The New Age of Business Success: Will Unicorns Survive?

New Age of Business Success

How Culture Can Make or Break a Business, The Gap in Unicorn Companies, and The Evolution of Corporate Training

In my early 30’s (many moons ago) I had the privilege of being an Officer for Waffle House. Yes, the chain of 24-hour diners that has inspired many late night drunken visits (not to mention a number of in-house weddings). From a business perspective though, there is nothing funny or accidental about their success. As the VP of People at the time, I had the pleasure of facilitating the screening, hiring, on-boarding and training for 10’s of thousands of new employees and manager trainees each year. I also participated in Waffle House University. Easy to laugh at that premise but it was set up as a graduate school of sorts for the 30 or 40 officers of the company and taught by Georgia Tech grad, Harvard MBA and CEO Joe Rogers Jr. (son of the co-founder). Waffle House is still run by talented Georgia Tech grads and MBA’s and I’m very grateful for the practical and academic education.

What I recall most about the case studies, business failures and successes that Joe taught from Harvard Business Review were the behind-the-scenes cultural elements that ultimately contributed to business failures. With Joe there was always a method to his madness. He didn’t just read the technical financial analysis from these case studies – he dissected the changes in culture that ultimately lead to a company’s demise.

Dance With Who Brung Ya

When Arthur Martinez took over as the head of Sears Merchandise Group and eventually became CEO, he was initially given credit for streamlining operations and “saving” the company from a downward spiral. Most people know the rest of the story though; the once proud innovator of retail outlets, internet services (remember Prodigy) financial services (Discover Card) and hard goods has dwindled to next to nothing. In 1974 Sears opened the tallest building in the world and until 1989 Sears was the largest US retailer by revenue (it was overtaken by Walmart).

While Arthur Martinez was lauded for his efficiency and operational efforts, his re-positioning ultimately failed because he abandoned the core values that had led to Sears success. You see, Arthur was previously a finance guy (CFO) at an upscale apparel company (Saks Fifth Avenue) and by shifting the focus of the original trusted hard goods retailer to apparel, he made the retail equivalent of changing the formula of the original Coke.

As the old saying goes, “always go home with the lady who brought you to the dance.”

The “Softer Side of Sears” retail strategy and advertising campaign ultimately turned a once great retail conglomerate into an undifferentiated mess.

Maybe it was my early education from Joe Rogers Jr. or maybe it was my fascination with psychology, but I was always intrigued by what made some businesses succeed and others fail. Innovation is critical for the sustainability and growth of a business (Blockbuster is just too easy to pick on) but I’m talking about getting deeper than the Hedgehog and Flywheel concepts of Jim Collins’ business bestseller, Good to Great.

I was more fascinated by the cultural and sociological aspects of what made some companies succeed while others failed. There are countless examples of business near failures like Sears that come to mind, including replacing Phil Knight at Nike with a posse of MBA’s;  it’s difficult to forget the cultural shifts that took place at Apple with the replacement of Steve Jobs; Ford Motor company is a more recent and notable turnaround example albeit with an outsider twist of an airline executive, Alan Mulally being charged with returning Ford to its roots. And make no mistake, returning Ford to its roots is what Alan was charged with and regardless of whether you agree with his methods they resulted in a 2.7-billion-dollar profit in January 2010 after a 14.6 dollar loss in 2008.

How Corporate Culture Relates to Business Sustainability

There is an underlying culture that exists within each successful organization that is essential to its sustainability. Simon Sinek would call it their “Why” but I think it goes deeper. At Google, it is relevant search results. That must always drive the culture of their core business and they can’t be deterred by how many fly-by-night guerilla marketers they have to shut down to continue that purpose. For Sears, it was the essence of the American house hold delivered conveniently to an urban market. It was the best of hard goods along with great soft goods. They tried to pivot back to that, but they had already hit the proverbial iceberg. At Apple, it gets down to one simple Steve Jobs quote, “You’ve got to start with the customer experience and work back toward the technology – not the other way around.” Jobs was always the champion of the customer experience.

A company must continue to innovate… but must also stay true to its underlying foundation and guiding culture.

The Gap in Unicorn Companies

Over the past 5 years, I have been struck by the sheer number of specialized companies that seem to break with market tradition, and sustainability becomes a second thought. The Internet has created an environment where businesses can go from zero to a billion in valuation seemingly overnight. Jet.com did it in just 4 months in 2015. 4 months! [1]

Startups that hit a billion dollars in valuation are called “unicorn companies.” According to VentureBeat [2] there are 229 of them with a cumulative valuation of 1.3 trillion dollars.

