eBay stays competitive by adopting starfish principles.In many arenas, a lack of traditional leadership is giving rise to powerful groups, such as al Queda, Craigslist and Napster, that are turning industry and society upside down. I liken these groups to a starfish, and businesses, institutions, governments and individuals (exemplified by the spider) must realize that starfish and spiders may look alike, but starfish have a powerful and miraculous quality. Cut off a spider's leg and you have a seven-legged creature; cut off its head and it dies. But cut off the arm of a starfish and it grows a new one. Plus its severed arm is capable of generating an entirely new body!
Today starfish organizations are taking society and the business world by storm, changing the rules of strategy, engagement and competition. In the book The Starfish and the Spider, we use the spider as a metaphor for organizations and business models with the traditional structure of a rigid hierarchy and top-down leadership; and the starfish to represent organizations based on peer relationships, and a catalyst style of leadership. We give many examples in the book of successful starfish-like organizations, along with several stories of how traditional “spider” companies have suffered when faced with “starfish” competition.
The Power of Innovation
One of the key aspects of the success of starfish organizations is their ability to innovate. Traditional companies may have trouble with innovation because they are set in their ways, and don’t know how to adopt the latest emerging business strategies.
Sometimes the more an organization is tuned, optimized and efficient, the less innovative it becomes. Innovation often comes out of new circumstances, new challenges, or new and often young people.
The most innovative companies in general do a good job listening to their customers and listening to and respecting their employees. This is essential because over time, many traditional companies become sclerotic - their arteries become clogged with paperwork and bureaucratic practices that don’t actually add value to the business.
Every now and then, renewal is necessary. One way to have a renewal is to listen to and engage young workers in helping to revamp the business. Young employees in their twenties, for example, are often extremely comfortable with the latest cell phone wizardry, internet social community sites or other technology toys and tools. Old companies can hire them to help set up their website, blog, YouTube videos or whatever else. There are a lot of smart young people around that can help companies move into the digital age. It is a generational issue.
Much of my professional speaking is to CEO’s. I speak to different groups. One averages 47 in age, another 35. The technology language and knowledge gap differs completely between the two. As an example, most of the 35 group not only know what a wiki is, but they use them. Most of the 47 age group have heard of wikis but many have not and fewer have used them. The tools of communication and collaboration are changing faster now than ever in human history and the younger the person, the more likely they are to have used and embraced new technologies like blogs, wikis, Skype, free conference calls, Facebook, MySpace, instant messaging and the like. It is crucial that companies utilize these kinds of innovative tools to remain competitive in the changing marketplace.
The Power of Decentralization
Decentralization enhances a company’s ability to innovate and adapt to today’s world. By expanding from just one centralized location to many different offices or branches, a company can cast a wide net and leverage each location’s individual network in a given region. This allows a business to multiply its access to ideas and contacts.
To meet the challenge a traditional organization faces when dealing with starfish-like competitors, they should adopt the philosophy of “if you can’t beat them, join them.” A company doesn’t need to radically change its structure to benefit from decentralization.
One technique that works well is a process called “appreciative inquiry.” This involves bringing together people from all levels of the company, from the janitor to the CEO. You pair up participants, and each person interviews his or her partner. Use questions for these interviews that encourage people to open up to each other. This process will break down hierarchical differences, and people begin to see each other as individuals instead of as a boss or subordinate. These interviews are followed by brainstorming sessions which draw on the knowledge from the edge of the network. Low-level employees may have good data and creative ideas that would not otherwise reach the CEO. Because everyone feels heard, participants are more likely to support a new plan.
In whatever form, decentralization has helped companies ranging from eBay to IBM stay competitive.
Utilize Starfish Concepts
There are several things a traditional centralized organization can do to move towards a starfish-style business model. One thing is to implement policies that support bottom-up communication within the organization, giving employees a voice that is seriously listened to by top level management. Businesses can learn from Toyota’s strategy to allow assembly line workers to stop the line and make suggestions for improvement. Toyota implemented 100% of worker suggestions, which made each worker feel like a valuable contributor to the organization, motivated to do their very best for the company. This strategy allowed Toyota plants to produce a high-quality product and foster efficient teamwork, outperforming General Motors, its major competitor in the U.S.
In order to strengthen competiveness and increase value, traditional organizations can also adopt a strategy of decentralizing the customer experience and giving customers a role in the business. Good examples of this include eBay’s success with letting customers rate sellers, Amazon’s success encouraging any reader to review titles, and Oprah’s creation of book circles that became a coveted customer block in the publishing industry.
Catalyst Style of Leadership
To benefit from the advantages gained from adopting a starfish business model, business leaders such as CEOs need to develop the characteristics of a catalyst. Instead of acting like a dictator/boss, CEOs should interact with people as a peer, and come across as a friend. Instead of leading by command-and-control, they should depend on trust, and inspire everyone in the company to do their best and strive for excellence. In a starfish model, business leaders need to cultivate emotional intelligence within themselves, and create personal relationships. They need to stimulate a spirit of collaboration, and urge people to work together around an ideology. In the starfish business model, business leaders are more effective working behind the scenes, and learn to thrive on ambiguity and apparent chaos. This involves being able to give up control to some extent. I know this may seem counter-intuitive to many Hong Kong business leaders, but as the following Cisco example demonstrates, this can really work.
Cisco Systems, Inc., a leading supplier of networking equipment & network management for the Internet, has adopted starfish decentralization strategies extremely successfully. Cisco uses starfish strategies such as Web 2.0 and wikis as central tools that are being used extensively to change processes. As a result, Cisco’s merger engine is now so efficient that they were able to close their $6.9 billion dollar purchase of Scientific-Atlanta, Inc., the TV set-top box manufacturer, in just 45 days from the first meeting to the closing.
Cisco did this by having one centralized data room for tracking, analyzing and closing the deal. They then decentralized the data room so people could work from wherever they were within or outside of Cisco. This same strategy allowed Cisco to set a speed record for the time taken to acquire a public company on another deal. It took Cisco only seven days from contacting WebEx to closing the $3.2 billion dollar deal with this web conferencing company. This is starfish networking at its best.
Finding the “Sweet Spot”
We talk about the right balance between centralization and decentralization as being the “sweet spot.” It depends on the business, the environment, the technology and the customers. Centralization is often needed where control is absolutely essential. Decentralization works well where innovation and employee motivation are paramount.
One key technique for managers to master is to realize that with every management decision they make, they are either moving their organization towards centralization or decentralization. For example, every time managers decide to make a decision themselves, they are sending a message to their subordinates that they are not empowered or trusted to make decisions. This pulls control back to the center. On the other hand, every time employees are allowed to make decisions, perhaps after managers ask them penetrating questions, the employees feel empowered and the organization is further decentralized. The average manager makes more than one hundred decisions a month that affect whether the organization is moving towards or away from the right sweet spot. Part of improving our leadership and management styles is at least becoming aware of these behaviors and results.
There is no single business model that will work best for every company. Although most businesses will benefit from adopting starfish principles, each business must find the “sweet spot?that works best for them. This involves discovering the best combination of centralization and decentralization that suits the type of organization, and yields the best competitive position.