A Tale Of Two Cities: The Hypergrowth & Stagnant Decline In Tech

From the outside looking in, stalled tech companies and those experiencing skyrocketing levels of growth seem to be facing totally different challenges—but they share a common denominator.

Everyone thinks of tech as lean and efficient, but even tech companies have locked doors and locked silos.

From decade-old tech companies struggling to reinvigorate stalled growth to mid- and early-stage companies experiencing unprecedented levels of demand during Covid-19, every organization has the potential to expand and improve upon business.

It’s a tale of two cities—one needs scale, and one needs speed. For some tech companies, demand is skyrocketing, prompting leaders to navigate scale. For others, executives know they are years behind with legacy platforms and tech debt mounting. Yet these executives question how to drive speed through upgrading antiquated tools, systems and skillsets to keep pace with industry consolidation.

Yet having both speed and scale is still possible; they are not mutually exclusive. Leaders can and should have both. It’s all a matter of how to unlock them.

A Common Denominator

On the outside looking in, stalled tech companies and those experiencing skyrocketing levels of growth seem to be facing totally different challenges.

Yet these firms share a common denominator: how to activate people to drive growth in the most strategically significant areas of the business. Especially after 12 months of fear-driven burning platform after burning platform during Covid-19, both types of organizations have employees who are wading through massive amounts of change and uncertainty. How well employees adapt can mean the difference between thriving and not surviving at all—regardless of how well-suited a company’s products are to the current situation.

In today’s market environment, innovation is moving at the speed of light, and customer preferences are evolving rapidly. Companies don’t have the luxury of spending years developing a product or launching a new distribution methodology. If they move too slowly, their growth plans will become obsolete.

For stalled tech companies, many obstacles can get in the way of transformation, including rigid hierarchies; departmental and organizational silos; a lack of insight among employees into the company strategy and how they fit into it; not understanding the current market environment and an over-reliance on experience; an inability for people to question why things are done the way they are done; and legacy acquisitions never getting fully realized.

Early- to mid-stage tech companies grappling with a surge in pandemic-related demand face challenges of their own, including an inability to scale their businesses to keep pace with demand; figuring out how to leave behind legacy processes and procedures; retaining a culture of speed; and, similar to stalled firms, a lack of employee understanding about the company strategy and their role in bringing it to life.

However, stalled or skyrocketing tech companies that don’t stay ahead of the change curve will soon find themselves in trouble. As Peter Drucker once said, “The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic.”

Just Keep Digging to Survive

“Why are we having to change?”

“This has worked so far—why do it differently?”

“That’s not how we do it here.”

“We’ll figure out how to make this acquisition work.”

Too often, these questions and comments can dictate what strategies leaders chase after—especially at early- to mid-stage tech firms that are struggling to innovate and meet increased demand. Companies don’t all of a sudden break when they reach $500M in revenue. The hairline fractures begin as soon as early- and mid-stage companies start to scale, organically and inorganically. One self-inflicted barrier to growth is an inability to focus on what really matters and create clear visibility across the organization with specific metrics that track leading and lagging indicators of critical growth. Are your teams working on the two to three most strategically important metrics that will appease your investors, your board of directors and potential suitors?

On the flip side, many stalled tech firms are in a trance of desperate incrementalism. Leaders at these firms just keep digging to survive, rather than creating the conditions for their company to thrive. Instead of taking steps to achieve dramatic growth—growth that’s arguably needed to increase relevance in the eyes of customers and meet their demands—these leaders often set modest goals rooted in predictability and gradual progress.

Simply leveraging Agile is a great example of this. Leaders of stagnant tech organizations often turn to this approach expecting a panacea—and a seemingly quick fix—but because Agile is rooted in Lean and Six Sigma, their efforts to transform often result in incremental growth, leading to further frustration and gridlock. They need another solution.

Change can feel hard and scary, especially for leaders who have leaned on one way of thinking for their entire career. But relying on past experiences may not help leaders solve today’s problems, and what brought success yesterday may not offer that same promise tomorrow. The pandemic has made this inordinately clear.

The truth is that our world has been changing faster and faster before many of us were even aware of the ground shifting beneath our feet. Covid-19 was simply a wake-up call.

