The critical mass you need to make your firm pivot
Some IT services companies have understood this need for vertical integration from the bottom end of the stack, Infosys’s acquisition of the agency Wongdoody is an example
Most chief executive officers (CEOs) today face the unenviable task of making their company pivot into the digital, online world.
This means different things for different types of firms, since each occupies a corner of an industry or a geography and has unique problems that occur in those corners.
There has been much conjecture, for instance, around the role of today’s advertising agencies, which, not so long ago, had a fairly simple, though certainly creative, task in order to help chief marketing officers (CMO) increase brand recognition.
Today’s ads are dominated by the internet and its spawn such as search engines and social networking sites—and ad agencies working with contemporary CMOs have needed to become both creative agencies and technology companies.
Some information technology (IT) services companies have understood this need for vertical integration from the bottom end of the stack, Infosys’s acquisition of the agency Wongdoody is an example.
But CEOs have far more to deal with than their CMO underlings when it comes to steering their firms through the tight turn into the digital age.
Too fast and you lose control, too slow and you die. The main ingredient in a CEO’s effort to enforce change is through the employees of his or her own firm.
Recognizing that people are the main ingredient, CEOs and their human resources heads often turn to pompous, but clueless white-shoe consulting firms in an attempt to effect organizational change. Consulting firms have entire “change management” and “organization design” practices, and by virtue of having been in hair-raisingly close proximity to them, I can say, hand on heart, that these practitioners aren’t even as good as the one-eyed man who ruled the kingdom of the blind. They spew out psycho-babble and rely on an inexact battery of competing personality assessment tests as the main tools of their trade and get self-righteously indignant when asked to back up their methods with evidence.
The theory of the “tipping point” is a popular one; it holds that once an idea takes hold with a certain number or “critical mass” of people within an organization or an electorate, the tide turns inexorably towards that idea. On a related point, I have dwelled on in this column before about how Kenneth Arrow proved that you only need a minority out of a set of people to sway an election (or public opinion) one way or another.
But Arrow only explained the mathematical theory behind what causes the swing, and we have not yet been able to precisely define at what critical mass this tipping point occurs. Knowing exactly how many people you need on your side in order to make your organization go through wrenching change without self-destructing would be a useful tool for any CEO.
Help may be at hand. In a recent issue of the journal Science, researchers from the University of London and the University of Pennsylvania have claimed that they have been able to nail down this magic number through a series of online experiments. The fact that these experiments were online is significant, since the online world is one that is still open to easier manipulation for a CEO (or a politician) than the physical world of tours, speeches and propaganda.
I shall not go into detail about the online experiment here—suffice to say that it included financial rewards or penalties (much as a corporation would) to allow large groups of people to achieve a consensus. The researchers then introduced committed “confederates” or “change agents” into the mix to see at what tipping point they could change the existing consensus and cause a “paradigm shift”.
In every instance, the confederates only needed to comprise around 25% of the population to effect the “tip-over”. So now we have it. That marvelous magic number is 25%.
This means that all a manager needs to attain using online methods is to get 25% of employees committed to the change. And as the study acknowledges, Machiavellian organizations can infiltrate their own “confederates” as online interlopers. Once you hit 25%, you have a good chance of swaying opinion in your favour.
Trim your consulting spend; follow the scientific evidence instead.
Siddharth Pai is founder of Siana Capital, a venture fund management company focused on deep science and tech in India.
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