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The Stakeholder-Aligned Enterprise: How newly empowered constituencies will change the shape of enterprise technology

  • October 26, 2021
  • by Quentin Clark and the GC Stakeholder Aligned Enterprise Team

The old adage–’power to the people’–has never been truer.  A sea change is happening that shifts the balance of power in large enterprises – with employees, customers, partners and shareholders having more say and sway than ever before.  We are seeing a dramatic amplification that an individual voice can have within a business – bringing with it perspectives on not only what is right for those individuals and the business, but increasingly, what is right for society at large.  This broader group of stakeholders will have more influence on determining how companies will operate, communicate, innovate, partner and grow.  We believe this will have a dramatic impact on the types of systems, processes, products, and platforms modern enterprises will need to deploy.  Rather than try to block or control this new stakeholder power, the enlightened enterprise will find ever more innovative and interesting ways to help stakeholders better leverage it.

 

This stakeholder-alignment shift is different from the ones we often recognize and talk about that stem from technological progress. Technology has continued to be an evergreen source of efficiency and growth opportunity – and that will continue.  But the shift we are seeing today is different, and is coming from a whole variety of factors influencing people, society, and culture. Over fifty years ago, the economist Milton Friedman asserted that companies only exist to make money for shareholders.  But today’s enterprise will need to be ever more mindful and inclusive of a much broader set of diverse stakeholders in order to thrive. To go one step further: we believe the stakeholder aligned enterprise will outperform and outpace the less aligned business–who will struggle in the competition for customers, talent and investment.

 

The perils of stakeholder misalignment

 

Every established business today is trying to keep up with the sea change of new technology, new business models, new market demands and new competitors.  The buzz word of the last decade has been ‘digital transformation’.  But the truth is that, largely speaking, digital transformation has been a myth – what we have seen to date is more disruption than transformation as large enterprise companies are being outpaced and outmaneuvered by start-up competitors. 

 

Having worked in large successful enterprises, we know there are myriad reasons that lead to disruption – legacy systems, cultures that are risk averse and slow to innovate, perceived threats to existing business lines, etc.  But one area not often discussed is the impact of not being aligned to all stakeholders. One of the reasons established companies missed the digital transformation and got disrupted is because they were not focusing on the changing needs of their stakeholders – they didn’t have the mechanisms to serve the different and evolving demands of their customers, their employees, their partners.  This allowed new companies who were in more harmony with their stakeholder ecosystem to quickly rise-up and dominate.  This is not a new phenomenon really – when a company first starts it is usually very focused on its customers; its employees are aligned with the leadership, purpose and mission;  and its investors have proximity and clarity around the company’s longer-term business and ambitions.  But as a company grows, those forces sometimes become misaligned.  As any business’ focus on shareholders alone becomes outsized, it–too–is vulnerable to the next crop of more inherently aligned disruptors.  This has been an enterprise cycle for decades.  The new challenge–and opportunity–is for scaled enterprises to think more like start-ups when it comes to being more stakeholder aligned and behaving in the collective best interests of those stakeholders.

 

The new stakeholders–who are they?

 

So who are these new stakeholders, and what are the factors behind their new expectations, demands and growing power?  

 

There are several groups worth noting:

 

The demanding customer:  Much has been written about the customer economy.  And yes, every business is on a mission to delight its customers.  But this is an increasingly difficult task.  First, the bar for what makes a ‘great’ customer experience has been raised–shifting from expecting products and services to expecting experiences; from expecting mass personalized offerings instead of mass produced ones.  Customers increasingly expect their experience everywhere to be as good as the last great experience they had somewhere. In addition, today’s customer (especially GenZ) is looking beyond the traditional boundaries of customer experience and upping the ante on social expectations–a new set of requirements of companies to operate in line with their mission and values and to create positive societal returns in addition to financial ones.  Next generation enterprises will need to find new ways to listen to and deliver on customer demands for best-everywhere customer experiences and more beneficial societal outcomes. In recent years, the tech industry has started talking about “Product-Led Growth” – a strategy for driving- engagement through product innovation.  This is going to have to change to “Outcome-Led Growth” – shifting the mindset to consider what is right for the customer in a more holistic way, not just chasing the next incremental engagement metric.  

 

The emboldened employee: Probably no stakeholder group has grown in power as much as the workforce post-Covid.  Emboldened by unprecedented demand for talent, the new ‘work from anywhere’ flexibility, a new perspective on work/life balance, and a reprioritization of what’s important (purpose in addition to paycheck), the workforce can–and increasingly does– hold their employers to standards never seen before.  They feel a new sense of power, because they have new power and are using it to demand different ways of working, collaborating, communicating, connecting, creating, expressing, advancing, progressing.  This is a huge and currently untapped market opportunity. The modern enterprise will not only need to meet the changing dynamics and logistics of work (allowing people to successfully and happily work where and how they want), but they will also have to foster the environment and culture that maximizes Individuality and personal creativity.  Little of the technology that is widely adopted by enterprises today is up to this challenge.  Much of it is too horizontal in nature – too generic, too inflexible.  Much of it is too narrow in its remit – creating another inflexible system of workflows and silos that humans have to wrestle with and adapt to, rather than being designed in service of the humans in the first place. We’re entering a new era of employee technology solutions versus enterprise technology solutions. This is a huge shift from where we’ve been historically. 

