Navigating a world of accelerating change
The world around us is often described as increasingly volatile, complex, and ambiguous. We see signs of accelerating change and exponential growth in a number of different areas, such as the increasing speed of technological development and digitalization. Some claim that we even walk faster in cities today than what we did a few decades back.
Perhaps it is not so strange that eighty percent of all companies already run some type of change projects. Not seldom several change projects are running in parallel, sometimes completely paralyzing the whole organization. Various observers also claim that eighty-five percent of all companies will have to undergo major transformation in the next five years. The problem is that seventy percent of all planned changes fail to reach their goals, and there is nothing to indicate that the future will be more gentle, quite the opposite.
The current changes affect us all and are by no means exclusive to the tech bubble of Silicon Valley, which already seems defined by exponential growth. Several academics and practitioners have already provided several different explanations as to why big and well-established companies fail to adapt to the changes around them. There are theories ranging from economic cycles, creative destruction, and disruptive innovation, to organizations becoming inflexible with age, that successful companies become the victim of their own success, but also that the destruction is brought about by poor, misdirected and irrelevant strategies combined with poorly executed implementation and change management, and strong internal resistance to change.
CHALLENGES AND OPPORTUNITIES
To me, these explanations are not only challenges, but they also offer opportunities. And that is because many of them fall back on areas which the management team itself has the power to influence.
Basically, by continuously listening to what is going on, both internally and externally. And take the time to learn to understand the new playing field that is developing, and what that may mean to the current business. Digitalization, globalization, and sustainability are all important factors. If you work to understand the new playing field fairly early on, you have time to take action proactively, long before it is too late. If you are proactive, you can even contribute to actively shaping the future of your industry.
This has however proven to be extremely difficult for most mature companies. Why is that? Perhaps because the majority of companies are so busy delivering their results here and now, that the future and the world around them remain unknown and unchartered land. Short-term targets are in focus and more prioritized than the long-term. Maybe because it is easier – and feels safer - to focus on the present (or even the past), rather than making the effort to explore what the future could bring.
THE HISTORICAL LUGGAGE OF LEGACY ORGANIZATIONS
If your business belongs to the new generation of companies, you already have a big advantage. A “young” company is generally more open, innovative, flexible, and responsive than companies of the older generation. Mature companies face different challenges than young ones – on all levels. Above all, mature "legacy" companies carry a lot of “historical luggage” as they have over time have built up complexities across processes, people and organization, and spend a lot of time and resources on continuous improvements and in protecting their profit margins rather than innovating for the future. The main challenge is that the innovation so much needed to create new business opportunities often clashes with the needs for effectiveness and efficiency in existing operations. In short, big organizations seem to become slower over time and fail to change at the same pace as the outside world. They also have great difficulty handling today’s and tomorrow’s challenges in parallel.
This historical luggage is something the new generation of companies is still happily lacking. And an aspect that offers a very strong competitive edge, even if they are often lacking in the resources, skills, and distribution channels that the mature companies have built over time. This nimbleness is a competitive advantage that lasts until the new generation of companies mature and see the new next generation of companies, business models and technologies rise up on the horizon. In a never-ending circle.
IT'S NOTHING NEW...
What’s interesting here is that this is nothing new. For example, economic history helps us see and understand that certain patterns repeat themselves over time – and that it’s not for the first time in the history of the world that there are old and new generations of companies. Or, that the new generation renders the old one irrelevant.
The first industrial revolution began during the latter half of the 18th century and was established in the 19th century, with the increasing use of the steam engine. When the second industrial revolution commenced in the last third of the 19th century, confirmed by the widespread use of electricity in the 20th century, companies of the old generation soon became irrelevant. Partly because of the introduction of new management theories for effective leadership of large, industrial organizations (Scientific management).
We are currently experiencing the third industrial revolution, initiated during the end of the 20th century and currently manifested through the many possibilities and the widespread of microelectronics. Some also believe that the fourth industrial revolution is already underway. From the creation of something new follows creative destruction of the old – of that which is no longer effective, relevant, or attractive enough to customers, consumers and investors. Almost like the natural cycle of life. We are born, grow up, mature, age, and die.
So, perhaps the big question should be whether the lifecycle of an organization is governed by fate, or if all major companies actually are able to develop the ability to disrupt, transform and renew themselves over time – on their way to the future. And on top dealing with the challenges of a VUCA world and accelerating change.
My own studies of long-lived companies show that it is possible. A clear direction, ongoing innovation and learning, and an agile and dual organization can help. More about that another time.