Five by Five / 5×5: Coasting vs. Risk-Taking

by | Friday, October 4th, 2013

Every Friday RE:INVENTION’s team reviews a recent news article or research study and provides analysis and insights from each of our cross-functional perspectives. We call this weekly blog feature, 5×5.

UP THIS WEEK: A DISCUSSION ABOUT CHANGE

All too often, admirable companies are faced with the unfortunate reality that their innovative ideas are passé relative to industry trends. The worst of these cases is when it hits them blindly; the last thing business owners want to consider when they’re ahead of their competitors is the fact that they may be unknowingly falling behind. This takes both modesty and the understanding that although they’ve performed fantastically up to this point, the threat of competition remains obstinately prevalent. In today’s marketplace, larger corporations are far less likely than their boutique or startup counterparts to admit the need for change and shift gears.

BlackBerry is the quintessential example of this phenomenon and quite possibly a foreshadowing for the future of the mobile communication industry as a whole. Once revered as the “inventor of the world’s premier smart phone”, BlackBerry has fallen far behind industry trends simply because it refused to acknowledge Apple’s ever-dominating presence in the marketplace and adjust its strategies accordingly. Knowing when to make these adjustments is one of the toughest choices a business can encounter, particularly when its current competitive advantage is well above the remainder of firms’ on the marketplace.

This Week’s Reference Articles:

• “Inside the Fall of BlackBerry“, a September 2013 The Globe and Mail article.
• “An Attempt at Failing to Innovate“, a September 2013 WIRED magazine article.

THIS WEEK’S QUESTION

Where does a company draw the line between being anchored in previously successful strategies and risking trying something new?

OUR TEAM’S RESPONSES

Joe Barrus (“The Technologist”)

The article, “Inside the fall of BlackBerry”, is an excellent case story of challenges facing companies today and how no company is too big to fail in today’s rapidly changing and increasingly competitive markets. The question asked is “Where does a company draw the line between being anchored in previously successful strategies and risking trying something new?” I think the question is a bit misleading as it implies a line must be drawn. I think the answer is that there is no line.  Companies need to find a way to do both!

The problem with BlackBerry was that they had no idea how to do both. Interestingly, they did draw from Clay Christensens’s book, The Innovator’s Dilemma, which shows at least some recognition that innovation requires different practices. But they didn’t go far enough. BlackBerry’s dilemma was that while they had built a significant trench in enterprise mobile telephony, they were mesmerized by the potential in the emerging smartphone consumer market.

In my opinion, BlackBerry should have found a way to hold on to their corporate market share as that was where they had their key differentiators. But at the same time, rather than trying to compete in the consumer space against behemoth yet agile companies like Google and Apple where, much like Microsoft, they would surely have difficulty succeeding, they should have recognized the potential threat the growing consumer smartphone market would have on their corporate market in which they were the champion. In my opinion, they should have defined a strategy that would have continued to protect their corporate market by innovating cross-platform technologies that would have enabled all smartphones to operate within corporate environments while at the same time working on transforming their keyboard-based phones into alternative smartphone options for consumers, corporate or otherwise.

If we look at the Lifecycle of Continuous Transformation, we can get a clearer view  of where they failed and how they may have had better outcomes had they adopted RE:INVENTION’s model for change.

  1. Customer Insights & Idea Management – BlackBerry failed to predict the changing market soon enough to be a leader of change. Instead they were a follower trying to play catch-up in a market where Google and Apple were the leaders! BlackBerry wasn’t innovating at all! If they were in better touch with their customers, they may have predicted the demand for smartphones earlier. But at least they should have recognized the threat that smartphones would eventually have on their corporate market. They found that business executives had little interest in the features smartphones offered for business use and used that resistance as a way to justify ignoring the voice of the consumer by thinking they “knew better” than their customers. BlackBerry could have recognized that the consumer would eventually put pressure on corporate environments to adopt smartphones as business devices since they were bringing them to work anyway because the interfaces and apps offered better mobile solutions for business applications. Technology lagged significantly in enabling these smartphones to operate securely with corporate data. BlackBerry had already developed a very good, and pretty much only, industry solution that supported their own phones. There was a significant lost opportunity to extend that technology to be the de facto enterprise software to manage BYOD devices! Had BlackBerry put in place solutions that captured and analyzed the voices of their customers, they may have been able to gain a head start on at least some of their solutions.
  2. Rapid Product Development, Market Commercialization & Culture of Change – The article highlights that BlackBerry got too big and too complex to quickly change. Their organizational structure was not optimized for agility. In addition, they “miscalculated the speed at which the consumer market changed.” This is a recurring problem for companies that don’t recognize the accelerating rate of change. Corporations must recognize that change will continue to accelerate and the windows of opportunity to capitalize on new offerings will get shorter and shorter. In the end, they failed to get to market soon enough for the areas where they did try to enter or innovate. Companies, especially larger complex companies, are going to have to face the reality that traditional command and control structures and cultures will no longer work effectively in rapidly changing markets. Had they introduced practices and technologies that supported rapid development while at the same time uniting disparate working groups through crowdsourcing and social technologies, they not only may have been able to speed up change but also could have avoided the internal dysfunction that resulted.
  3. Convergent Strategy – Ultimately BlackBerry could not agree on a sound business strategy. It turned out all their executives were wrong! A process that relied less on unsubstantiated visions of their leaders and more on analytical holistic strategy practices may have helped uncover the inadequacies inherent in each leader’s vision and instead found a way to integrate each leader’s vision in some way that they complemented each other. It may have resulted in the recognition that they could have invested in innovating and entering a new market of consumers while at the same time hedging their bets with sound investment into solidifying their hold in the corporate enterprise market and that ultimately both those strategies could converge when the BYOD forces came to bear.

