Published

29

Jul

2021

Commentary

Learning from the Next Generation

Shein is unquestionably one of the most interesting changes in fashion. This Chinese startup has exploded onto the scene, even overtaking Amazon as the top e-commerce app in monthly US ratings. The key to Shein is speed. Zara reduced the time from design to mass manufacture of clothing from many months down to two to three weeks; Shein takes that down to five to seven days. It uses real time data analysis to spot trends, quick prototyping, and a web of suppliers to achieve this feat, launching 1,000 to 6,000 new products a day. This is all backed up with fast feedback loops on customer response.

Learning from the Next Generation

Critical to this is first Shein's unconventional approach to supply chains. It pays suppliers in a timely fashion; it invests in suppliers, and appears to take responsibility for the entire supply chain. Second is its marketing strategy, which is almost entirely based upon social media, led by external influencers. Taking responsibility for the supply chain and modelling it whilst being led by external influencers are common characteristics that we have found in next generation companies. 

We have just completed our study of such companies; the report will be out soon but Figure 1 summarizes the most statistically significant changes in behaviour that we have observed.

Figure 1 – Traditional vs next generation 2021 behaviours 

Figure 1 – Traditional vs next generation 2021 behaviours

I mention Amazon because traditionally you would think that Amazon would be a fierce competitor to Shein. That is until you discover that Shein was banned in India (due to a lockdown on Chinese tech companies) but it has found its way back into the market with the assistance of Amazon. For Amazon, what matters is not competitor actions but its own guiding principles, which include an obsession with customers. If customers want Shein then Amazon will make that happen – as long as this does not conflict with its other principles. Those guiding principles are not empty words but lived by. They are also not static, as Amazon has recently added two more – “strive to be the Earth’s best employer” and “success and scale bring broad responsibility” – both of which are represented in our list of next generation behaviours, where sustainability, harvesting without depleting and a focus on the wider community are core beliefs . As Amazon expands its reach into the supply chain, there will inevitably come a conflict between responsibility and customer obsession. That is the thing about guiding principles: they are models for how to think about a space and sometimes they conflict.

The most controversial of these new emerging behaviours is leaderless leadership. It does not mean that there are no leaders, but instead the leaders are contextual, emerging as needed and not embodied in some easily identified individual described as powerful, charismatic and given the halo of a hero. This concept was explored in Brafmon and Beckstrom’s book The Starfish and the Spider in the discussion of the Apache nation’s war with the Spanish army. The Spanish failed to defeat the Apache nation over several hundred years, but they had quickly conquered the Aztecs and the Incas. The reason for that failure is that, contrary to popular Hollywood imagery, the Apache nation was a decentralized organization run on shared guiding principles (often expressed in stories or parables). It was a community, and this made it quick to adapt, gave it speed and it made it difficult to counter – a lesson that hedge funds more recently learned when they went up against Wall Street Bets.

When discussing concepts such as an organization’s leadership or its orchestration of people and things to resolve a problem, then the traditional are described using words such as role-based, slow feedback, homogenous, directed, planned, synchronized, tyranny, accidental, reactionary, centralized command, executive war room, monolithic, over-engineered, strategy, hierarchical co-ordination, powerful and charismatic leaders. The next generation are described with words such as adaptable, fast feedback, heterogenous, self-organizing, democratized, intentional, negotiated, collective intelligence, distributed cognition, cell-based, emergent, weak signals, non-hierarchical and leaderless leadership. Underpinning these changes of behaviour are communication mechanisms and this is the real influence of social media and online collaboration tools today. They are enabling us to find new structures, new ways of orchestrating and new forms of leadership whether in the financial sphere or even the manufacture of fridges.

Fridges? Well, it would be remiss not to mention Haier and its RenDanHeYi model of organizing. Haier, another Chinese company that has gone on to lead the world  (the global no.1 major appliance brand for 12 years according to Euromonitor) buying up groups like GE Appliances, Candy, Fischer & Paykel along the way.  One quote from Haier’s CEO Zhang Ruimin stands out: “With the RenDanHeYi model we truly enter the network age. But the network aspect is not even the most important. What is more important is that we no longer try to delegate to, or ‘empower’, employees. It’s now time for every employee to be his or her own boss.” As with the Apache nation, everyone is in charge when they need to be.  The communication mechanisms of the ‘network age’ make this possible today in large organizations. However, in order to function they need guiding principles – which Haier, like Amazon, has.

As for Shein, whilst it has some attributes of the next generation and certainly does a good job of promoting more sustainable credentials, it is not clear whether this is due to some guiding principles or greenwashing. It is however a company worthy of future investigation, which is ultimately the point of this post. Those next generation behaviours are emerging; we do not know what they will become but we do know they are here to stay. We can even describe them:

Next Generation

The next generation company is not seeking to return to the office but adapting to a more distributed world. This form of remote working — in many cases enforced by the isolation economy — is seen as the new norm. The company is driven by guiding principles which are stated and enforced in both recruitment and promotion. Power is distributed to where it is needed. Teams will often swarm around problems; leadership is transient in nature and leaders will arise to fit the problem. In this world, hierarchy is unimportant and few care about the top-floor office or the status symbols of power. Outcome not output matters. What motivates people are customer and societal outcomes. The projects undertaken always consider the wider community and sustainability is not a buzz word but a core belief. In support of this, a deep understanding of supply chains is considered essential, therefore these tend to be modelled as the company holds itself responsible for its entire supply chain. Ethics also matter a lot and drive external communication; they are not an add-on. Awareness of the market  is systemic (throughout the organization) and not the function of a sole leader but of everyone. To train people, the company uses scenarios and gameplay, usually online. The idea of EVE online being a training tool for management is not an alien concept. In terms of future technology, the company expects that AI will complement humans, replacing some tasks and augmenting some functions. It also considers the future of the company to be currently one of growth with positive times ahead.

What does this mean for your organization? The report discusses this in depth and includes recommendations for action.

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