As a business advisor, I have long been surprised by the large number of industry stalwarts, including Blockbuster, Kodak, and General Motors, that have been dealt major setbacks, or even total failure, by upstart young companies, with a fraction of the resources or industry experience. The stalwarts should be making the big leaps to be competitive, rather than the other way around.
In fact, almost 90 percent of the Fortune 500 firms that existed in 1955 are gone. Conventional wisdom is that mature companies are their own worst enemies, too blinded by their success to see the world changing around them, and too focused on repeatability to see the need for innovation and leapfrog advances in technology.
Based on my experience as an executive in a couple of large companies, including IBM and First Data, I second the principles for keeping up with competition and change outlined in a new book, “Leap: How to Thrive in a World Where Everything Can Be Copied,” by Howard Yu. He speaks from years of experience as director of an advanced management program for global executives.
Let me paraphrase a few key points that he and I both agree are critical:
Understand your firm’s foundational knowledge and trajectory. Many large companies, and even startups, often forget their core competencies and direction in an effort to grow their business and customer base faster. The results in a dilution of their focus, doing many things poorly, and losing sight of key markets and key competitors.
For example, Kodak invested billions of dollars into technology for mobile phones and other digital devices, but didn’t recognize the impact of digital cameras on their core film business. The result was that they reacted too late to recover, and were overrun by competitors as the market and technology rapidly changed.
Acquire and cultivate new knowledge disciplines. Competitive advantage depends most critically on the assimilation of new knowledge and the timely creation of new markets and new businesses. The role of managerial choices cannot be overstated here. True leaders have to be willing to take calculated risks, rather than taking safe positions.
Procter & Gamble, for instance, has maintained its leading position in household consumer goods by leaping toward new knowledge disciplines, versus merely refining existing products. They made big bets on IVORY soap earlier when they predicted candle revenues falling, and push the limits today with environmentally sustainable products.
Leverage seismic shifts in the market or economy. Although important variances exist between industries, certain seismic shifts to the global economy will be felt by everyone regardless of who you are and where you live. Today it is the inexorable rise of intelligent machines, the emergence of ubiquitous connectivity, and digital convenience.
Every potential winner must leverage these seismic shifts around them and leap accordingly. Whether you are a technology creator, traditional manufacturer, startup entrepreneur, or nonprofit organization, you must identify those forces that matter the most in the coming decades and reconfigure your competencies ahead of competitors.
Experiment to gain evidence about unknown unknowns. Bold decisions always look good – until they are proved wrong. To make evidence-based decisions, leaders must carry out frequent experimentation to arrive at conclusions with the required level of accuracy. The biggest risk in large corporations is often political infighting and inaction.
Starting with top executives, dive deep into execution. Awareness is not the same as commitment, so insights alone never suffice. Thinking doesn’t equate to doing. Committed executives at the very top must be ready to intervene to implement a new directive. Only they can remove the organizational hurdles that may stand in the way.
Deep dives are different from micromanagement, because they rely on knowledge power rather than position power. Elon Musk’s deep dive into Tesla has been based on his knowledge and conviction that electric and driverless car technology is here now, rather than any market research from third parties.
Even with these principles, outperforming competition is difficult, and doing it consistently over decades as your leadership changes is nearly impossible. It certainly can’t be done unless you start today. Your customers, your local community, and your stakeholders all are depending on you and count on you to maintain momentum and success. Are you ready to take the leap?
*** First published on Inc.com on 07/06/2018 ***