It’s easy to criticize in hindsight. However, BlackBerry did exhibit classic symptoms of a company no longer fit to survive in today’s markets and rapid change. Had they adopted the practices of Continuous Transformation, they may have been able to position themselves without having to make a choice between holding on to successful strategies and risking trying something new. They could have done both!

Kirsten Osolind (“Change Catalyst”)

Crea fama y acuéstate a dormir (“create fame, go to sleep”).”
Spanish Proverb

Companies today are confronted with unprecedented change – they’re in constant flux. Technology is changing at exponential rates. Incremental adjustments are no longer sufficient; companies need to be “at the ready” to meet new customer needs, address customer complaints and questions, and adapt customer experiences. Companies can’t remain in a fixed state in a world where customers, competition, and technology advances demand flexible, agile responses. You need to adapt faster than ever these days just to keep up.

Despite dramatic industry shifts and rising competition, BlackBerry bafflingly never felt pressed to reinvent. According to industry insiders, the organization was rife with internal turf battles among executives, dysfunctional product development and sales teams, and delays in decision making. They continued to insist on full keyboards when it was becoming clear that users preferred touch screens. They failed to recognize that applications had become the the key to growth…that people were hungry for exciting new devices. They refused to acknowledge the consumerization of the mobile phone market. They couldn’t come to grips with the new realities of their industry. And all these problems in aggregate led to missed opportunities and a downward spiral.

The good news is that Blackberry is going private, not bankrupt. Although it is admittedly unlikely that they will recover in the consumer market, they may yet be able to rise like a phoenix from the ashes, especially if the company leverages their underdeveloped assets (such as the server and secure networks they provide to government and corporations).

So where does all this leave us? One simple headline: companies need to adapt. No company is too big to fail, especially if they rest on their laurels, arrogantly thinking that they are invincible.

Forrester Research’s November 2010 report, “The CMO Mandate: Adapt or Perish“, suggested that in the future, there will only be two types of companies, those that can quickly adapt and those that go out of business.

Change simply for the sake of change is an abdication of leadership.”
John Luke Jr, Chairman and CEO of MeadWestvaco

While change can be critical — it can help companies compete and prepare for what’s next — not everything needs to be “tweaked.” And the best change is both well-planned and well-timed.

Consider these questions as a litmus test before undertaking any change:

  • Is energy associated with the status quo waning?
  • Is it becoming clear that a change will soon be needed to stay competitive and relevant?
  • Have the needs of your customers changed or grown? Have you listened to them? Can you anticipate what they might want next?
  • Has the market evolved? Has your market position changed?
  • Would improvement be planned and purposeful?
  • Is your organization agile and prepared for the change and if not how will you fill in the gaps?
  • Will a change result in greater efficiency, measurable returns, increased profits, or create some other value?
  • Is this something that needs to be undertaken now and if so why?

Before you green light change, ask the right questions and address the strategies, skills, and structures that need to be aligned in order to achieve successful outcomes.

Chris Lathrop (“The Digital and Social Media Thinker”)

Leave it to sports talk radio to jump-start my contribution to this week’s 5×5. On a recent morning commute I heard this quote from Duke basketball coach Mike Krzyzewski: “Each year I coach, I try to adapt to the people I’m coaching. I’m 66 years old right now. Look, I’m coaching kids that are 18 to 22. I’m 48 years older. I can’t even imagine that. So, how do you talk to them? How do you motivate them? How do you get into their world? It takes a little bit of effort. Every once in a while I text them, I try to find out what current songs are.”

It’s undoubtedly a winning formula, as the Blue Devils are perpetually among the elite programs in NCAA basketball. They’re the Apple and/or Google if college hoops, if you will. Clearly Coach K “gets it” and knows full well that he can be knocked from that pedestal at any time if he doesn’t stay current with the times.

