In our previous discussion of the Stages of Industry Growth, we outlined that companies pass through predictable stages in their development: Early / Rapid Growth, Competition, and eventually reaching a point of “maturity”. This leaves them at a leadership crossroads, and the decisions made here forecast one of three future stages:
Transformative: Maintain high growth even at the expense of existing products/services
Continuous Improvement: Protect our current business and widen the gap
Survival: Competition has passed us by and now it’s about survival
Achieving each of these stages, as you can see, requires very different approaches and decisions by company leadership (often ranging from “Bold and Proactive” to “Reluctant and Reactive”).
In our experience, it is the rare company that can consciously adopt the “Bold and Proactive” Transformative approach. Apple, for example, has made that conscious decision to repeatedly transform their business, even at the expense of current successful products. Successful transformation requires companies to establish a strong foundation for dynamic innovation, built into their company culture, married with effective leadership to nurture and keep them going in the right direction – even in the face of conflicting information and slower than hoped for market results. This high risk, high reward approach has sometimes led to great success, but other times to untimely failure if the company wasn’t ready to adopt and support transformative change. For transformation to work, a leader must be confident that the company has the cultural strength and resiliency to survive the process and emerge stronger and better, just like a metal refiner knows the precious metals he exposes to the fire will be able to withstand the heat and come out more valuable than before.
Of course at the other end of the spectrum is the “Reluctant and Reactive” approach where companies slowly relinquish their market position as a result of either failing to keep pace with increasingly capable competitors or failing to react to changing market conditions. In many cases, their devolving position happens so gradually that company leadership fails to recognize what is happening – much like the proverbial frog put in a pot of water that is slowly heating to a boil. As the story goes, by the time the frog has realized what has happened it is too late to “jump” and they find themselves in Survival mode. Being in survival mode doesn’t result from a single mistake, a single disappointing product, or one bad decision. It happens because a company’s leadership missed the inflection point and failed to see the signs of decline coming on the horizon and, as a result, didn’t react until it was too late.
These are the companies that we often see in the headlines, talking about selling subsidiaries, closing stores, and/or reducing headcount. Think Starbucks in 2008 – once synonymous with market dominance, in 2008 Starbucks announced that it planned to close 600 stores and lay off 12,000 employees. As one journalist noted “My disillusionment set in about three years ago, but the company’s ballyhooed ‘Starbucks experience’ died even earlier, killed by a growing bureaucratic culture” (see “Drip by drip, Starbucks lost what made it shine”). The water temperature in the pot had been rising for years and management either didn’t, couldn’t, or wouldn’t feel it. By 2008 the pot was boiling and Starbucks was in Survival mode. Since then, Starbucks has managed to turn things around, which is an incredible achievement. Sadly, the story doesn’t always end this way.
Knowing this, if it is rare for a company to embrace the risk of Transformational decision making, and nobody wants to wait for the boiling water of survival we believe most companies are best served by anticipating, planning for, and proactively adopting an approach of Continuous Improvement. In continuous improvement, the leadership proactively recognizes the need to improve processes and products in order to regain, maintain or widen their lead over competitors – and do so “above and beyond” the normal course of business evolution. This last point is key!
Yes, every company, every department, and every employee is (or should) always be focused on continuous improvement. That’s not the point. We cannot tell you how many times we have heard “We already do that here, we are constantly innovating,” and they are right. But step back and think a moment. If every company improves and innovates, then every company remains at the same relative state of performance. If everybody is “great”, then by definition they are all average, they are all mature, and they are all facing the exact same three future paths. So the question becomes: What are you going to do above and beyond to break out of the pack?
At Brookeside, we believe there is a better way, and we will begin to address that in our next blog where we will discuss our approach to continuous improvement, what we call Efficiency Evolved, in more detail, and provide more insight as to why the middle path could be the best option for your company.