The Corporate Immune System: How To Break Through
Scott D. Clary | Mental Models, Performance, Business & Entrepreneurship
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The Corporate Immune System: How To Break Through
There’s been a lot of talk about immune systems these past few years — and in more ways than one, as it turns out.
Recently, I was made aware of the ‘corporate immune system’; the phenomenon that protects companies from failure, but in the same breath prevents innovation. Disruption is taking place across every major industry, and the ones that succeed are the ones that understand this immune response.
I learned about this fascinating topic from Salim Ismail. He’s only one of the most cutting-edge entrepreneurs and strategists alive today. Salim has been working with Singularity University to help companies like Yahoo innovate and grow in today’s rapidly changing world.
Perhaps you’re in an industry where disruption and innovation loom, but you don’t quite know how to make that final breakthrough. Or maybe you’re starting a business and want to do everything possible to stay on the edge. This newsletter is for you. We’ll be talking about Gutenberg moments, ExOs, and what it takes to innovate in 2022.
Let’s dive in!
We Are Living In the Gutenberg Era
Johannes Gutenberg; you might know him as the inventor of the very first mechanical printing press. At the time, any written and printed work was a rarity. (No wonder, as any printing was to be done very painstakingly by hand.)
What Gutenberg did was, in every sense of the word, revolutionary. The ability to print books en masse, in perfect duplicates? Not a chance. But Gutenberg did it — and though it would take time to come about, he also sparked the beginning of mass media as we know it today.
In the twenty-first century, we are seeing these Gutenberg moments happen all around us. The iPod revolutionized music consumption. The Tesla upended the automotive industry. Airbnb gave the average homeowner a chance to become a hotelier.
What all of these innovations have in common is that they disrupted an industry by attacking its underlying business model. More simply than that, they changed the way we do things. And that is what we are seeing in the world of business today.
The Current Climate
In 2022, disruptive startups are attacking incumbents by using new technology, new processes, and sometimes even new business models to change the game.
Salim Ismail knows this pattern like the back of his hand — perhaps better than most — and it was a privilege to hear him speak on the subject in our recent interview.
“The printing press in the 15th century? Fundamentally changed the world. Solar energy fundamentally changed the world. AI completely changed the world. We’ve had these kinds of breakthroughs once every few decades, but now we have 20 of them hitting us all at the same time. And this is blowing up our industries globally.”
Salim has been building disruptive digital companies as a serial entrepreneur since the early 2000s. He’s also a serial entrepreneur, angel investor, author, speaker, and technology strategist, as well as the Founding Executive Director of Singularity University and the lead author of Exponential Organizations.
In other words — he knows what he’s talking about. I was all too eager to hear his insights on how to break through the corporate immune system.
Corporate Immunity: Our Protection, and our Downfall
As we’ve established, the world is teeming with innovation and disruption like we’ve never seen it before — but don’t be fooled by the mystique of Silicon Valley or the charm of Elon Musk. This isn’t the status quo, and it won’t be for a long time.
Why? Because within every organization exists an immune system.
“Big companies have an immune system. Our institutions, like education, journalism, and health care, have their own immune system. Academia has its own immune system, and then probably the worst is religion — the ones that kill you if you don’t follow the relationship,” Salim explained.
Like our bodies, companies have a way of fighting off threats in order to protect the whole. And while this immune system is incredibly important for the health of any organization, it can also be its downfall.
To the well-established company, a ‘threat’ is anything deemed altering, dangerous, or potentially damning to the mothership. For instance, companies respond to economic strife by downsizing and restructuring. It protects the core of the company and minimizes risk.
But like our biological immune systems, corporate immunity doesn’t discriminate between ‘good’ threats and ‘bad’ threats; it attacks them all.
“There are a few things you will hear that indicate an immune response,” Salim said. “We can’t do it. It’s not a priority. We’re not set up for this. It’ll never work. All of the normal reasons to say no to something.”
In the early days of a company, this is a good thing. It’s how companies grow and become successful.
As those companies mature, though, they can become less nimble and more bureaucratic. The immune system, designed to protect the organization from harm, can instead start to suffocate it. Disruptive ideas — the ones brought in by the ‘crazy’ employees — are quashed. Risk is minimized, and so is growth.
