Transforming Businesses into Socially Sustainable Systems

Constant Transformation Is the New Normal

In Executive coaching on November 5, 2009 at 11:19 am

This article is by Scott Anthony and was originally posted on the Harvard Business blogs. I post it here because transformation is the new normal – it’s what ExecuShift is all about. But the most pithy point of his article is a quote: “Success now requires not just doing it better, but mastering the ability to do it differently.” That’s my focus with executives – how to think differently so that you can act and execute differently.

I picked up an interesting vibe at the Magazine Publishers Association Innovation Conference the other week. For the most part, the industry has had a tough year as it grapples with recession, changing consumer behavior, and a range of disruptive technologies. Yet signs of economic recovery and a sense that the magazine industry could learn from missteps from cousins in the music and newspaper business produced an unexpected sense of optimism.

One point I made in my remarks is that the forces at work in the magazine business — increased competition, rapidly shifting technologies, and emerging disruptive business models — are the forces that are reshaping many parts of the global economy. In other words, the challenges of the magazine industry are the challenges of industry, period.

What does it take to respond to these challenges? I jotted down three thoughts on the train ride back to Boston after the conference.

1. True transformation starts with a deep understanding of the severity of the problem.
There are still some executives who are waiting for things to return to “normal.” It’s not going to happen. Constant change is the new normal. I told the audience my belief is that the era of optimization, the era of disciplined expansion is dead. Success now requires not just doing it better, but mastering the ability to do it differently.

If you don’t recognize the severity of the problem, it’s easy to fool yourself into thinking you are making progress when you really aren’t, or to convince yourself that all you have to do is wait for the economy to bounce back and your company will bounce back as well.

I wasn’t the only one promoting this message. Reed Hastings, the founder and Chairman of Netflix, described how his company began the process of shifting its business model years ago by offering streaming content in addition to delivering DVDs by mail. “We’re working toward the day when streaming is dominant,” Hastings said.

Similarly, in a fascinating presentation, David Liu from theknot.com described how his business achieved dominance in the wedding space — and is now investing to completely redefine the business from a mass-market approach to a niche approach.

2. Transformation requires being outside-in, not inside-out.
Many companies pay lip service to being customer-focused, but when the chips are down, they look around at their capabilities and try to figure out how to fit them onto the market. I heard some warning signs of this during the MPA conference; people talking about next generation technologies without talking about why a customer, advertiser, or stakeholder would have any interest whatsoever in the technology.

Transformation requires a relentless outside-in focus. That focus should first be applied to identifying opportunities for growth. Then companies need to determine which of their capabilities they can borrow to seize that opportunity, which new capabilities they need to create, and which capabilities exist on the open market to be acquired or sourced through some kind of partnership.

In an interview with Innosight last year, Jeff Bezos from Amazon summed up this point nicely:
“It is much easier for us, and I suspect for many companies, to start with your skills and work outwards. But that doesn’t allow you to do certain kinds of things,” Bezos said. “If you want to really continually revitalize the service you provide the customer you can’t stop at what are we good at. You have to ask what do our customers need and want. And no matter how hard it is, you better get good at those things.”

3. Space is the only way to avoid the “sucking sound of the core.”
Every organization has unique DNA. Companies that are seeking to intentionally mutate that DNA need to provide space for new ventures, lest the “old” DNA infect the new venture so it begins to resemble what has been done in the past rather than what is required for the future.

There is significant debate in the academic community about what “space” actually looks like. Some academics suggest the need for something like Lockheed Martin’s famed “Skunk Works,” a physically separate location with almost no ties to the parent organization. Others suggest that new growth efforts need to be “distinct but linked.”

My field experience suggests that there isn’t a one-size-fits-all answer to this question. More space gives new ventures more freedom to move in new directions, but makes it harder to port learning back to the core organization.

As I’ve written before, there’s no challenge that taxes leadership more than driving true transformation. Three pithy bullet points clearly aren’t enough to crack the transformation code. But hopefully they help transformation-oriented executives — in and out of the magazine industry — to begin to move in the right direction.

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