Unleashing the Innovators: How Mature Companies Find New Life with Startups - Hardcover

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JIM STENGEL was the global marketing officer for Procter & Gamble, where he worked for 25 years. In 2008, he formed The Jim Stengel Company, helping clients from global companies to Silicon Valley startups to find their purpose, build their brands, and grow their businesses. He is the author of the critically acclaimed book Grow.
 
TOM POST is a former managing editor at Forbes Media, where he oversaw stories about legacy companies and entrepreneurs. As a journalist at Fortune, Newsweek, and ABC World News Tonight, he covered business and foreign affairs. He is currently senior VP for content at SnappConner PR

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1

What Keeps Companies Up at Night

We’re not always the smartest people in the world.

--Steve Ellis, head of the Innovation Group at Wells Fargo

The idea for this book began percolating a decade ago.

A couple of years before I left Procter & Gamble in 2008 as its global marketing officer, I was attending Google Zeitgeist, the annual thought leadership event at the tech giant’s headquarters in Mountain View, California. I was there with other Fortune 500 company leaders, the kinds of people Google was courting to experiment with its search capabilities and its newly acquired video platform, YouTube.

On an unusually warm September evening in Silicon Valley, I had a revelation while dining under the stars with Google founders Sergey Brin and Larry Page. I already knew that this brash and growing technology giant would lean heavily on companies such as P&G. Of course it would: Google, or Alphabet, as it is now known, is able to poke into all those potentially life-altering innovations--from self-driving cars to balloon-powered Internet access--only by selling lots and lots of ads. So, obviously, it needed large advertisers. My cross-current thought was that we at P&G couldn’t survive without Google, as well as an exaltation of startups bent on changing the world. And that was probably true of other large, mature companies.

Why did we need startups? Not just because they offered indispensable products and services to P&G--but because they did business in a radically different way. They were engines of continual creativity; they engaged passionately with their audiences and customers; they hired the best and the brightest people, people who loved working there. In fact, they were sparking a dangerous talent drain away from mature companies like ours. They didn’t have to poach skilled, smart young people because the choice between working for an established company and an exciting upstart with endless potential to become the next Facebook or Uber was really no choice at all.

Exuberance. Passion. Excitement. Audacity. Intensity. These were the words I would use to describe Google and companies like it. These were also things I hadn’t felt as intensely at P&G for many years.

Upstarts such as Google in its early days reminded me of what life must have been like in the earliest days at the biggest and oldest corporations. Every venerable established company--P&G, IBM, Levi Strauss, Target, Toyota, Wells Fargo, GE, Motorola Solutions--started with a dynamic founder, a brilliant idea, and a determination to deliver something extraordinary and transformative. But as companies grow--acquiring more customers, developing more products and services, bringing on more investors and strategic partners--those companies lose their original excitement, purpose, and drive as the years grind by. They become more concerned about how to maintain market share or survive in their space than about how to transform the world. In a word, they go from bold to old.

If we at P&G, a 170-year-old company at the time, didn’t start to learn from these companies and adopt their agility and speed--retrofitting our own operations to restore some of the charisma and fast-paced performance of startups--we would lose relevance with our employees and with consumers. Is this fossilization among mature companies reversible? I wondered.

On the flight back to Cincinnati, I started to scratch out a plan to learn from these new companies whose energy was garnering so much attention. Step one was to reconnect with Tim Armstrong, president of Google’s Americas operation, and invite his group to P&G’s headquarters in Cincinnati. (Since 2009 Tim has been CEO of AOL, now part of Oath, a division of Verizon.) Could our very different teams and cultures push beyond the ad-selling commercial relationship?

Imagine my excitement when, a few weeks after my visit to Google, Armstrong and his Google team descended on Cincinnati. We agreed that the best way to mix with and fully understand each other’s culture was to do a brief employee exchange. We sent leaders from a few of our largest brands, including Tide, to work at Google for a month. And Tim dispatched Google people to work in the daily rituals and rhythms of brand management at P&G. Both sides wrote up what they had learned and presented it broadly within each organization. (The Wall Street Journal got wind of the idea and put the story on its front page in November 2008.)

What did Procter get out of it? Google got us to loosen up a bit during a spoof campaign of Tide to Go, a stain-removing pen, and gave us a taste of user-generated content. Tim’s Google squad also persuaded us to wade ankle-deep into online marketing by empowering so-called mommy bloggers to write about Pampers.

And what did Google get out of it? Google learned that a big, established company like P&G could teach them a few things about brand management. As we taught Tim how P&G worked with leading retailers such as Walmart and Target, he came to realize that the sales organization he’d built at Google didn’t work for big clients. Why not set Google up along the lines that P&G had--focused on dominant customers and categories, instead of on geography?

But the fun didn’t last. That innovative experiment was never repeated. Not long afterward, I retired from P&G after twenty-five years and started my own business, The Jim Stengel Company, helping enterprises large and small work through challenges of activating their brand’s purpose, developing their organizational culture, and renewing brand strategy and positioning. Still, those stimulating weeks of Google/P&G cross-pollination have never been far from my mind.

Over the last nine years, as I’ve dealt with scores of clients, given hundreds of talks, and had meetings with countless executives, I’ve sensed a growing anxiety--sometimes bordering on panic--throughout the business community. Why? Increasing global competition has had a hand in it. So has rapidly evolving technology, along with the tilt of resources and media attention to anything digital. The Great Recession was a punishing gut punch, delivering a fatal blow to some businesses. There’s residual angst. Everyone worries constantly about survival, about who or what’s around the corner, about how they’re going to deal with it, outlive it, prosper again.

Let’s be blunt: many legacy companies are in trouble because their brands don’t mean as much to consumers anymore. Women really don’t obsess about Tide’s latest line extension. Budweiser and its new stepbrother, Miller, are no longer the top choices of millennials, who probably live or work near a craft brewpub that makes more innovative beer. In a world of Tesla and Uber, who identifies as much with Chevy and Ford anymore? Older brands need to acknowledge that the world has changed--and start acting more like startups. And not just try to buy them, the way GM put the moves on Lyft.

And startups can learn something valuable from legacy companies as well. Most startups need a little parental supervision. Failure rates for young companies are abysmally high. They often lack discipline, structure, the ability to scale up without losing their core culture or mission--in short, the wisdom of an experienced organization. Some young entrepreneur superstars could use a dose of corporate humility. It might forestall their sudden fall. We’ve all seen more than a few unicorns, those upstarts supposedly worth $1 billion or more, turn into donkeys.

Companies--large and small, old and young--don’t need to go it alone anymore. They’re beginning to interact with each other, establishing powerful new kinds of...