business in a changed world
Snoop is very focussed on the UK consumer at present, but it’s also looking at an SME offering and to meet demand for its offering in different geographies, with an eye to going global.
Jayne-Anne’s advice to leaders on how to come out of this is: envisage the future, don’t hold onto the past. Leaders need to be asking themselves ‘how can I as a business leader be part of that future’, ‘how can I make my business relevant in a changed world’. History shows enormous transitions occur in and around changing societies. It is happening now. Success leads into the future.
You can find a recording of our discussion here: In conversation with Dame Jayne-Anne Gadhia - Learnings from the trenches of running a startup.
For more insight into how legacy companies can supercharge growth, explore From Incremental to Exponential, a new book I have co-authored with Vivek Wadhwa of Carnegie Mellon and Harvard.