The prolonged act of hollowing out

Opinion on the average corporate’s trajectory to becoming average. All names within are illustrative only.

Over time, many corporate entities seem to hollow out their smarts with large ice cream scoops. Those who design, create, innovate and spin these creations into the world get zombified into coordinators, administrators and managers. True greatness dissipates. Yes, somewhere within remains a pocket that holds valuable expertise, or people key to the mission, or interesting sorts who could probably fly the plane themselves but aren’t allowed to. The majority become either:

• Well-meaning denizens of a cube world that from above look and act more like an ant colony
• Managerial aspirants who focus on appeasing someone, talking constantly about things like digital transformation and publishing photos of themselves at some conference (bonus marks if they were a speaker)
• Double dosers of the corporate kool-aid, sometimes sporting sunken eyes and who have an odd fixation that the admin job they do is paramount to keeping this whole thing running
• The many partnerships, alliances, contractors, suppliers and other outsourced entities that actually do the core job of said corporate, but do not belong to it

Does the same kind of hollowing happen everywhere? Which firms manage to avoid it, and how do they do it? Is this all merely a facet of a company’s stage in its Adizes Lifecycle? Weigh in with your opinion.

Here’s my take to source the symptoms, in five parts. Meet Dipton, a leader in quality teas.

1. Specialization and modularization (require you cut stuff): Dipton Tea is known around the country for brewing excellent tea but cannot square off the teabag quite right, so instead it buys bags from Danglebaggery, a tea-bag manufacturing business, that does it better and cheaper. Dipton can now specialize and focus on its core competence of tea since you can only be a master of one thing, said someone from consulting. Dipton squeezes out all the machinists and materials engineers* from tea-bag creation and replaces them with procurement pencil sharpeners and a red truck.

2. The shareholder needs (cash now): Naturally, Dipton Tea is beholden to its shareholders, and after a few years no shareholder cares much about tea anymore but they sure care about the returns. And they need them now, or at least by the end of the year, so in Dipton’s latest year when sales are looking poor, half the Craftery — Dipton’s skunkworks of aroma wizards* and taste chefs* — get the chop. They are deemed the most expensive and least essential to keep the major tea line flowing. Costs subside for the last 3 months and although profits only scored a “shaky” from analysts, it’s clear that next year will be solid. The congenial codgers* that built the grassroots restaurant partnerships over decades get replaced by target-driven Bus Dev leaders.

3. Captured markets and monopolies (bar entry): The great thing about Dipton’s start in your grandfather’s days is that now everyone drinks Dipton. Some people don’t even know it’s called tea instead of Dipton, but everyone does know the Dipton jingle from the 80s. All this means that the big ship just keeps sailing and Dipton can put a lot of focus into buffing up on suitwear, deploying a new echelon of middle management and doubling up on golf days. None of which appeal much to the master tea brewers* and eventually they feel enough like outsiders to find the door. But the money within the company attracts a new breed of joiners: each talks about “how important tea is” and they really do look good in that suit, and perhaps even just a little sharky in it, and do a fine job of managing and delegating.

4. Intangibles, capital and regulation (set more barriers): Dipton’s CEO eventually finds himself in a dusty bar … kidding, he’s at the Wooden Globe, the central bar at this evenings’ most prominent east coast charity ball, with Bob the banker. Bob, initially all grins and pats, now puts on a concerned look as he points out that Dipton’s dominance has a weak point, given the emergence of crafty new tea brewers. Really, Bob gestures, the way you want to bar the entry of others into your money pool is to be in an industry like Bob’s; highly regulated and capital intensive. “More golf days!”* he shouts. Though, he adds, his industry is fairly complex and intangible, no room for artsy-types and mechanics *. Since you’re in tea which just doesn’t have the same natural barriers, why not try something else to maintain prominence — diversify, acquire something? We can help.

5. Acquisition & culture (perpetuate disassociation): And this is how Dipton acquired Danglebaggery. By this point in time Danglebaggery had extended (um, leveraged) their production process to create all kinds of bags and sachets for other industries. Shortly after acquiring, Dipton naturally disposed of this subdivision in Danglebaggery to an aspirant sandwich bag maker. However, the suits continued to frown at Dangleberry’s entrepreneurial engineering culture*, which pushed along one of those lopsided integrations where the acquired becomes increasingly dysfunctional. Until one day when a consultant walked in and mentioned they should really focus on their core competency and probably dispose of tea-bagging and focus on tea. And oh my. We start again at the beginning of this story, squeeze and repeat …

* Did you count the scoops taken out? Machinists, engineers, aroma makers, chefs, grassroots developers, tea brewers, creatives, mechanics, entrepreneurs, more engineers. Then there’s the additions: managers.

That’s my scoop, in summary: the corporate tendency to fluctuate between singular focus (cutting) and, once cash is plenty, diversification. The way acquisitions are done often perpetuate employee disassociation. Large corporates require more senior executives who perpetuate a way of thinking that everything is a business deal , which promulgate to culture changes below. The stock price right now is more important than some creative newfangled R&D. Barriers to entry like captured markets make great capital bases and create ample time for corporateers to rather focus on internal politics. Industries with added entry barriers such as large capital requirements or detailed regulation, keep competitors out and buy more time for shenanigans. A fluid intangible product at the centre of things, like that of money, creates even more ways to distract from the cause.

Because a big corporate managed to become big doesn’t mean it is any longer really “good” at what it does for customers, it might have only been “good” at some point in its lifecycle, or in some pockets of the organization … rather, it is more difficult to tip over a big hollow ship, than it is for that ship to simply stay afloat.