In our first opinion piece, we considered Corporate Cholesterol and how once great companies lose their spark of innovation and slowly expire.  Here we provide words of experience to CEOs of high-growth scale-ups on how to remain healthy and proactively lead cholesterol-busting interventions.

As a CEO, it is vital that you develop yourself into the next phase of growth – we admire Larry Ellison, Jeff Bezos and others, who re-invented themselves for new phases of growth which led to global market leadership.  Over decades, they demonstrated ‘Day One’ thinking to bring the challenger, innovator, and disruptive culture. The key is to maintain the mantra, ‘champion of the customer’ rather than ‘protector of the status quo’, which creates a stifling culture of monopoly and defensiveness. How often have you, as a customer, felt ‘locked in’?  As many companies grow, the ‘customer obsession’ migrates to ‘no customer in the room’.  When Stephen arrived at Sage and MicroFocus, the Product Management teams were largely creating product plans devoid of market/customer input; passively ignoring user feedback; and published no roadmaps. The innovation had died, and the customer was invisible.  It was like ‘Brownian motion’ of smart, nice people endlessly discussing and building ‘stuff’ in isolation from the customers/market. At Sage in 2014, we knew we had a problem at the first ‘Top 200’ exec meeting, the execs (including the front-line sales leaders) were asked for a ‘show of hands for those who had met a customer or partner in the last month, and over 95% of hands stayed down.  In Government, the same was the case in multi-billion pound projects like ‘Connecting for Health’ with armies of expensive consultants but few doctors or front health professional users in the ‘room’. What a difference when www.Gov.UK put the ‘user’ (citizen) at the heart of the requirement ‘User first’.  The result was multiple awards and the UN recognising the UK as the worlds’ most digital Government.

What are the early warning signs for CEOs when your ‘Beginners Mind’ culture risks going into reverse? Why do companies develop bad cholesterol? The surprising answer is the very strategy, actions and commitments that helped a company’s initial prosperity and leadership fail to re-invent itself with renewed energy. Here are the warning signs of how a company builds up corporate cholesterol:-

1. Increasing internal competition between different regions or functions caused by a company becoming bigger and more international, causing confusion for the customer and diverting energy away from competing with outside competitors. ’Competition is always on the outside’.
2. Hiring big company people with increasingly complex titles but unclear roles. This can lead to ‘meetings about meetings’ around areas that are much less important than the vital issues of products, service and customers. Way back, we remember Larry Ellison asking a new employee, “so if you are not working with customers or building product, please tell me real slowly what you actually do and why you are here?”
3. Moving away from a meritocracy where the best performers fail to be recognised and rewarded. This not only encourages mediocrity but leads to the best people becoming demotivated and moving on.
4. Agile processes turn into rigid routines: Employees stop thinking of processes as a ‘means to an end’ and become a slave to the process rather than considering outcomes for the customer or market.
5. Corporate values turn into dogmas: Values become interpreted differently.
6. CEO chases celebrity status: CEO writes a book on the secret of the company’s success, and vanity takes centre stage. It’s always dangerous when employees think their job is done with an IPO or ‘Best Company of the Year award’.  There is no endpoint unless your company is bought with no ‘earnout’ – growing to market leadership is relentless, and events like an IPO are a fresh start.
7. Lack of leadership authenticity: Senior executive team members are clones rather than speaking the ‘truth unto power’ and have a vibrant customer alignment culture with a healthy challenge.
8. Senior Managers and Boards get hired with little operational/real-life/relevant domain experience – all the risk/governance goes into overdrive but is ‘ticking boxes’ devoid of the operational or customer reality? We think Donald Rumsfeld said something along the lines of “A players hire stars; B players hire D players, and D players hire muppets”. As the CEO, you should lead the hiring of ‘rainmakers’ who share the values centred on customer obsession and insurgency.
9. Internal meetings become ‘groundhog’ day.  It is the outcomes that matter. ‘If you leave the scene of a decision without an action, owner and timeline, then consider no decision was made’.  As a CEO, plan at least 10% of your time with customers, prospects and partners – tell their stories throughout your company.
10. The culture kills innovation – you start hearing ‘we cannot try that here’.  The senior management/board fight to protect the ‘status quo’ rather than innovate and disrupt.
11. Ambition for further market leadership innovation evaporates – ‘grow fast or die slowly’ translates to ‘grow market share faster than your competitors’. You have to plan to win market share. Our experience suggests that the UK Boards and CEOs set less ambitious goals and outcomes than our US counterparts until recently. It’s no surprise that the USA dominates the world of technology.  If your company plans to grow slower than the market, you are planning a slow death march.
12. Politics and internal games take energy and create factions. As a great early leader at Oracle, Mike Evans said, ‘5000 years ago, Egyptians buried people in pyramids.  Today, companies do the same’.  The competition changes from ‘outside’ the company to ‘inside’ where people watch their back to create a toxic environment.

The danger is that even formerly innovative and high-growth companies often experience a build-up in “corporate cholesterol” as they move away from their origins, with the rate of innovation falling, the vision blurring and the love of the customer fading.

Companies building up “corporate cholesterol” resemble a car with its back wheels stuck in a rut. The CEO steps on the accelerator, but rather than escape, they only dig themselves in deeper.  When your company has moved from being an insurgent for the customer, you will be losing market share and heading towards obscurity. Stopping this happening involves keeping the founder’s mindset. “You’ve got to keep customer success at the heart of your business.”

Companies that take the initiative with reinvention in the ways we’ve described will, on the whole, avoid the coronary-inducing bursts of a massive reorganisation. Even if they do have to undergo restructuring, they will be better prepared to survive it. As Steve Garnett, ex-chairman of Salesforce EMEA, says: “reinvention is not easy, but you can’t dodge it. It is with you, and you had better embrace it.” It is relentless and imperative to keep the customer as ‘keeper of the flame’ – invite customers to Executive, All Hands and Board meetings to keep the spirit of innovation and growth alive.  Good luck in your marathon.