Whats up and welcome to Trendy CEO! I’m Stephanie Mehta, CEO and chief content material officer of Mansueto Ventures. Every week this text explores inclusive approaches to management drawn from conversations with executives and entrepreneurs, and from the pages of Inc. and Quick Firm. In case you acquired this text from a good friend, you’ll be able to sign up to get it yourself each Monday morning.
Practically 20 years in the past, Harvard Enterprise Faculty professor Clayton Christensen printed The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, his groundbreaking work about why profitable corporations usually lose their method. However CEOs nonetheless wrestle with one of many e book’s central classes, which is that corporations must disrupt themselves.
“Firms actually know extra about disruption than they did in 1995, however I nonetheless converse and write to executives who haven’t firmly grasped the implications of the idea,” Christensen told former Harvard Enterprise Assessment editor and Inc. columnist Karen Dillon in an interview printed shortly after his dying in 2020. “The forces that mix to trigger disruption are like gravity—they’re fixed and are all the time at work inside and across the agency. It takes very expert and really astute leaders to be navigating disruption on a continuing foundation.”
New paths and challenges
Certainly, even after leaders make the troublesome resolution to shed conventional and dependable income streams to spend money on new services and products, executing such transitions can take years. Such lags can check the endurance of buyers and different stakeholders, particularly when there’s no assure that the brand new enterprise mannequin will succeed.
Simply ask Michael Weening, president and CEO of Calix, Inc., which took 13 years to rework itself from a networking gear maker right into a software program and managed companies firm for rural broadband suppliers. The corporate was based in 1999, at a time when startups and enterprises alike have been dashing into the profitable enterprise of creating gear to energy the web. (Keep in mind when Cisco Techniques was the most valuable company on the planet?)
However a decade later, enterprises began to alter the best way they have been deploying know-how, transferring to cloud-based options that started to reduce the necessity for corporations to take care of their very own computing gear. Calix leaders noticed the change coming and commenced laying the groundwork for a wholly new method in 2012—one which reimagined the corporate as a software program and cloud firm for rural broadband service suppliers. The corporate employed Weening from cloud trailblazer Salesforce in 2016 to assist with the transition.
Nevertheless, a 12 months later, the corporate’s annual loss had widened to greater than $80 million from $27 million on income of about $450 million as Calix realigned the enterprise to concentrate on investments in its software program enterprise. The market cap fell to $275 million, about two-thirds of its worth on the time of its 2010 preliminary public providing.
Staying the course
Weening credit Carl Russo, Calix’s founder and chairman, with having the endurance to climate losses. He says: “The founder was the biggest shareholder, who may in essence say to the market, ‘We’re making these large investments as a result of if we don’t do that, we’re going to show right into a low-margin commodity enterprise.’”
Along with making adjustments to Calix’s core enterprise mannequin and enterprise infrastructure, Weening and his management staff had to usher in new expertise, leading to restructuring prices for severance and termination advantages.
One other massive problem was convincing Calix’s purchasers, the agricultural broadband operators, to embrace Calix’s new providing. Fairly than promoting them gear for his or her fiber optic networks, Calix wished to supply a cloud and software program platform—with a number of totally built-in managed companies, a few of which the broadband corporations may then promote to their shoppers and enterprise prospects. For instance, Calix prospects can promote residential prospects a subscription to Bark, a social media-monitoring service for folks. “They’re nice at building; they’re nice at reliability and operating a community, however this new world of broadband is round experiences,” Weening says. “How do you train them easy methods to be gross sales and marketing- and experience-orientated?” Weening drew on his experiences main buyer success at Salesforce to develop sources and coaching to assist Calix purchasers benefit from its services and products.
New outcomes—a decade later
The transformation is beginning to repay. The corporate in 2023 made Fortune’s record of the 100 fastest-growing corporations of the 12 months primarily based on development in income, income, and inventory returns. The corporate reported decrease income and losses in 2024 however not too long ago reported first-quarter earnings that beat expectations. Calix’s market capitalization is about $2.4 billion.
Ask Weening what he thinks about disrupting Calix now, having gone by a 13-year transformation: He and the corporate say transformation is ongoing, and he says he depends on his prospects to maintain innovation on monitor. “You possibly can by no means get boastful,” he says. “You all the time must be listening. We now have 10 advisory buyer boards. And for those who’re not boastful, everybody will inform you the place you suck.”
He additionally presents a reminder of why so many corporations resist tackling the innovator’s dilemma, even once they perceive the dangers of inaction. “This,” he says, “will not be for the faint of coronary heart.”
How does your organization navigate disruption?
Has your organization confronted the innovator’s dilemma? How do you, in Christensen’s phrases, navigate disruption on a continuing foundation? Ship your tales and anecdotes to me at stephaniemehta@mansueto.com. I’d wish to share your examples in a future publication.
Learn extra: innovator’s dilemma
Why corporations fail to innovate. An excerpt from The Innovator’s Dilemma
Basecamp founder Jason Fried talks to Clayton Christensen
How Steve Jobs solved the innovator’s dilemma