 

The newly empowered C-suite:  Another group that has new superpowers within the enterprise are the C-suite functions of Chief Marketing, Customer, Experience, Technology and Talent Officers. These functions have seen their budgets increase and their influence grow as their strategic importance to the business has risen.  They themselves are emboldened employees who are less likely to endure a one-size-fits-all solution, but are leading their remits to deliver greater strategic impact.  They are increasingly not accepting just operating or presiding, they need to have a bigger role in driving strategy at the company. The newly empowered C-suite functions will require new tools, new systems and new platforms to meet their unique and ever more critical requirements.

 

The extended partner ecosystem:  Partners have also never been more critical to businesses or more discerning of who they do business with.  No business is an island – things are interconnected but often without visibility and proper stewardship. Businesses will need to be much more intentional and ever more transparent about the ecosystem they operate in. Businesses need to have the interconnected awareness to understand where they situate in their surroundings – be it in supply chain, in customer journeys, in market partners, etc. Never before has the opportunity to align interests been so strong – seamless customer experiences are in everyone’s interest, collaborating around data can create new synergies, opportunities to manage risk at great scale, etc. This visibility and connectivity is also necessary for companies to embrace the potential innovation power that comes from working as an ecosystem of partners.  Companies that thrive are largely going to be less vertically integrated themselves, and are embracing a different mindset of a B2B fabric that gives them leverage and focus on their core differentiation (e.g. the migration to cloud computing, renting manufacturing  or even labor, etc.) – this can in effect level the playing for enterprises in their ability to innovate.

 

Society at large:  Finally, there is a heightened awareness among companies that mission and purpose is as important as–and in fact connected into–market share and profit.  The recent successful IPO of Warby Parker(1) is but one example of a company that has built societal benefit into their model – a model that is supported by its employees and by millions of its eyeglass customers around the world. The drugstore chain CVS famously made a decision in 2014 to stop selling tobacco products in its stores and broadened how it hired and has moved its way up to now #4 on the Fortune 500.  Business will increasingly need to treat society as an ever more important stakeholder–and be clear, consistent and accountable around its commitments and behaviors to make the world a better place.  Awareness of the stakeholders, the ability to listen to their feedback and needs, anticipate where new focus will need to be, and taking actions that deepens the trust with their stakeholders will be the new norm.  Increasingly, investors are more representative of the broader society, as retail and individual trading continue to grow. Both this group and institutional investors are demanding new accountability and exerting more pressure around ESG actions and metrics.

 

Tomorrow’s successful businesses will need to go beyond just understanding the new needs of all these stakeholders; they will actually need to innovate for them as well.  They will seek ways that align the interests of these constituencies and put them into balance.  Doing this is not just something that sounds like the right thing to do.  Or something that is necessary for PR. Companies will do this because it is what’s necessary to build an enduring company; one who’s customers, employees, partners and shareholders are happy and proud to be associated/do business with it.  

 

So, what needs to change?  What does this mean for enterprise technology?

 

Increasingly, modern enterprises will need to transform to be ever more in tune to and responsive to the needs of both internal and external constituencies.   That means everything about how an enterprise relates to those stakeholders has to be reconsidered.  

 

We see a fundamental change in how enterprise solutions will get deployed.  We are entering an age when personalization is not just for customers; rather, it is for each and every stakeholder.

 

Take the example of but one newly empowered and highly influential enterprise persoane:  the Chief Talent Officer. The Chief Talent Officer is replacing the less modern function of ‘human resources’ (the name even suggests the idea that people are a resource to be exploited) and is taking on a new set of challenges that are essential for businesses to find, motivate and develop the talent that is essential to their growth and expansion.  How do you create culture in a world of remote working?  How do you find new ways to retain and retool a workforce as requirements shift and new skills are required?  How do you ensure greater diversity of workforce and what are the new metrics around that? How do you create a cycle of learning, improvement and engagement for people?  How do you reward and incent employee loyalty?  

 

The new Chief Talent Officer will need to look further than business outcomes and actively invest in the progress of people.  And this will give rise to a whole new group of businesses that are purpose-built for these tasks.  It’s why we invested in Eightfold – equipping talent leaders with new tools to change how everyone at the company is supported in their people management, development and hiring.  It’s why we invested in Guild and Multiverse – to give more people the agency to build the skills that lets them participate in how their work changes and improve their economic advantage.  It’s why we invested in Hopin – to help build the connectedness between a business and its employees and customers. It’s why we invested in GitLab, a productivity platform designed expressly for today’s distributed workforce. The companies that rise up to meet these new needs will have enormous TAM and market opportunity.  

