Several top executives, professors and researchers have struggled for answers on how to keep up being successful, when several traditional companies, very well managed, with ace CEO´s and top executives team, plenty of resources, technology advanced, enjoying the best scientists, patents, performing very much profitable, market share leaders, captivating great customers, considered innovators, and much more qualities are failing. It has been more and more common to see big firms that used to have strong capabilities and competitive advantages guided by the right strategies, to lose the battle to small, brand new, resources struggling start-ups.
It is difficult to understand the reasons why these high mortality rates happen, because we managers have been doing our jobs as we were supposed to be doing. We have been following Porter and Kotler teachings, we have been hiring the most famous consulting companies, we were analyzing the barriers to entry, the threats, listening to our customers, investing in the most promising projects, understanding our markets, hiring the best people, innovating in products and services, placing the customers first, partnering with suppliers, and so much more. And yet, comes a time when we are taken out of the Dow Jones Index!
What could be happening in the world that makes state of the art success companies like Blockbuster, Polaroid, Toys R Us, Borders, Compaq, GE, Woolworth, Kresge, and many others that enjoyed high market share, strong sales and huge profits to fail?
Please, let’s not fall into temptation and start blaming the business world, competitors, new entrants, technology advances, markets, countries, the VUCA world, and others excuses, because even with all that and much more there are companies being successful with good growth and profitability rates. There should be something else that the successful companies are doing that others, not so successful, are not.
Also, let´s not blame the transformation of the business world. Transformation is not new. Markets, business, technology, competitors, products and services, supply and demand, customers and others, have been changing since they were created. The pace of change or transformation is much more rapid now, but there are companies that are doing very well with this new change rhythm.
If you are counting on transforming your company because of a recent change, I am sorry to say, but it is too late. Your competitors or new entrants have already been transformed and you are already left behind. The need to learn what will change in the future and then, before the change happens, transform your company has never been so urgent.
Strategists must learn to “SEE” what is happening from a new perspective, that is, a different way to see the world that is not only focused on what is happening in your immediate surroundings, that is, in your “surrounding environment”. The business world is made of several surrounding environments and we are used to focus only on the ones that we participate in, the ones that we are part of. I consider the surrounding environment the context within a company where it acquires or produces raw materials, labor, money, technologies, equipment’s and others; then it transforms, and supplies value added solutions and products to markets and consumers. All the stakeholders or players, that is, a company’s suppliers, buyers, markets, competitors, governments, partners, financial analysts, stockholders are also part of the surrounding environment in which a company operates. Also, the business models, business metrics, desired profitability, capabilities, economies, and strategies that a company has or interacts with, are part of its surrounding environment.
The new perspective is to see and learn that there are several of these micro, surrounding environments that co-exist, all at the same time. Their existence is not new, but we as executives, marketers, strategists have learnt to analyze, monitor and make decisions based on our company´s surrounding environments. We have learned to develop a strategy based on what is happening in our markets, our customers, our competitors, and so on. We focus on the strengths and weaknesses, threats and opportunities of our surrounding environment. Unless we change the way that we SEE things and start to see that the business world is much larger than our micro, surrounding environment, we will continue to be surprised that things have changed and that we have been left behind.
We must have a higher-level view of what happens in our world, not only in our environment, and we need to understand that these micro, surrounding environments interact between themselves and sometimes, one environment gets so competitive that it dominates the environment that we have been so successful for so long. Those are the moments that we say that things have changed and that we need to transform ourselves, but at this point we have lost the first move advantage and other companies, much more adapted for this other, new to us environment start to capture our customers, suppliers, and so on.
We need to have insights on what is really happening in the whole forest, the broader business environments and not only in our own group. This is a new way of thinking that enlights how to continue to keep being successful. We also must understand that the way we do things is based on premises, culture, and metrics of our own micro surrounding environment. For example, the way we allocate resources, usually for the most promising profitable and growth projects (who does not do this?), is good and works for competing in our micro world, but not in other environments in which small markets, lower profitability, lower costs and simpler technology is attractive. We are used to getting motivated for positive and continuous share prices growth, which is accomplished by perceived sales and profit growth that in turn makes us ignore small projects, small customers and small markets. The catch is that some of these small, unattractive, unprofitable, unknown markets and customers may be the next Netflix, Uber, Amazon, Microsoft, that have been growing, sharpening their models and capabilities in another surrounding environment and then, enter in our own domain with most adequate costs structures, product features, prices, supply chain and partners than us.
It is important to understand that a company’s core competencies are more than its capabilities but are mainly processes and values. We can acquire top executives, great managers and scientists, technology, market share and others, but values and processes are much more difficult and much more time consuming to incorporate in our companies. The new entrants in our domain have been cultivating processes and values that are not valuable in our surrounding environment, but that are very well adapted to their environments that one day will overcome ours. They are just below our noses, just around the corner, but we do not see them, and therefore we are not aware of this threat.
Muito boa a discussão!
Estevão, Interesting perspective, a spin on marketing myopia concept. The challenge is to keep our minds young as we get old, as we have so much old stuff that we resist to throw away!
Great thought! Very interesting the concept of surrounding environment!