Michael Lazaridis, the genius behind the BlackBerry, the company’s co-founder and its former co-CEO, clearly did not “get it” during the boardroom confrontation that The Globe and Mail reports was a telling moment in the downfall of Research In Motion. In the not too distant past, Lazaridis’ device was so addictive that the term “CrackBerry” became part of the modern lexicon. Concurrently, MySpace also was the king of social media. Where are those companies now?

Eating the dust of Apple, Google, Facebook and Twitter, that’s where. In the case of the latter two, they teamed up to topple the once mighty MySpace by, among other things, not being hostile toward business (both in terms of their own advertising models and allowing companies to have a prominent presence on their networks) and offering an interface that was mobile-friendly.

But if Facebook and Twitter (the latter having just unsealed the documents of its planned initial public offering) think they’re permanently entrenched in their lofty positions, they could suffer the same fate as BlackBerry. While Google+ and Pinterest haven’t seriously challenged the big boys, who knows what’s waiting in the wings to become the next big thing? It would behoove any company to ask the same question and be prepared for the next social media phenomenon. Because one thing is fairly certain: social is here to stay from a digital marketing perspective. Ignoring it or dismissing it as a fad would be akin to resisting a touch screen in favor of an analog keyboard.

So to answer the question, there shouldn’t be a line at all. Companies should always be looking ahead to the next opportunity for success. As my colleague Jorge Barba accurately observed, it’s better to be proactive than reactive. Every time Coach K sends a text to one of his players asking which rapper he should be listening to, he agrees.

Jorge Barba (“The Culture Guy”)

It is the difference between playing to win and playing not to lose. Most innovative businesses start playing to win, but as they mature and become successful, they stop playing. I believe a healthy dose of paranoia is needed, for it is not human nature to keep “getting better” while at the same time “exploring something different”.

Here is an example of someone who did this for a long, long time…

Just recently, the ex-president of Nintendo, Hiroshi Yamauchi, passed away. Mr. Yamauchi oversaw Nintendo during its golden years, when most of what we know about them now, a gaming company, was created. Nintendo, did not start out as a gaming company. Mr. Yamauchi started with them in their pre-electronic years when they were card makers. It is incredible because he was at the helm for 53 years!

This is a classic story of company reinvention. And, it never starts with a set strategic plan, but with curiosity. This is what playing to win looks like, because there is an understanding that whatever your initial success was, will eventually reach its expiration date.

Companies that are stuck in the past have to go find the revolution before it finds them. Whether it was management, or something else, BlackBerry — for all its previous success — failed to make the right decision.

Dennis Jarvis (“The Marketeer”)

When companies successfully implement innovation strategies and are in a growth mode, a self-deceiving hubris often sets in, and with it a comfort that the growth will simply continue. So, what was once a culture defined by transformation, becomes one of inertia. The attitude of “if it ain’t broke, don’t fix it” takes over, which can be the death knell for a company. I believe in just the opposite as stated by rocker Meat Loaf, “if it ain’t broke, break it.”

Kriegel and Patler, in their book by the same name, applied this concept about changing business and it was more recently driven home by Williams in his book, Disrupt. The experience of falling prey to this challenge of not breaking something that isn’t broken was recently headlined with the fall of BlackBerry; it is not limited there. It has occurred in medical devices, retail, household products, financial services, insurance, etc.

So, how can a company implement this seemingly counter-intuitive logic of breaking a strategy that is working? Consider these approaches to building a culture of continuous innovation:

  • Create a vision for the organization that is based on the fundamental principle of pushing to the next frontier.
  • Expand the competitive frame. In what sector is the company really competing? Should it be re-cast with a broader perspective?
  • Always have a long-range strategic plan in place, a minimum of five years and longer if possible. The plan should include different growth scenarios and sensitivities around achieving the growth. The plan should challenge the assumptions, such as what happens if competitive technology interrupts the path of the company’s own technology. The plan needs to by dynamic.
  • Plan for obsolescence. Assume a life cycle for the current innovation and what new innovation will take its place.
  • Open up the R&D think tank, including potential skunk works — under a watchful and focused eye.
  • Create intrepreneurial teams, charged with transforming the existing business model.

These approaches will ensure that the company doesn’t develop innovation malaise by positioning it to “break what ain’t broken.”

THE FINAL WORD

There are plenty of examples of companies that have failed to adapt with market developments, but is it possible that a culture of too much innovation can lead to downfall as well? If a company is currently performing above industry averages, where do you think lies the tipping point at which that company needs to reconsider strategies? Let us know your thoughts in the comments below.

0 comments

Let's discuss your growth goals.
Learn more about what RE:INVENTION can do for your business.
Chicago, IL: 312.635.1350 San Diego, CA: 619.342.4411Schedule a Free Consultation