Recruiting A Volunteer Army

It’s one thing to be able to spot opportunities—it’s another to be able to activate people around those initiatives before the window closes and execute against them at a speed and scale that really matters.

Sometimes leaders fall into the trap of using a “burning platform” to generate urgency among employees around a change initiative. Yet any urgency they create will be short-lived. Employees can only sprint for so long before they burn out, and a lack of clear communication around the transformation can cast a dark cloud of uncertainty over the organization, leading employees to fear for their jobs and resent any disruption created by the change.

Urgency that lasts comes from engaging employees in entirely new ways, creating purpose, getting clear on goals and adopting new mindsets so that employees across the organization can help supercharge growth in a measurable and scalable manner and feel as though they are part of the change—and that their contribution is valued. Providing this kind of flexible framework can yield great results when people want to be on the project, feel connected to its underlying mission and have the freedom to experiment with new methods.

HMS, a leading provider of payment accuracy and population health management solutions, shares common traits with both early- and mid-stage companies grappling with exponential growth and more established tech companies dealing with the challenge of “what got you here will not lead to growth going forward.” HMS is a “45-year-old startup” that has successfully sustained a balance of driving significant profitable growth regardless of industry threats—represented by an 82% increase in EBITDA from 2014 to 2020—and leveraging every competitive advantage of having an established brand, technology and strong talent. They’ve done this through activating people at all levels around their most strategic priorities, as evidenced by a 26% increase in the employee engagement survey on individuals understanding how their daily work connects with the company’s vision.

HMS tapped into the power of cross-functional teams of individuals selected for what leadership and change expert John Kotter calls a “volunteer army,” based on a personal passion or expertise for a particular project. The teams are given authority to set their own rules, so long as they achieve a material goal and demonstrate progress quickly. More than 60% of employees at HMS contributed to one of these volunteer-based initiatives, in addition to their traditional jobs.

In a well-established and regulated market, tech companies need inorganic growth as a critical element of their strategy. With an HBR study revealing that 70-90% of acquisitions fail, HMS knew the odds were against them and wanted to mitigate any and all risk. In addition to the traditional integration work following an acquisition, a small team was tasked with generating quick, demonstrable value with the advent of new technology and talent. In one product line, they were able to double revenue in 90 days and have a line of sight to 4X growth in the subsequent 12 months. This was not about how many people were trained in the new technology or how many Agile trains were released, but about people leveraging technology and talent to drive material growth.

An Uncertain Future Awaits

Regardless of a tech company’s stage, clearly communicating the vision and strategy throughout all levels of the organization and enabling people to participate is essential. This might take the form of allowing employees to dedicate a certain number of hours per week to work on projects they are passionate about or welcoming their input on what opportunities exist that the company could seize. To be successful, leaders need to be inclusive of diverse skills and experience, enable people to explore the possibilities outside of standard work practices and give teams the authority to make decisions.

As we make our way out of the pandemic, leaders must open the aperture of their thinking about how companies should work. A year ago, many tech companies thought teams needed to work in the same office to be successful; Covid-19 has obliterated this idea. From corporate structure to talent sourcing to collaboration tools, the world in which we operate is changing, and those unwilling to explore new approaches will be left behind.

Here are a few practical tips on how to get started:

• Clarity = Speed: Be sure that you are crystal clear when defining what success looks.

• Results vs. Activities: Have people report out, update and focus on the results you need to see, not the activities that will get them there.

• Engage a wide range of employees in key projects. Seek their input and enable them to test new ideas.

• Explore options for being more inclusive with respect to talent pools, sourcing methods, hiring protocols and work practices. A one-size-fits-all approach no longer yields the best outcomes.

• Examine the structure of organizational decision-making. If it is concentrated with a few people, you are unlikely to scale effectively.

• Be open to examining all operational practices, even ones that seem to be working well today.

As the tech industry moves beyond Covid-19, there will be new learnings, changes and life-saving imperatives. Leaders who bring employees into the transformation and invite their ideas and participation will not need to manufacture false urgency. Employees will feel urgent every day because of their connection to the company’s mission and their desire to capture windows of opportunity before they close.