Eric Beatty has an interesting post on this subject on LinkedIn, “Challenge your business model before someone else does.”
He suggests that companies examine their customer experiences and try to find “pain points” that they can solve. He cites Simple.com, Square, and Uber as start-ups that have created new business models and asks why established companies can’t do the same.
It’s a very good question.
Beatty proposes several answers, all of them good: “Is it greed? The ‘If it works don’t mess with it’ model? Internal politics? Fear of change? Management? Or are companies busy talking and are forgetting to listen?” The answer is “All of the above,” with internal relationships, “politics,” locking the existing system in place. In other words, the people who count in the company got there via the existing system. Ponder the implications of that statement.
You say, “Well, but if we could do a cold-bloodied examination of the company system, people would see the problems and fix them.” Sure, just like the French did in the run-up to 1789. Or ask yourself how GM got into the mess it’s into today.
In fact, if you even try such an exercise, you’ll only make things worse, and I think this observation was one of Boyd’s greatest contributions to competitive strategy:
You cannot determine the character or nature of a system within itself, and attempts to do so will generate confusion and disorder.
What often happens is that the organization turns inward as people focus their attention on protecting their rice bowls.
The solution, the only solution, is to open up the system. Tom Peters, for example, once suggested that everyone from the cleaning staff to the CEO and all levels in between make at least two customer visits a year. You need to evolve a culture where suggestions like this seem completely logical, even necessary. Toss it out in yours today; see what happens.
However, such a philosophy is much easier to proclaim than to implement. Suggesting that people look outside implies that what we’re doing inside isn’t so great — painful, but if you truly believe you’re the best at everything, why is the company going down the tubes? And who is going to admit that the function they run is demonstrably second rate? So you can see why the founders of the Toyota Production System cited the belief that “our present way is the best” as the strongest obstacle to change.
It’s worth pointing that while you may work towards creating an external focus, you can’t neglect what’s going on inside because that’s where your products and services are invented and produced. This means that you must, somehow, develop an organizational climate where “inside” and “outside” are not seen as antagonistic or even mutually exclusive. One way to tell that you’re on the right track is when you’re able to use expressions like, “There is no inside without an outside and no outside without an inside” with a straight face.
Chet, is it possible that once a company gets to a certain position, it automatically takes a very risk-averse mentality?
Then it refuses to consider the possibility of itself being disrupted and attempting to preempt such future competition by not wanting to cannibalize its own lucrative revenues (which are often cash cows with pretty stable and high margins)?
Is this inevitable?
Good question — I don’t know. You can think of a number of mechanisms that might cause established companies — and other organizations — to become risk adverse, including protecting cash cows, the if-it’s-not-broke-don’t-fix-it mentality, and the fact that eventually, most of the people running the system will have come up through that system.
But whether’s it’s inevitable …