 

Becoming a stakeholder-aligned enterprise means modernizing experiences across all stakeholders, an unscaling and tailoring of experiences, tools, programs, products.  This is how we achieve personalization for customers. It’s how we build the culture and talent to attract and retain empowered and agile teams working at the company.  It provides the organizational will to build bespoke partnership programs.  Some of this is mindset and approach – of company leadership and ultimately the whole of the company.  But much of this is going to ultimately be powered by technology.

 

Even the metrics that are focused-on day to day by leaders all across different businesses will evolve.  Top-line revenue and growth is not enough – and even the more recently focused-on ESG metrics are not enough.  Increasingly companies will worry less about micro measures and instead orient around outcomes:  in product design – not time spent, but job accomplished; for employees – not hours clocked in an office, but impact and effectiveness.  

 

Four concepts that will shape innovation moving forward

 

We think that the technology that empowers the coming generation of stakeholder aligned enterprises will be concentrated around these concepts:

  • A fully visible enterprise.  Every aspect of a business will be digitized and thus instrumented and part of a broad tapestry of data in a business.  That tapestry powers seeing, understanding and ultimately acting through different lenses – common facts that are universally accessible but differentially leveraged by each stakeholder for their unique purpose. This powers traditional metrics, but new metrics too that serve the needs for all stakeholders. This will go well beyond the customer data trends we are seeing – necessary for tailoring customer experiences – but on its own incomplete to tailoring the entire business.  
  • Systems of strategy.  Built on the fully visible enterprise, and powered by the rising generation of AI, every industry, every role has the opportunity to be transformed into a more strategic function.  The roles of People, Marketing, Support, Financing, etc. can shift to being more strategic because we can retool their systems to work across the context of the whole company and its operations – powering them for strategic impact and innovation.  Industry solutions will see similar transformation – operational systems that are domain-deep but company-wide in context.   
  • Tailored productivity.  Instead of most of our time spent in one-size-fits-all horizontal suites, much of day-to-day work will happen in tooling that is purpose-built for the role, activity and even domain.  Some of these tools might look tactical at first, but they are actually giving people real leverage and advantage in their work.  The accessibility of information, workflows and collaboration is going to have to dramatically improve – finally reaching consumer-grade ease of use.  
  • Viral culture.  The pace of business today demands that people and processes are connected, not disjoint.  With the acceleration of remote work and hybrid teams becoming commonplace, we have lost the serendipity that often made-up for gaps in how we work, and also provided room for creativity.  Systems and ways of working will emerge that support the engagement, rewards, collaboration, and organic connectivity between people – beyond the communication tools that we are using today.  These systems will also drive wellness, learning, inspiration and support for individuals and teams. 

 

There is a steel thread of leverage in all of this.  How do we give more leverage to everyone in a business – a field worker who through better workflow efficiencies is spending less time on the road and less time on paperwork and more time on the actual servicing; a CTO who is able to drive strategy around skills and org shaping; a desk worker who is able to spend more of their time on their creative work with less time on process and integration.   The stakeholder aligned enterprise amplifies both the personal and collective leverage of everyone in the organization.   It does this by providing the tools, visibility, metrics, and systems which in turn fuel innovation.  

 

Our ‘internet moment’

A few of us remember when Bill Gates penned a famous memo to Microsoft  titled “The Internet Tidal Wave.”  In it, he made a case for an industry sea change that would impact the entire world in numerous and previously unseen ways, particularly how businesses function and thrive.  And we saw that come to pass.  We believe this is another tidal wave moment. The advent of the stakeholder aligned enterprise is as big a sea change as we have ever seen – it too will change all the rules and create abundant opportunities for those that capitalize on it.  

 

(1) Certain private investment funds advised by General Catalyst hold an interest in Warby Parker. Nothing in this piece should be construed as a recommendation to buy, sell, or hold securities issued by Warby Parker or any security. Nothing in this piece, in whole or in part, is intended in any way as an offer of any security, a recommendation regarding any security, or as investment advice. For a full list of General Catalyst funds’ portfolio companies, click here or visit https://www.generalcatalyst.com/portfolio/.

 

Views expressed in “posts” (including blogs, podcasts, videos, and other media and social media) are those of the individual General Catalyst personnel—whether quoted in, contributor to, or author of such posts—and are not necessarily the views of General Catalyst Group Management LLC (“General Catalyst”) or its respective affiliates. General Catalyst is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. Posts are not directed to any investors or potential investors, and do not constitute an offer to sell — or a solicitation of an offer to buy — any securities, nor do they constitute an investment recommendation of any kind, and may not be used or relied upon in evaluating the merits of any investment.

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