“There are ways of beating this,” Salim informed me. “We’ve found ways the big companies can adapt. But it’s very rare to see overall. And we’ve got a methodology now to transform big companies, but most actually don’t believe it, because they just can’t see how you get there.”
Why Do We Need To Innovate?
Obviously, the Apples and Amazons of the world aren’t the only successful companies out there. You don’t strictly need to innovate in order to survive. But think about the fallout of disruption, and how it affects the little guys.
Amazon has totally revolutionized the book industry. The only companies that can really compete with Amazon now are the Barnes and Nobles of the world, which have been forced to close hundreds of stores. Now, if you’re an indie author, where do you sell your books? You can’t go up against Amazon.
Uber has disrupted the taxi industry, taking millions from the taxi companies in the process. Apple and gutted the CD industry; Netflix has sent thousands of DVD stores out of business.
So you don’t need to be Apple or Amazon, it’s true — but you do need to keep up. And if you’re one of the ‘big guys’, you need to be thinking ahead at every waking moment.
Salim is an advocate for thinking big; it’s what much of his career has been built around.
“It’s pretty simple: as the as the external world becomes more volatile, your ability to adapt is going to drive market value. And we can prove it like six ways to Sunday. So the big challenge now becomes, how do you take a big company and make it more agile?”
It’s a challenge, alright — and your only real solution is to sidestep your company’s immune system.
Apple’s Strategy for World-Altering Disruption
Before I talk about Salim’s proven method of building an innovative and successful company, I want to share one of the most fascinating take-homes from our interview.
As we all know, Apple is one of the most successful companies to have ever existed. But what makes them so? How is the company constantly found on the teetering edge of world-altering disruption, decade after decade? Here’s how it works, according to Salim:
At its core, Apple is tediously and fastidiously organized.
“I will argue that Apple’s core innovation is organization. Because what they do, unlike anybody else in the world, is it will form a small team that’s really disruptive. It will take that team to the edge of the company. And they will say to that team: ‘Go disrupt another industry.’”
This was mind-blowing to me. It’s not just the products that Apple creates that make them so successful, it’s their organizational strategy. They systematically — and intentionally — send people out to find their next big thing. Incredible.
Apple’s disruptive team looks outside of the box.
“Here’s how Apple works. They have a portfolio of teams investigating the future of cars, payments, retail watches, education — you name it. And when they think an industry or product area is ready for disruption, they go into it and disrupt it, and then they iterate their product very aggressively.”
So Apple isn’t just watching with beady eyes for the latest in mobile phone technology, or even consumer electronics. They’re looking at the future of transportation, healthcare, and education — all industries ripe for disruption. They are looking at everything, all at once.
And finally, Apple keeps it hush-hush.
“When an idea suddenly works, they fold it back into the mothership, back into the iTunes platform. Nobody knows about it — or they’ll fail it elegantly.”
You’d think that, with such a forward-thinking business model, Apple would be bragging to the world about its successes. But they’re not. In fact, they’re so secretive that most people have no idea what they’re working on until it’s released. They keep things under wraps until they’re absolutely sure of success.
“They’re essentially an incubator of breakthrough ideas with the platform of design and technology as their strengths. But the key innovation is organizational. And not only does nobody else do this, but nobody’s even noticed that this is all they do.”
I feel like there’s so much to learn from just this tiny segment of my conversation with Salim. Being an industry leader isn’t about ‘keeping your eyes open’. It’s about actively hunting down new ideas, ones that haven’t even been dreamed of yet, and bringing them to market in a big way.
Disrupting Your Industry (In Spite of the Immune System)
Innovation is about being ruthlessly organized, keeping things under wraps until they’re ready, and having the fortitude to see your ideas through — even when everyone tells you that you’re crazy.
But how do you do this without triggering the immune response? This is what I really wanted to know. Salim was all over it.
“We’ve been focusing on a toolset to transform legacy organizations, and we’ve cracked it. It’s working.”
What I’ve forgotten to mention up until this point is that Salim’s entire job is based around helping organizations sidestep their company’s natural immune response. Like antibiotics for the corporate world, his team at Open ExO are the shock troops that can help you to introduce change into even the most entrenched and calcified of businesses.