In the past, everything was general – like the store on Main Street. There is still a lot of success that pins on general solutions, like search for instance with Google. I classify that as a general specialty; where everyone can be served but in a very unique fashion. Amazon is another great example. They specialize in high volume, easy to access, immediate retail gratification via the internet. It’s about the path of least resistance to the end user and technology is the great enabler.

Of those 229 unicorn companies, according to Visual Capitalist [3], there is an outlier on the slow side of valuation growth. The international average age of achievement for unicorn status sits at 6 years, but one industry has only two entries with an average maturation age of 16 years. That industry is Ed Tech (think Lynda.com) and they are 4 years behind the closest industry group unicorn of Media (think Buzzfeed), 12 years behind the Social group (think Facebook) and 14 years behind the industry leader, Real Estate (think Compass).

Considering the fact that I run marketing for an Ed Tech startup, the realization that we sit at the very bottom of the unicorn industry list was an eye opener for me.

mLevel is an end to end microlearning and gamification platform that enables any company to easily optimize their training to achieve better learning outcomes and positively impact business unit performance. Sounds unicorn worthy, doesn’t it? The education industry, especially on the corporate side, is very traditional – a lot like Real Estate models – so why do they sit at the top while Ed Tech is sitting at the bottom?

I had to go back to Steve Jobs and culture to get an answer. “You’ve got to start with the customer experience and work back toward the technology – not the other way around.”

We all know real estate agents don’t have the best reputation (sorry if that offends anyone). It’s not that they don’t or can’t add value (because many do) but it’s also an industry with a traditional, inflated commission model that tends to attract some people who think they can make a quick buck rather than treat it like the profession that the Realtor designation strives for. Either way, the industry was ripe for technological breakthrough especially because it is a transactional engagement; albeit a large one. Without analyzing the entire list, I would be willing to place a sizable bet that most of the 229 unicorn companies have products that are transactional, even if B2B (think Kabbage).

Why Corporate Training is Being Forced to Evolve

Corporate training also has a very traditional model, but the big difference is that training isn’t transactional and one of its big flaws is the assumption that learning occurs around a single event (like watching a video, reading a book, attending a workshop). it doesn’t; learning is a process. It takes time and repetition and other elements that neuroscience [4] has recently uncovered about the most effective ways for knowledge transfer and recall to occur.

I’m going to be so bold as to say that corporate training in the traditional sense has served the Learning and Development professional more than it has the end users. Steve Jobs is turning over in his grave at the notion! No one enjoys traditional training any more than they enjoy the traditional experience of riding in a cab. Enter: Uber eliminating a huge engagement barrier.

I am disappointed that the new age of business success hasn’t caught up to the Ed Tech industry, especially since I view education as such a priority in an ever-changing and confusing world. Corporate cultures have to change. Better stated, corporate training cultures must be defined as starting with the learner in mind.

Private cultures have to change, too, but they are actually ahead of corporations. I have an 11-year-old at home who does 100% of his school work on a supplied Microsoft Surface Pro whereas I know a handful of multi-million dollar companies intimately who still send out a single printed document for employees to learn from with the expectation that the new knowledge is retained, can be recalled and appropriately applied on the job. That’s a wing and a prayer strategy that doesn’t end well for anyone.

It will be interesting to follow the sustainability of the unicorn companies and how well they can maintain the essence of what made them great in the first place. Even more, it will be interesting to watch the growth of the Ed Tech space as it figures out how to eliminate the barriers that currently exist to make knowledge transfer more palatable.

 

[1] Green, Dennis. “How Walmart turned its $3.3 billion acquisition of Jet.com into its greatest weapon against Amazon.” Business Insider. http://www.businessinsider.com/jet-walmart-weapon-vs-amazon-2017-9 Accessed November 15, 2017.

[2] “The Science of Making Learning Stick: An Update to the AGES Model (Vol. 5).” NeuroLeadership Institute. https://neuroleadership.com/portfolio-items/the-science-of-making-learning-stick-an-update-to-the-ages-model/ Accessed November 15, 2017.

[3] Desjardins, Jeff. “The Fastest Startups to Hit $1 Billion Valuations” Visual Capitalist. http://www.visualcapitalist.com/fastest-startups-hit-1-billion-valuations/ Accessed November 15, 2017.

[4] Koetsier, John. “There are now 229 unicorn startups, with $175B in funding and $1.3T valuation.” Venture Beat. https://venturebeat.com/2016/01/18/there-are-now-229-unicorn-startups-with-175b-in-funding-and-1-3b-valuation/ Accessed November 15, 2017.