“Change” used to happen to other people. Our forbearers would be born, go to school, grow up and, upon completing their schooling, either begin work on the family farm or in the family craft shop, or get a job at or factory where they would work until they retired.
These times are past, of course. From the industrial revolution, to the information age, to the dot-com boom, “change” now happens at a rapid and unforgiving pace to all types of industries. We have entered the hockey stick of the “Toffler Curve” and the pace only accelerates (the “Toffler Curve” is named after futurist, Alvin Toffler, based on his 1970 book, Future Shock). The pace of change is not the only unique aspect of this phenomenon. Companies that were stalwarts, companies that were seen as “giants” of their sectors have fallen and ceased to exist. From Blockbuster to Borders Books and Zenith to Detroit Steel, these companies are no more.
While somewhat dated, Steve Denning of Forbes shares data in this blog post that highlights this decline. More impressively, some of these very companies were highlighted by Jim Collins as “great companies” as late as the early 2000s. Did they simply lose their way? Why was their decline so precipitous? Could it have been prevented?
If it can happen to these types of companies, what’s to prevent it from happening to you? How do you know it is not happening to you right now? How are you tracking changing customer needs in your industry? How do you know that there is not some small start-up, maybe in a garage somewhere, that is designing a product or service that will devastate your offering?
Back in the industrial and pre-industrial age, a business took years to form. Someone had to take the idea and get it funded. They then had to determine how to produce the product, including where to source raw materials and how and where to manufacture it. Then they had to determine a distribution mechanism and sales process, which in addition to the aforementioned steps, often required hiring people. Only then, at substantial financial risk, would the company know if the idea was a profitable one.
Contrast that with the marketplace today. Complicating this further is the fact that the people and products that are going to disrupt yours rarely come from your known competitors. The automobile was not brought to market by a horse buggy manufacturer. The personal computer was not brought to market by IBM or one of the BUNCH (an acronym representing the “also rans” in the computer industry at the time: Burroughs, Univac, NCR, CDC, and Honeywell). And Uber was not the product of a taxi company or rental car company. Websites like Kickstarter allow entrepreneurs to quickly vet with consumers whether their idea will be profitable. Entire companies are run from coffee shops around the world with manufacturing, distribution, sales and service all provided by independent networks of freelance individuals. Add to this new, agile-driven techniques for product development, such as those described by Eric Reis in his 2011 book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.
No wonder the large behemoths of industry struggle to complete. These newer, lighter competitors are organizationally designed to make decisions quickly, and nimbly switch focus based on changing customer needs. While these flexible organizations are responding to changing customer needs and taste, the larger, bureaucratic, “brittle” organizations haven’t even determined that a change has occurred and technological changes, such as artificial intelligence, will only exacerbate the gap between these types of organizations.
More importantly, even if you are aware of the threat, can you respond? Can your product development teams quickly take feedback from the marketplace, incorporate it into your product and then deploy it? Are your internal processes set up to encourage rapid iteration or do they stifle innovation?
Below, I offer some recommendations for addressing this situation and dealing with “change” because it’s not a matter of “if,” it’s a matter of “when.”
How to Compete Today to Achieve Business Success
Above, I established that “change” is no longer something that happens to others. It happens every day to organizations of all sizes. If you fail to adapt, your organization at best will be rendered ineffective; at worst, it will die.
If you are going to compete today and not end up like Circuit City or TWA, you need to do the following:
- Know your customers – Spend time with real customers — especially the ones that have left you. Not those proxies who buy the product or service for someone who will use it, but those who actually do. Observe them in their native environment. What are their pain points? What causes them worry or frustration? How can you improve? Ensure that this customer interaction isn’t limited to the C-Suite, but extends those who actually produce the product.
- Focus on unique opportunities for innovation based on your core value proposition – Know what your value proposition is and don’t try to be all things to all people. You would never ask for discounted Apple Computer or a filet mignon at McDonald’s; don’t confuse your customers by offering products that are both “low cost” and “technically innovative.”
- View complimentary steps in your value chain as expansion opportunities – Look to examples like Netflix or Hulu and expand either up or down your value chain. Both of these entertainment companies have expanded their offerings recently to include original programming, increasing the value of their core products.
- Follow thought leaders regardless of industry or specialty – Thinking creatively about your value chain will require innovation – taking ideas from outside of your domain and applying them to yours. Consider Cirque de Solei – there is nothing new in the concept of theater or a circus. However, put them together and you have a valuable, worldwide brand.
- Encourage adaptability and resiliency with your teams – Establish long-lasting teams that are close to the customer who rapidly iterate in an unending quest to delight their customers via continual delivery of valuable product.
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Trains thought they were in the train business; they didn’t understand they were in the mass transportation business. Newspapers thought they were in the newspaper business; they didn’t understand that were in the curated news and information business. Auto makers seem to be figuring out that they are not in the car business, but in the personal transportation business.
To be highly adaptive to change you have to have a purpose that is essentially changeless; as Simon Sinek recommends, you have to “Start with Why?” So, be true to your purpose, but, as chess players all know to do, watch the whole board. Only by being open to a shift in focus, an expansion of innovative thought and a religious-like devotion to customer value, can an organization survive in the long term.
What changed today? More importantly, what are you going to do about it?