Behnam Tabrizi is a professor, best-selling author, and Executive Program Co-Director in the Department of Management Science and Engineering at Stanford University. He has served on the teaching faculty of Organizational Transformation at Stanford University and its executive programs for the past 25 years. His research with McKinsey & Co. has been featured in the Economist, Financial Times, Forbes, The Chicago Tribune, and more.
Below, Behnam shares five key insights from his new book, Going on Offense: A Leader’s Playbook for Perpetual Innovation. Listen to the audio version—read by Behnam himself—in the Next Big Idea App.
1. The tale of two cities.
For years observers of tech had written off Microsoft as a 20th century phenomenon: fat and happy from their Windows monopoly. The tech giant hadn’t had a breakthrough innovation in decades. It was rich enough to be a fast follower, but too big and bureaucratic to lead in any market. So bad was their reputation, Jeff Bezos was known to tell his staff at Amazon to not become complacent like their Seattle neighbor. Microsoft was written off for playing defense and for its conservative position in the tech world. However, as it signaled its partnership with OpenAI and it challenged Google Search supremacy, it moved back to offense and shifted Google to the defensive.
As another example, Tesla had an avalanche of wins in electric vehicles, especially in the charging area. In May, Ford Motor Company announced that it would incorporate Tesla’s charging points into their future electric vehicle models, a decision that was also quickly made by General Motors, Chrysler, and Toyota. A recent announcement about dual charger stations acknowledged that Tesla’s charging system would eventually become the standard for electric vehicles. So how did this happen? How did Tesla come out of nowhere and become a dominant force in the automaker industry, sending other car manufacturers back on the defensive? And what makes companies continue to innovate even after initial success?
2. Existential purpose.
At Microsoft, the existential purpose, and its commitment to it, really started when Satya Nadella, chosen by the Board to replace the retiring CEO Steve Ballmer in 2014, took the reins. At the time, he was head of the company’s fastest-growing cloud computing, and his promotion seemed unlikely to change the lumbering giant’s trajectory. However, Nadella and the Board were tired of seeing the tech world pass by this one-time industry leader. Nadella announced that it was time to, “rediscover our soul, our unique core.” This wasn’t just another exercise in corporate purpose, Nadella treated it as an existential moment. Having long accomplished its goal of a PC on every desk and in every home running Microsoft software, the company needed a new inspiring vision to get its coders and engineers fired up.
“Microsoft needed to combine its enormous assets, cash, and engineering talent, with those of other companies.”
With his colleagues, Nadella reoriented the company to empower every person and every organization on the planet to achieve more, and this pivot was accomplished by a strategic shift. Instead of protecting its assets in a defensive posture, Microsoft went on the offense by seeding big investments in existing tech and looking to jump into emerging opportunities. The most noticeable change was external. For decades the company had resisted partnership, but the days of enjoying its cash cow DOS operating system were over. To fulfill its new existential commitment, Microsoft needed to combine its enormous assets, cash, and engineering talent, with those of other companies. They did this by opening up to other platforms and investing in one partnership in particular.
They achieved this in two notable forms. First, Microsoft embraced rival operating systems such as Linux and iOS and supported other companies virtual reality devices. Second, they recognized the entrepreneurial agility of startups. Microsoft started investing in a series of small firms at the forefront of technology with the goal of elevating some of these talented people. One example of this was Kevin Scott who worked for LinkedIn until Microsoft acquired LinkedIn and promoted Scott to Chief Technology Officer, playing a critical role in the success of Microsoft.
3. Adopting a startup mindset.
Despite the firm’s massive size, Microsoft’s cultural transformation involved several attributes of startups: one being an obsession with customers. The company sold a great many software products, most of them connected online in various ways. Rather than go by sales, a lagging indicator in a fast-moving market, or even what customers were saying, Nadella had product developers focus on what people were actually using.
They set up dashboards to see usage over the previous month so as to see up-to-date information about the market. They also freed up its engineering talent to explore new possibilities. As Nadella wrote in his account of the change, these engineers came to Microsoft with big dreams, and Microsoft needed to unleash their talents. Nadella reduced hierarchies, freed engineers from most of the institutional control, including roles, and let them focus on finding answers to specific problems. The engineers became Microsoft mainstream, rather than fighting daily battles. With them on board, the company could better address sudden opportunities and threats.
Microsoft also sponsored what it called the world’s largest private hackathon, where company engineers worked together on all sorts of projects that they had dreamed up. The annual event drew more than 10,000 engineers from all over the world and also from other functions. Each one lasted only a few days, but it made connections across silos and ended up with some remarkable products. This was Microsoft acting like a startup, rather than a high-inertia, slow-moving culture.
4. Customer obsession.
Customer obsession is tied to existential purpose—Tesla has focused on giving customers what they want. Electric vehicles had an enormous initial cost, so Musk and others started with luxury-end cars. The higher price point enabled them to give buyers a delightful experience and spread a positive vibe across the globe with this new technology.
“If Tesla had gone for scale immediately, their product would have been mediocre.”
Over time, in the usual practice of car makers, that delightful experience could happen even for buyers of mid-priced vehicles, and that’s where scale and the results for the world can happen. If Tesla had gone for scale immediately, their product would have been mediocre. The same thing happened with their superchargers. Tesla developed advanced superchargers whilst other electric vehicle makers saw them as premature. Isn’t it hard enough to just get the basic charging down? Tesla, like Apple, knew that reducing friction was essential to driving widespread adoption, especially for luxury buyers who had more cash than time. Now, even mid-tier buyers want access to superchargers.
5. Radical collaboration.
This is hard to see because it’s entirely internal, but Tesla operates with a different sense of hierarchy than conventional automakers. Musk specifically tells people to ask for help from anyone, even if that colleague is three levels higher in the organization. In most organizations, you have to go through every level, and each one could take weeks. The information gets filtered, and it becomes a very slow-moving process. Respect at Tesla comes from expertise, not rank, and people are willing to pass on insights to anyone who asks, without worrying about losing stature from talking to the underlings.
Musk himself notoriously goes around to people working on problems and offers unsolicited advice and insights. At Tesla, people can go straight to Musk for help with a problem. Musk is thus able to offer a fresh but sympathetic perspective that truly adds value since he talks to employees all over the company. Simply put, what this leader does, others follow. The traditional carmakers have tried to loosen their hierarchies, but they still have a long way to go, and this is why Tesla can continue to out-innovate them.
Oftentimes, these traditional companies use known methods, such as gathering a lot of data before you act. Yet Tesla gathers enough data, iterates and iterates, and constantly pivots with a very clear focus on doing big things. Due to these and other factors, it’s no surprise that Tesla is still outmaneuvering companies with a century of experience in their industry. The real question is whether Tesla can continue its impressive streak of agile innovation as it becomes larger and more profitable. Oftentimes, one-time darlings, like Google and Alphabet, fall behind after becoming fat and happy. Only time will tell if Tesla can avoid this fate and continue running on all eight cylinders.
To listen to the audio version read by author Behnam Tabrizi, download the Next Big Idea App today: