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Friday, April 18, 2014

8 Characteristics That Distinguish Companies Who Thrive on Change 04-19

8 Characteristics That Distinguish Companies Who Thrive on Change

Change is opportunity to more people than it threatens. Yet, for many companies, change is akin to falling off a cliff.
Change can come in many forms. Sony failed to adapt the Walkman to new technology until the iPod dominated the market for MP3 players. For Fidelity, it was financial deregulation that spurred change. For Dell, it was changing distribution channels, though the company has been slow to move with the next phase of change as, with the shift from desk-tops to lap-tops, consumers want to buy computers from retail stores once more. In the face of technological change Microsoft used Internet Explorer to leapfrog its competitors. So, while for a few companies, change and is an enormous opportunity, for others, it spells out potential doom.
Are there differences in how the companies behave which lead to these results? The answer is very much “yes.”
Some of the key characteristics which distinguish companies which thrive from change are:
1. They seek to not only embrace and welcome change, but drive it. The principle is that the more the rules (regulations, technology, or market situations) change, the more the most adaptable companies will change to be successful.
2. They never reject an idea, however dumb it seems, without investigating and working to make it better. Few ideas are good when first initiated; many can be improved and made strong.
3. They have a strong customer/consumer focus, not only as a reaction to change, but in “getting ahead” of changes. They do this by understanding their customers’ needs at a deep level so that the company can meet them before the customers consciously acknowledge having them. While most companies carry out market research, it frequently does not meet the needs of discontinuity planning.
4. They boast an internal culture and capability to take advantage of change, whether it is through technology, regulatory or channels of distributions.
5. There’s a real understanding of the existing business model. In most companies much is assumed, and an external perspective from someone who is not afraid to ask the “dumb questions,” can strongly benefit even those within the company who challenge the existing order.
6. They encourage people to “stray from their own lanes.” While uncomfortable for many, companies where roles are indistinct tend to be more adaptable, even if they are sometimes less efficient.
7. They encourage and reward curiosity. The desire to understand and to explore new ways to do things is essential if a company is to profit from change.
8. There is an assumption that everything a company does can be changed, and much of it should be. “Received wisdom” is dangerous. Doing anything because “that’s the way we have always done it,” or even, “we developed the perfect process a couple of years ago,” is an enormous barrier to improvement.
Online Social networking is a great example of how change has been both positive and negative. Along the path to Facebook, Twitter and Foursquare many networks have died or almost so, from Friendster to Tribe, Ryze to eCademy. Technology alone is not enough to survive, as Twine/Evri has found. Yet, niche sites continue to prosper alongside the mass ones and in the future, we will probably give up more and more privacy to be better connected.
Few companies have managed to maintain leadership positions for longer than five years or so. Continuous re-invention is even hard to do consistently. Many of the companies which are held up as shining examples of managing through discontinuity have done it once, but fail to do it a second time.
While Microsoft adapted rapidly to the growth of the Internet with the introduction of Internet Explorer, which met and beat back the threat from Netscape, it has been slow to meet more recent challenges, from search engines to smart phones.
Dell created a system to keep down costs and provide a more up to date system by requiring all customers to custom order, but as laptops have gained share from desktop systems, consumers are more likely to buy from a retailer where they can see and try out the machines.
Enron was a master at dealing with the discontinuity of energy deregulation, but lost sight of core values and went much too far in trying to manipulate change.
Apple, which contributed to the creation of the future in 1984, lost its way, but found it again, and for the past twelve years has continued to innovate and create discontinuity to its own advantage. As Alan Kay said, “the best way to predict the future is to create it.”
While corporate culture is critical, and very hard to change, understanding the consumer/ customer is as hard. Most companies carry out traditional market research, which tends to reinforce existing business models, even as it fine-tunes them because the questions asked are in context. Even most qualitative research makes assumptions going in.
The key is to carry out exploration of consumer and customer attitudes, which is completely independent of framework. A major client in the health industry recently carried out such work, and discovered that it was operating under mistaken assumptions for reform. It had previously identified 7 key issues in reform. It discovered that in total, those 7 issues represented only 20% of the issues in the marketplace, and only 5 of them were in the top 20! So, it had been developing plans that were based on false assumptions. This was largely because the executives were using “received wisdom,” where they had so much experience in the industry that they relied on the stuff which “everybody knows.” It is critical to question all assumptions, yet few do.
Dee Hock, the original force behind Visa, believes that our knowledge may be a hindrance as much as a help. “Every mind is a room packed with archaic furniture.”
One of the simplest ways to find new processes and products is to look outside the industry or country. The “transfer of success” is a technique which has often, though not always, been very successful.
When the energy industry was deregulated in the late 1990s, US energy companies spent a lot of time looking at how other countries dealt with deregulation. While the processes were often different, that look resulted in some very successful new business models. In financial services, the ATM was first adopted by Barclay’s bank in the UK, but adopted soon after by US banks. In healthcare, there are companies which make money in each country, but they may have to adopt a very different business model in countries where the system is different. How can an insurance company make money in a system where it has to provide basic health insurance on a non-profit basis? Well, in a regulated US industry, where profits are regulated, how can they grow profits while revenues remain steady? They certainly do – by understanding how to adapt to the system.
A very few people can look at the world they live in with eyes that see clearly how it can be changed and improved. This is the opposite of pessimism, but a sort of active optimism, wherein they know that for good things to happen they have to make the changes. So, a Steve Jobs, or a Dee Hock can make changes which build businesses.
My experience with change dates back to extending Mars’ candy brand names to ice-cream, and includes among many others, putting the “Perdue” name on added value products, introducing the first consumer high-speed data service (for which I first used the descriptor “broadband’), the first IP telephony, and digital video. I took Reliant energy, already a large company, to a market leading position when energy deregulation occurred. The lesson being that it is possible to consistently take advantage of change to a business’ benefit. It is not simply a matter of being lucky. Those who consistently do this shape the world to suit their own needs.