Rethinking Business as Usual

It was ironic that I would spend a little time in such a magnificent building that has withstood the test of time - and which looks as it did back in 1840 when it was first constructed - because the subject of my talk at the Breakfast of Leaders forum was “change.” Specifically, the need for all businesses to change if they are to survive.

The thrust of my talk was that the rate of change in technology poses serious threats to many established businesses, while simultaneously presenting attractive opportunities to entrepreneurs. How each handles the challenge often determines the success or failure of the enterprise. Drawing on my personal experience, I presented some guidelines for how the challenge of change can best be handled.

I’ve spent much of my career building businesses that leveraged changes in technology -- first at IRI and now at Comscore - and I consider myself something of a student of the art and science of business change. Fortunately for me, most of my experience with change has been positive. I have been the innovator and the “other guy” to the incumbent. But, this has also allowed me to see the damage that change in market conditions can do to an existing business if not handled correctly - or ignored even.

In 1982, I remember reading “In Search of Excellence: Lessons from America’s Best-Run Companies”. Written by two McKinsey consultants, Tom Peters and Robert Waterman, it is one of the top selling and most widely read business books ever, selling 3 million copies in its first four years, and reigned as the most widely held library book in the United States from 1989 to 2006. The book explores the art and science of management used by leading 1980s companies with records of long-term profitability and continuing innovation. But, what I found particularly fascinating about “In Search of Excellence” came from examining the performance in subsequent years of companies that Peters and Waterman identified as excellent in 1982. For some, it’s not a pretty picture. Digital Equipment, Atari and Wang are just three of the companies that were rated as excellent in 1982 but which subsequently (and quickly) fell on hard times.

How could this have happened? Well, in an interview in 2001, author Tom Peters provided the answer. He confessed that: “In hindsight, there were whole categories of business changes that were headed directly at us that we completely whiffed on.” Tom identified these changes to include:

• Customers have more choices. They’re interested in the newest, best, fastest, and cheapest. And there are more competitors.
• The rate of change in information technology
• The advent of globalization
• The importance of speed

I believe these factors still represent the most pressing challenges for incumbent companies and some of the most attractive ways in which entrepreneurs can successfully enter a market. Change is a constant today. And to paraphrase Will Rogers: “Even if you’re on a fast track, you’ll get run over if you just sit there.”

The challenge is how to best handle change. While I’m always wary of giving generalizable prescriptions for success (I’ve found out the hard way that the best course of action is often situation-specific), there is one rule of thumb that seems to apply well to how best to handle change: speed is of the essence. Nimble entrepreneurs who are fleet of foot can often be successful against larger, well-established competitors. In turn, to successfully defend their businesses, incumbents need to react fast to entrepreneurial threats. I can remember Howard Tullman, one of Chicago’s most successful entrepreneurs, outlining the importance of speed in change management:

• Get more done with fewer resources in less time
  Almost by definition, new entrepreneurial entrants have fewer resources than incumbents, and that often translates into more flexibility and less bureaucracy. And that, in turn, translates into speed. The challenge for a large incumbent company is often how to duplicate this behavior.
• Time lost in not making a decision can never be recovered
  Thousands of years ago, the poet Virgil said: “Tempus fugit”, meaning “irreplaceable time flees”. For the incumbent, never being able to recover lost time means the new entrant may well have had sufficient time to achieve its most critical -- and deadly – advantage: market acceptance.
• Sooner is better. Right now is best
  A sense of urgency pervades successful new market entrants, for they well understand the inherent advantages of speed.

There you have it. Sage advice from Howard Tullman on how to manage change.