A Rite-Aid drug store recently moved to my town, which made me think of my fathers drugstore business of 30 years ago.
My father was a pharmacist. He owned and operated different drug stores for more than 25 years. His last store was located in a small suburban neighborhood. His customers called him Doc. They counted on him for health-related advice and counsel. He really cared about them, knew most of them by name, and provided personalized services such as home delivery and charge accounts.
Business was good until a Rite-Aid moved in just a few blocks away. While Rite-Aid did not offer the same level of service and didnt get to know their customers on a personal basis, they were less expensive.
The writing was on the wall but my father felt helpless to do anything about it. Operating a drugstore was all he knew. Much of his life savings were invested in the store. He couldnt just relocate and if he did, he would probably face the same situation.
Over the course of several years his business steadily declined and he eventually had to close his doors. He suffered the fate common to many in business both then and today. He failed to find a way to adapt to the changing realities of the marketplace.
There is only one thing for certain in the business world - things are changing and will continue to change. Examples of the many types of changes that can lead rapidly to failure for organizations include:
Technological changes - digitizing of content, businesses moving to the web, green fuels, wireless communications
Changes in the competitive landscape - outsourcing to third world countries with less expensive labor costs, low-cost super stores
Geo-political changes - changes in trade regulations, the mortgage crisis, the changing value of the dollar, international embargos, wars
Changes in customer preferences - generational differences, aging of the population
All organizations, ranging from solo practitioners and small business owners, to huge multi-national corporations, are vulnerable to these changes. For example:
Brick and mortar banks, one of the most stable institutions in our country, are now threatened by on-line banking.
Huge mature businesses such as Ford and General Motors have dramatically lost their competitiveness due to their high labor costs and inability to innovate as quickly as their overseas rivals.
The old AT&T, formerly synonymous with blue chip, rock-solid stability, was forced to close its doors and sell its name due to the changes in the telecommunications industry.
Valuable small businesses such as neighborhood drugstores and hardware stores that used to profitably stand on the Main Streets of virtually every town in America have become endangered species. Even the mainstay of our agricultural economy, the small, family-owned farm, has given way to huge farming conglomerates.
Think that rapid change can't crush your business? What would happen to your business if:
The price of gasoline doubled next week?
A college student figured out a way to conduct your business on the web?
The leading company in your industry set up shop next door to you?
The government regulations that drive your business were dramatically changed?
A cure was discovered for the ailment that you treat?
Insurers reduced their payments to your business by 50 percent?
The product you sell was discovered to cause cancer?
A competitor was able to provide essentially the same services twice as fast at half the cost?
The value of the dollar decreased by 50 percent?
These types of changes are happening every day and will continue at an increasingly faster rate. Yet organizations typically conduct business as though their business environment is stable. They do this at their own peril.
Organizations perpetuate their inflexibility in five ways:
- They make long-term
Organizations typically make long-term investments in buildings, equipment, and people that are not easily reversible. This locks them into continuing to do business in a consistent manner for a long period of time.
- They fail to
continuously sense their environment.
Adapting to change can't be a one-time event. Organizations need to evaluate changes in their external environment and the potential impact of these changes as an everyday part of how they conduct their business.
- They adopt rigid
Organizations typically develop rigid structures to help manage and control day-to-day operations and control costs. But these structures are difficult to change. Organizational charts, job titles, reporting lines, salary structures, and even job descriptions are resistant to change. They are designed to perpetuate the status quo.
- They practice
incestuous hiring practices.
Organizations typically hire specialists with extensive experience in their industry. Indeed, most good companies tend to cherry pick these veterans from their competitors. The problem is that these industry-grown professionals have a narrow perspective on the market and what's possible. Their years of experience result in tunnel vision. Who they know, what they read, how they view the world, and how they conduct business are all pre-programmed from what has worked for them in the past. But, inbreeding leads to stagnation rather than creativity and advancement.
- They are locked into
traditional leadership styles.
Traditional leaders know their business, are results-oriented, and hard-driving. They focus on incremental improvements with little attention to the changing needs of their customers or other potential changes that could impact their business. They typically lack the agility to anticipate and react to changes in the environment, to empower those in their organization to participate in making changes, or to develop a deep sense of shared purpose with their employees.
WHAT TO DO
- Constantly scan your
Bill Gates is known to lock himself up for a week each year to immerse himself in reports about other industries, trends, and other environmental events that might impact Microsoft.
But once a year is not enough. Organizations need to develop processes so that they are constantly scanning their environment. This should be conducted not just by a specific department or a few individuals, but by everyone on a rotating basis.
- Discern your core
It is important for organizations to balance change with staying true to who they are. Organizations that try to adapt to their environment by making radical changes that are inconsistent with their values and mission are doomed to fail. Just as a sailboat needs a keel to keep stable and on course when winds and tides threaten, so organizations need to understand and articulate their bedrock identity.
Defining one's core identify requires distilling the perspectives of management and employees, as well as customers and the public into a simple statement that represents the essence of the company.
- Maintain a readiness
Organizations must be poised to constantly change. Processes for sensing the environment, anticipating likely future scenarios, and matching these events with one's core identify need to be built into the fabric of the organization.
- Develop a new
The static and stable vocabulary of organizations restricts their ability to change. Organizations instead need to develop a more active vocabulary that emphasizes organizational processes and continuous evolution.
For example, instead of developing a fixed "strategy," organizations need to be constantly "strategizing." Instead of developing a staff that can serve customers well, organizations need to hire employees who are constantly evolving new approaches for providing value to their customers. Instead of developing an efficient organizational design, organizations need to focus on constantly designing and redesigning the organization to best meet current and future needs.
- Replace rigid
structures with fluid processes.
Most organizational charts are out-of-date before they are printed. Instead of adopting rigid structures, organizations should become more fluid. Instead of fixed job descriptions, assemble teams as needed to solve problems and work on projects. Change the composition of these teams as the need for ideas and resources change.
- Stay light on your
Long-term investments in buildings, equipment, and people can strangle organizations. Consider renting space and equipment and hiring employees on a temporary basis. This provides more flexibility.
- Hire differently.
Instead of hiring experienced veterans in your industry, hire people from other industries who see the world differently. Also, hire employees who have demonstrated that they are "early" rather than "late" adopters, enjoy keeping up
- Develop a more agile
Move beyond what Joiner and Josephs (2007) call "heroic leadership" to a more agile "post-heroic" leadership style. This involves inspiring rather than directing others to achieve the organization's vision, empowering rather than telling others how to achieve the goals of the organization, collaborating rather than directing, and involving rather than ordering others.
Change is here to stay. Organizations need to be like chameleons, able to change as their environment changes. Start by systematically scanning your environment for changes that may impact you, discerning the core identify of your organization, replacing rigid structures with fluid processes, and becoming a more agile leader.