Burning Down The Building (Platform) Next Door

“Emotionally, it’s easier to change when you’re haemorrhaging.” — Andy Grove

Conventional wisdom suggests that to effectively motivate people for digital transformation, a leader needs a burning platform — a narrative of how an external threat is going to disrupt your organisation, such that you must either change quickly or go up in flames.

“We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning.” — Stephen Elop

The term “burning platform” comes from a famous memo written by Stephen Elop, the CEO of Nokia at the time, who was trying to awaken his executives from their inertia. Despite Nokia being the leading company in mobile phones for years, Elop highlighted the existential threat posed by Apple’s iPhone and Google’s Android, urging a drastic and immediate response to these disruptive technologies.

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In the memo, he relates a story about a worker on an oil platform in the North Sea waking to find the entire platform on fire after an explosion. The memo is worth a read, see here. As we know, Elop’s burning platform was not enough and Nokia’s mobile phone business went up in smoke. Nokia sold its phone business to Microsoft and exited the category.

This sense of urgent, existential threat exemplifies why companies often find it easier to transform when faced with clear, linear, and imminent risks. Success, ease, and prosperity can be the biggest enemy of innovation.

It took the murder of George Floyd in 2020 for companies to act on their neglect of diversity, equity, and inclusion. It took Russia to invade Ukraine and the business implications of operating within a nation known for corruption became starkly clear. Even the widespread issue of environmental damage only reached a tipping point in public and corporate consciousness following a revealing documentary by David Attenborough on corporate packaging practices.

Organisational transformation seems to occur only in the wake of visible disruption. Similarly, individuals often only undertake significant lifestyle changes after facing severe health crises, despite years of prior warnings. This pattern suggests that both learning and change are most profound during crises. Consider, for instance, how the COVID-19 pandemic acted as a catalyst, forcing countless organisations to spring into action and adapt to new realities, underlining the intense impact that immediate threats can have on prompting decisive change.

“A man who carries a cat by the tail learns something he can learn in no other way.” — Mark Twain

The absence of a palpable threat often represents a significant barrier for those looking to initiate change. Phrases like “If it ain’t broke, why fix it?” are delivered with self-assured confidence, illustrating how triumphs can inadvertently sow the seeds of future failures.

Consider IBM in the late 1970s and into the early 1980s, when Jobs and Wozniak were laying the groundwork for Apple Computer. While Apple grappled with the challenge of evolving its products beyond the hobbyist realm, IBM was reaping substantial profits from its established mainframe business. For IBM’s senior executives, the idea of their lucrative revenue streams drying up, or envisioning that Apple could develop into a formidable competitor, was almost inconceivable. In the context of the global business landscape, and more specifically against IBM’s reputation for reliability and performance in mainframe computing, it’s understandable why IBM’s top management might have struggled with this predicament.

Just as IBM’s initial disregard for the potential of personal computers is a cautionary tale, so too is the history of Levi Strauss through the 1990s. Throughout the early part of the decade, Levi’s witnessed strong revenue growth, a success that unfortunately masked critical shifts in customer behaviour that would undermine the company. Despite losing relationships with key distributors like the Gap and facing new competition from both high-end designers and low-end retailers introducing their own jeans, Levi’s initially perceived these challenges as manageable — or even ignorable — as long as the revenue numbers looked promising.

However, by the late 1990s, as revenue growth began to stall, it became clear that Levi’s market share had dramatically decreased, and the company found itself burdened with an expensive retail strategy and a product line that was misaligned with the evolving market demands at both the high and low ends of the denim market. Throughout the decade, the signs of these market shifts were clear to Levi’s executives; however, the challenge lay in discerning the critical signals from the noise, as the illusion of ongoing success obscured the true gravity of the evolving market dynamics. Levi’s experience underscores the difficulty of adapting to market changes without the impetus of a “burning platform” — a scenario where the urgency of declining sales is absent.

When an organisation is not experiencing a crisis, rallying everyone around the need for transformation is the immediate threat.

Many frustrated changemakers have realised that compelling facts and logic alone will not motivate action. They send articles, podcasts, and keynotes in the desperate hope that those in positions of authority might take notice. As American novelist and social reformer Upton Sinclair noted “It is difficult to get a man to understand something when his salary depends on his not understanding it.” Furthermore, people are bombarded with information and misinformation, pros and cons, rewards, and penalties. Decision-making is more complex than ever before. In such cases, you might require an impactful event to truly compel action.

Staging a Crisis: Daylight Robbery

Consider the compelling example shared by my friend Charles Conn, in his book The Imperfectionists: Strategic Mindsets for Uncertain Times.

