Article

Becoming a Scale Insurgent

The firms that have succeeded at becoming both big and fast are leading the way into a new business era.

Par James Allen, James Root, et Andrew Schwedel

First published on mars 25, 2019
min


No corporate leader today has missed the call for companies to become nimbler, more innovative and faster moving. But while most leaders have a clear idea about what they need to do, they are finding the how to be more elusive. This puzzle affects both traditional incumbents and disruptive challengers—the Amazons, Alibabas and Googles—which have become incumbents in their own right. It is equally relevant to the generation of insurgents following behind. The question for companies competing amid constant disruption is how to combine the scale of an incumbent with the speed of an insurgent: how to be both big and fast. The few firms succeeding so far—we call them scale insurgents—are leading the way into a new business era. At the heart of what scale insurgents do well is the lost art of business building. Business building is more than innovation. It requires setting up all the go-to-market systems behind the innovation, creating a profit pool and a model to capture an outsize share of the market. Some companies seem to be serial business builders: Amazon, for instance, in online retail, marketplace services, web services, logistics, devices and next, perhaps, health services. Why is business building becoming a lost art? After studying hundreds of companies around the world, we believe that much of the problem lies in the system of professional management that has been at the center of the firm for the last hundred years. This is not a simple critique of bureaucracy. In fact, the system of professional management has been remarkably successful. It emerged to institutionalize and sustain the success of a founder’s vision. Its functions are essential: to build competitive advantage through smart decisions on where to play and how to win; to deliver the benefits of scale as the organization grows; to develop the routines and ways of working that will perpetuate the company; and to manage risk. The thinking and habits of the professional management system are deeply ingrained in many business leaders. But for all its strengths, the system is too rigid for the emerging era. Scale insurgents today must compete on scale and speed. Yet professional managers are programmed to prioritize scale over speed. Managing a global supply chain, for example, is usually more efficient than managing multiple country-level supply chains. But adapting global supply chains to changing customer tastes in a particular market is difficult and slow. Conflicts are bumped up to the top of the organization—often the only place where they can be resolved—and decisions must then travel back down again. That sort of slow, deliberative process leaves companies poorly equipped to cope with the accelerated metabolism of global markets. Also, the old incremental-growth playbook—opening a new country, selling additional products to current customers, and so on—is reaching a point of diminishing returns in a world with few large untapped markets and more formidable domestic competitors, especially in China and India. The winning paradigm for the new era is already emerging. Its defining characteristic is the ability—in fact, the requirement—to be fast and innovative…at scale. Since the Alfred P. Sloan era at General Motors, organizations staffed by professional managers have managed growth by adding layers, span breakers, functions, strategic business units and centers of excellence. The standard deal for talent has been, “Execute well and we will reward you with a promotion into management.” In the era of scale insurgency, this system is too slow, too unresponsive and too unappealing to a generation that aspires to a greater sense of purpose in their firm. This doesn’t mean the professional managers should disappear. Some managers will still determine strategy, allocate resources to meet strategic goals, and build the systems to promote and scale innovation. Dialing up the speed of execution, however, will require displacing the professional manager from the center of the organization. Firms will need fewer managers—perhaps far fewer—and their roles will be different. Rather than spending their days shuffling information, allocating resources, creating routines and issuing instructions to subordinates, they will need to support those in the firm’s mission-critical roles: the people who execute, innovate or work directly to deliver the firm’s promise to its customers. No matter your starting point, now is the time to ask how your firm can become a scale insurgent. James Allen is a senior partner in Bain’s Global Strategy practice based in London, and the former global leader of the practice. James Root is a Bain partner based in Hong Kong and chairman of Bain Futures. Andrew Schwedel is a Bain partner in New York and coleads the firm’s Macro Trends Group.

No corporate leader today has missed the call for companies to become nimbler, more innovative and faster moving. But while most leaders have a clear idea about what they need to do, they are finding the how to be more elusive.

This puzzle affects both traditional incumbents and disruptive challengers—the Amazons, Alibabas and Googles—which have become incumbents in their own right. It is equally relevant to the generation of insurgents following behind.

The question for companies competing amid constant disruption is how to combine the scale of an incumbent with the speed of an insurgent: how to be both big and fast. The few firms succeeding so far—we call them scale insurgents—are leading the way into a new business era.

At the heart of what scale insurgents do well is the lost art of business building. Business building is more than innovation. It requires setting up all the go-to-market systems behind the innovation, creating a profit pool and a model to capture an outsize share of the market. Some companies seem to be serial business builders: Amazon, for instance, in online retail, marketplace services, web services, logistics, devices and next, perhaps, health services.

Why is business building becoming a lost art? After studying hundreds of companies around the world, we believe that much of the problem lies in the system of professional management that has been at the center of the firm for the last hundred years.

This is not a simple critique of bureaucracy. In fact, the system of professional management has been remarkably successful. It emerged to institutionalize and sustain the success of a founder’s vision. Its functions are essential: to build competitive advantage through smart decisions on where to play and how to win; to deliver the benefits of scale as the organization grows; to develop the routines and ways of working that will perpetuate the company; and to manage risk.

The thinking and habits of the professional management system are deeply ingrained in many business leaders. But for all its strengths, the system is too rigid for the emerging era. Scale insurgents today must compete on scale and speed. Yet professional managers are programmed to prioritize scale over speed.

Managing a global supply chain, for example, is usually more efficient than managing multiple country-level supply chains. But adapting global supply chains to changing customer tastes in a particular market is difficult and slow. Conflicts are bumped up to the top of the organization—often the only place where they can be resolved—and decisions must then travel back down again.

That sort of slow, deliberative process leaves companies poorly equipped to cope with the accelerated metabolism of global markets. Also, the old incremental-growth playbook—opening a new country, selling additional products to current customers, and so on—is reaching a point of diminishing returns in a world with few large untapped markets and more formidable domestic competitors, especially in China and India.

The winning paradigm for the new era is already emerging. Its defining characteristic is the ability—in fact, the requirement—to be fast and innovative…at scale.

Since the Alfred P. Sloan era at General Motors, organizations staffed by professional managers have managed growth by adding layers, span breakers, functions, strategic business units and centers of excellence. The standard deal for talent has been, “Execute well and we will reward you with a promotion into management.”

In the era of scale insurgency, this system is too slow, too unresponsive and too unappealing to a generation that aspires to a greater sense of purpose in their firm.

This doesn’t mean the professional managers should disappear. Some managers will still determine strategy, allocate resources to meet strategic goals, and build the systems to promote and scale innovation. Dialing up the speed of execution, however, will require displacing the professional manager from the center of the organization. Firms will need fewer managers—perhaps far fewer—and their roles will be different. Rather than spending their days shuffling information, allocating resources, creating routines and issuing instructions to subordinates, they will need to support those in the firm’s mission-critical roles: the people who execute, innovate or work directly to deliver the firm’s promise to its customers.

No matter your starting point, now is the time to ask how your firm can become a scale insurgent.

James Allen is a senior partner in Bain’s Global Strategy practice based in London, and the former global leader of the practice. James Root is a Bain partner based in Hong Kong and chairman of Bain Futures. Andrew Schwedel is a Bain partner in New York and coleads the firm’s Macro Trends Group.