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Saturday, July 12, 2014

Your Business Doesn’t Always Need to Change 07-13

Your Business Doesn’t Always Need to Change

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Image credit : Shyam's Imagination Library
Evolve or die. If it ain’t broke, break it. If you don’t like change, you are going to like obsolescence even less.
By now, the idea that organizations must adapt in order to maintain both relevance and market share in a rapidly changing world is so ingrained that it’s been reduced to pithy sayings. And there are many organizations — from Blockbuster to Kodak, print-only newspapers to pay-phone makers — that no doubt wish they’d followed the advice.
But is constant adaptation always the best policy? Our research indicates it isn’t. Indeed, any company considering an adaptation initiative should first ask itself five questions:
  1. Do your customers really want you to change? The offerings from privately-held Berger Cookies in Baltimore have been the same for 179 years. The company’s continued success shows that people crave consistency. When you taste your favorite cookie, you don’t want to suddenly discover that the recipe has changed.
  2. Will change alienate your base? Earlier this year, executives at Sirius Satellite Radio decided to capitalize on the renewed interest in singer-songwriter Billy Joel by creating a temporary channel dedicated to him and his music. But it replaced one that had played music of the 1930s and ‘40s, prompting those customers who enjoyed classics from the likes of Irving Berlin, Cole Porter and the Gershwins to cancel their subscriptions.
  3. Will you confuse people? If you bounce from one strategy (say, low prices) to another (full service) and back again, people won’t know what you stand for. The recent failures of mass market retailers Sears and J.C. Penney are clear examples of the problem with inconsistency.
  4. What is the cost? When remaking or radically changing your offerings, you must always weigh the risks against the rewards. This is a lesson Starbucks learned the hard way in the late 1990s. To expedite its expansion, the company made several tweaks: For example, it started shipping its coffee in flavor-locked packaging, which was more efficient but also eliminated most of the aroma; it also streamlined store design to gain economies of scale. But the result was “the watering down” and “commoditization” of the Starbucks experience, founder Howard Schultz later reflected. The company struggled, and its stock price fell, until Schultz came back and reversed those decisions.
  5. Will the change make you vulnerable? When you add to, or alter, your offerings, you can open the door to competitors. For example, Cadillac decided to offer a smaller car, the Cimarron, in the early 1980s. The diluted management focus, coupled with the car’s poor sales, hurt the brand and allowed competitors — especially luxury imports — to gain market share.
It’s important to remember that some companies manage to have it both ways – adapting on the periphery to capture new opportunities while also maintaining their existing businesses. Brooks Brothers serves as a case in point. Instead of simply sticking to selling classic clothing, and waiting for outside catalysts (such as the popularity of the fashion in the television show Mad Men) to increase its popularity, the chain innovated around the edges by offering more fashionable accessories — shoes, belts, bags and the like — while leaving its core basically unchanged.
We like this model of adaptation because you haven’t lost much money, time, or management effort if the changes don’t move the sales and earnings needle. Even more important, they will not have damaged how your base sees you. If the changes are well received, you can expand and integrate them, and/or spin them out into a separate store, division or product line.
The point here is simple: Your customers will dictate when and how much to change. Keep asking them what they want (we recommend a formal or informal audit every six months) and keep watching their behavior, since they aren’t always able to articulate their desires. Then change as they do, or just a little bit faster.

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