The Stage: the Federal Reserve Bank in San Francisco.

The Actors ( McKinsey & Company legendary advisers) Ted Hall and Don C. Watters.

The Concern: lax security around the building — particularly a bulletproof glass door consistently left propped open.

The Challenge: could not convince the bank’s senior team of the potential risks.

The Play: they conspired with the bank’s president, John Balles, to stage a robbery.

With the senior team watching, Hall and Watters disguised themselves as delivery personnel. They bypassed the unsecured guard shack and made their way to the vault. Inside, they found bolt cutters stored for emergencies, which they used to symbolically ‘break out’ of the vault area.

The bank’s security team — who weren’t in on the demonstration — arrived with the San Francisco police department, guns drawn. Don says, “They found bank president Balles with arms crossed standing in front of his two co-conspirators, blocking the first responders’ entry to the vault, Ted guarding the three filled-to-the-brim laundry carts, and my arms reaching up to the ceiling with the bolt cutters on the elevator padlock — ready to make the cut.” Tensions quickly eased, but the point was made.

This dramatic demonstration, unknown to the security team vividly highlighted the security gaps. The immediate, tangible experience of the staged robbery led to significant security overhauls at the Federal Reserve, affecting everything from delivery protocols to access controls — changes that mere words or traditional presentations could never have achieved.

A changemaker cannot stage a robbery within their organisation, but what can they do? As the author of “Red Team”, Micah Zenko shared one of his favourite quotes from the former head of security for Dow Chemical, Dan Erwin. Erwin said, “The surest way to get the senior management invested in a senior management plan is to burn down the building across the street.” The problem is you rarely have a spare building to burn down. A notable example of how one changemaker drove change by notionally burning down the building next door comes from “The Corporate Explorer Fieldbook”, his name, Krisztian Kurtisz.

Cherrisk: Igniting Industry Transformation

Ai’s depiction of UNIQA beside Cherrisk

In 2018, UNIQA Insurance Group’s Hungarian branch, with a clientele of twenty million across Europe, launched Cherrisk, a venture that metaphorically set the neighbouring building on fire, signalling an urgent call for change not just in the insurance industry., but in UNIQA itself. Cherrisk was a departure from tradition, breaking many industry norms and redefining digital insurance service.

Cherrisk was revolutionary for being entirely digital, requiring no physical agents or customer service personnel. It offers flexible monthly subscriptions with simplified products, drastically reducing the need for administrative staff and operational costs also introduced a novel idea: allowing customers to direct a part of profits to charities and promising to settle claims within an astonishing three days by presuming customer honesty and using AI for fraud detection.

Despite UNIQA’s existing success, the leadership chose to invest in Cherrisk, a concept that defied conventional insurance practices. This bold move was driven by Krisztian Kurtisz, who identified the industry’s shift from community support to a complex, self-serving model as the enemy.

Kurtisz illustrated the required shift for UNIQA, not by writing a burning platform, but with a stark visual. He presented a traditional office building’s operational cost next to Cherrisk’s efficient model. On one side, he showed a large office building, segmented by the percentage of cost represented by the different administrative departments of the company. The other side was the cost to serve Cherrisk customers — in the first plan, just two people. This visual served as a wake-up call, emphasizing the need to embrace change or face obsolescence.

Cherrisk’s success across nine countries stands as a testament to visionary leadership and the boldness to incite change, proving that sometimes, the best way to drive action is to metaphorically “burn down the building next door”, even when you own both buildings!

Note to Reader. Framing change as a threat can be effective but it can activate organisational fight or flight responses. Fear and anxiety, anger, and stress shut down agility, innovation, adaptation, and change. A burning platform should be accompanied by a kindling future that burns brighter than the current reality. Negative urgency must be girdled by a strong vision for the future. This is a topic for a future Thursday Thought and an episode of The Innovation Show with David Rogers.

For now, I will leave you with the words of Milton Friedman…

“Only a crisis — actual or perceived — produces real change.”

The latest in our Corporate Explorer Fieldbook series thanks to Wazoku and inspired by Andrew Binns, Michael Tushman and Charles O’Reilly is on “Connected Collected Intelligence” with the founder of Wazoku, Simon Hill. Find that episode below and anywhere you get your podcasts.

https://medium.com/media/d680f29c3de0ce6105cd00a954f56ccf/href

Burning Down The Building (Platform) Next Door was originally published in The Thursday Thought on Medium, where people are continuing the conversation by highlighting and responding to this story.