Let’s run through his key principles for innovating on the edge. You’ll be amazed, I promise; I certainly was.
Lesson 1: The mothership is not programmed to accept threats.
In other words, there’s a reason why so many great ideas are shot down, ridiculed, and wasted; leaders in high-stakes environments aren’t prepared to take risks or chances. Especially not on ‘crazy’ new concepts.
“Big organizations first need to realize they’re in trouble in order to actually take on that path. It’s like a patient who first shares they have cancer; they don’t want to know, and they’re not set up to know. And you have to kind of wake them up.”
Lesson 2: When you innovate, innovate on the edge.
“The key concept here is this: you do not do disruptive innovation in the mothership. You do it at the edge of the organization pointing into adjacent spaces. Really important.”
What Salim instructs his client organizations to do is create an external startup company; an ideas ‘incubator’ that operates completely externally to the mother company, but is still linked to it. This allows for a much greater degree of freedom, and also means that failures (or successes) won’t be blamed on the mothership.
This is something Salim has seen and directly instigated in other companies.
“Larry Page from Google came to me a few years ago said, ‘Should I build an incubator at Google?’ I said, ‘Don’t — you’ll have the immune system response. But do something like it. Point into adjacent areas.’
“And you see the result is Google X, where they have their core information processing capability in the mothership, and they use hardware, (Google Car, Google Glass contact lenses) to go into adjacent areas.”
Lesson 3: Hire the crazy ones, and use them to your advantage.
Most companies have them; the frustrated visionaries, teeming with ideas that get shut down the moment they’re uttered. In fact, it’s often these people who are the most frustrated with the status quo, and the ones who are most likely to try and change things.
“Every company has about 5 percent of people that are totally nuts — super smart, very loyal, but super hard to manage. You never know whether you’re gonna fire them, or they’re gonna quit anyway. Those are the ones. Grab them and put them at the edge.”
To me, this is an incredibly smart move. If you’ve got visionaries busting to make moves and change the course of your business, why not use that passion to your advantage?
“If you’re setting up a new CO at the edge, you ideally want to hire from the outside. Because anybody from the inside that has any depth of experience will be useless for the future. You need somebody as young as possible and as crazy as possible.”
Lesson 4: Keep the politics at bay and develop a culture of innovation.
In Salim’s words, incremental disruption is best at the core, and disruptive innovation is best at the edge. When you’re incubating new ideas, keep them separate — or risk the politics of the mothership shutting them down.
“At Yahoo, one of the challenges I had with my incubator is that the company kept publishing what I was doing. And all the other teams at Yahoo were like, ‘Hey, we’re doing that. Why does he get to do that?’ And you set up horrible internal politics.”
To combat this, Salim and his team have been working on a 10-week agile sprint designed to bypass this response and create a culture of acceptance within organizations.
“We’ve now done it 60 times with big companies, and the average return on investment is like 70X — because it juices up the internal metabolism of the company, and allows them to accept disruptive innovation. So if somebody does something wacky at the edge, they go, ‘Wow, that’s interesting.’ And they let it permeate every level of the organization.”
At a time when innovation and disruption are your keys to the city, it’s more important than ever to have a playbook for getting your ideas through the corporate immune system.
“It’s pretty clear that we’ve stumbled across the organizational model for the next 10 years. By the end of this decade, every organization in the world, be it a big company, a start-up, a nonprofit, an impact project, even a government department, will be organized in this way — because it’s just better.”
Wrap-Up Thoughts: Does it Really Work?
I left the interview with Salim feeling genuinely excited for the future of business. It’s people like Salim, and companies like ExoWorks and Open ExO, that are going to change the course of how business is done.
So far, Salim has found that the potential for growth is exponentially increased by using his 10-week program.
“Beforehand, we found that when somebody had a great idea inside a company, they might get funded five or 10 percent of the time. After you’ve done this process, they’re getting funded 95 percent of the time, because the company culturally knows now that disruption needs to be embraced, and not shut down.”
This is really hair-raising stuff. If you want to hear more from my interview with Salim Ismail, you can find the full episode here. I highly, highly recommend giving it a listen — especially if you’re ready to break through your company’s immune response and start seeing some serious growth.
Thanks for reading! Until next time.
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