It is now common cause that the world you and I live in is changing. This is more apparent in business. What it took to do business and be successful in business just a decade ago can be challenged and even outmaneuvered today.
The best response to a changing world is to think about the competitive edge a company has and seek to better it. I will argue here that the best way to do that – as scary as this may sound – is to cannibalise your competitive edge it in the creation of a newer better version.
In his latest keynote at Cambridge University, Steve Ballmer the former CEO of Microsoft, argues that most businesses are essentially one-trick ponies. Their existence is based on developing a product a customer needs, building competencies into their business model and operations that allow them to deliver that product cost effectively, and then building a revenue model to monetize the entire process. Steve argues that once this “chaotic foundation state” is successfully navigated companies get on with the business of making money. So they build the Titanic to sail.
Some more intuitive businesses may then embark on strategy-led or market-response initiatives to tweak their offering in the quest to keep it ever relevant. You see this evident in the change of direction each time a CEO departs and a new one joins or each time a company does not meets its anticipated performance levels. Its Microsoft selling slimmer discs packs rather then embracing the Internet technology as a sales and distribution mechanism. Thankfully for them, they later corrected that bad move.
Often, it not always, these responses are precipitated by a “burning platform”. A market changes. Customers pursue cost-cutting measures that threatened core business lines or profitability. Competitors introduce a newer better technology. Or worse, a new smaller competitor enters the market. Be aware that changing things because things are changing is the least inspiring form of change. It is a change effort driven by the need to remain relevant rather than the need to remain the best. The narrative is often how do we survive the change, not how to we thrive through it.
Point: to thrive during periods of change is to create the change not respond to it. Being a one-trick pony is the enemy of change. Organisations get so good at at what they are good at, they forget to ask the questions, “Is what we are good at still serving a customer need?” second, “can we make money from that?” and finally, “can we be the best at that”?
Businesses that have successfully navigated periods of extreme change have a commonality: they were not afraid to cannibalise their core.
Kodak believed that their core, the camera, would never date. It did.
Smith Corona believed that their core, the Typewriter, would never date. It did.
Bullwagon believed that their core, the ox wagon wheel, would never date. It did.
Kodak is a fascinating study. It was the first company to successful digitize the camera. However their corporate bureaucracy and dinosaur perspective of the world led them to continually pursue the strategy of analog film over digital. So Fuji and Olympus did not pioneer the technology. They perfect the process of producing it cost-effectively. They architectured the change. Why did Kodak not change when it had the heads up on the market changes and the head start on the technology? Simple. It was too afraid to cannibalise its core business.
Protecting the core of today is tantamount to murdering the sustainability and aspirations of the organisation into the future.
The lesson for those of us leading in this highly complex world is not only to be adaptive but also to be brave. If the future calls on you to cannibalise the present, do it. Or your competitors will.
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