All change is not growth, as all movement is not forward.
In business as in life, we all want progress and growth to be linear. None of us want to struggle or have setbacks to achieve our goals. For every peak, there’s a valley. For every leap forward, there is a stumble backward—sometimes just an inch, and other times, what seems like miles.
During these uncertain times, never is this more relevant. What you thought 2020 was going to be for your business has quickly changed. Not only has it changed, but many are not sure even what its going to look like going forward and/or if it will still be around.
This is clearly outlined in the business life cycle. As much as we like to believe that growth is constant, the company life cycle is getting shorter and at an increasingly faster pace. The average life span of a company listed in the S&P 500 Index has decreased by more than 50 years in the last 100 years, from 67 years in the 1920’s to just 15 years today, according to Professor Richard Foster from Yale University. Professor Foster also predicted that by 2020, more than three-quarters of the S&P 500 will be companies not known to us just 3 years ago. As company life cycles become shorter and change accelerates these stages, it’s immensely more difficult to think about business planning in a linear and progressive manner.
All new businesses start with a competitive edge or niche market. The challenge is to maintain that in the face of the onslaught of ever faster innovation and change. The speed we are all experiencing in business activity also means that decision-making and reaction time must be faster.
Because of the speed of change, engaging a team, continuously learning and growing, and seeking out mentors and advisors to partner with are critical to keeping up with the change. As the saying goes, “none of us is as smart as all of us.”
So, what gets in the way of many organizations “winning” in today’s market? It’s quite simple...the fresh thinking that led to a company’s initial success is often replaced by a rigid devotion to the status quo. These can be called the 4 dynamics of failure.
Strategic Frames: Strategic frames are the mental models, the mind-sets, that shape how managers see the world. These frames provide answers to key strategic questions such as, what business are we in? how do we create value? and who are our competitors? However, while frames help managers to see, they can also blind them. By focusing managers’ attention repeatedly on certain things, frames can seduce them into believing that these are the only things that matter. In effect, frames can constrict peripheral vision, preventing people from noticing new options and opportunities. As a strategic frame grows more rigid, managers often force surprising information into the existing plan or ignore it altogether. When strategic frames grow rigid, companies, like nations, tend to keep fighting the last war.
Processes harden into routines: When a company decides to do something new, employees usually try several different ways of carrying out the activity. But once they have found a way that works particularly well, they have strong incentives to lock into the chosen process and stop searching for alternatives. Fixing on a single process frees people’s time and energy for other tasks. It leads to increased productivity, as employees gain experience performing the process. And it also provides the operational predictability necessary to coordinate the activities of a complex organization.
But just as with strategic frames, established processes often take on a life of their own. They cease to be means to an end and become ends in themselves. People follow the processes not because they’re effective or efficient but because they’re well known and comfortable. They are simply “the way things are done.” Once a process becomes a routine, it prevents employees from considering new ways of working. Alternative processes never get considered, much less tried. Active inertia sets in.
Relationships become shackles: In order to succeed, every company must build strong relationships—with employees, customers, suppliers, lenders, and investors. When conditions shift, however, companies often find that their relationships have turned into shackles, limiting their flexibility and leading them into active inertia. The need to maintain existing relationships with customers can hinder companies in developing new products or focusing on new markets.
Renewal, not Revolution: Success breeds active inertia, and active inertia breeds failure. But is failure an inevitable consequence of success? In business, at least, the answer is no. Successful companies can avoid—or at least overcome—active inertia. First, though, they have to break free from the assumption that their worst enemy is paralysis. They need to realize that action alone solves nothing. In fact, it often makes matters worse. Instead of rushing to ask, “What should we do?” managers should pause to ask, “What hinders us?” That question focuses attention on the proper things: the strategic frames, processes, relationships, and values that can subvert action by channeling it in the wrong direction.
Change is inevitable, but change itself is not progress, but no progress occurs without change.
Sull, Donald. “Why Good Companies Go Bad.” Harvard Business Review, 31 July 2014, hbr.org/1999/07/why-good-companies-go-bad.
Jayne McQuillan, CPA, MBA, is a strategic management consultant, certified exit planning advisor, and the owner of Journey Consulting, LLC, in Green Bay