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5 Dire Lessons in the Importance of Creating a Culture that Embraces Change

by Clark Vitulli | Posted on June 12, 2018

5 Dire Lessons in the Importance of Creating a Culture that Embraces Change

It’s been more than a decade since business author Alan Deutschman popularized the “change or die” slogan within the business world, but the simple statement is still just as true now as it was then. Life moves at a ferocious pace, and your business can quickly fall to the wayside if it doesn’t adapt to keep up.

But you already know that. You don’t need an MBA from Harvard to see real life case studies of companies that bit the bullet because they failed to make the changes necessary to stay in the game. Once-iconic brands like Blockbuster, Toys R Us, BlackBerry, Pan Am, and Yahoo all suffered from the same costly miscue: rigid adherence to the status quo despite signals indicating the need for change.

If these five storied brands couldn’t make it without a culture of change, then you can bet your company is no different. Every organization needs to foster a culture that is open to change so it can pivot quickly and seamlessly at just the right time. This begs the question: how do you identify when it’s time to change?

Five Change Signals

No matter how strong the willingness to change may be, it does no good if a company doesn’t recognize when to adapt. Thankfully, there are always signals indicating the need for change, but a business must have eyes to see them. Sometimes a company misses these signals and doesn’t realize that something is awry until more serious signs appear like slumping sales, spiking expenses, and poor cash flow. And at that point it could be too late.

So, brands have to be vigilant and be on the lookout for five change signals: heightened competition, shifting consumer trends, technological advancements, new government regulations, and burgeoning market opportunities.

Heightened Competition

When a competitor in your space is trying to steal market share, then it is probably a sign that you need to defend your territory.

The beginning of the end for Blockbuster was when it failed to update its distribution channel to compete with newcomer Netflix’s DVD-by-mail offering.[1] Even more, Netflix’s leverage its own ability to pivot to catapult the brand past Blockbuster. When Netflix first introduced its service, it used the same fee-for-movie rental model as Blockbuster. That model didn’t pan out, so Netflix quickly changed to a subscription model that let customers rent as many movies as they wanted while only paying a monthly fee. Netflix eventually became the clear leader in the movie rental business as Blockbuster held onto its outdated model and slowly died.

Are you poised to take action when the competition heightens?

Shifting Consumer Trends

As consumers’ demographics and habits change, your business must change, too.

There was a time when Toys R Us had locations in countries all over the globe and was touted as the world’s greatest toy store. But the largest toy chain started to lose its ironclad hold on the industry during the early 2000’s when ecommerce shopping was gaining serious traction with consumers.

A botched collaboration with Amazon to sell toys online left a sour taste that kept Toys R Us from giving ecommerce another bona fide shot. Unfortunately, consumers’ preference for online shopping only grew stronger while Toys R Us continued to focus on building its empire of brick-and-mortar stores.[2] Toys R Us refused to adapt to consumers’ shifting behaviors and consequently set itself up for failure.

What changes does your business need to make to keep up with consumer trends?

Technological Advancements

Advances in technology within your industry can be a strong indicator that your company is facing a crossroads. Adopting new technologies can be intimidating for a business; the process can be time-consuming and expensive. But if the technology helps you improve your products and services, then it might be worth the cost to make the upgrade.

At one time BlackBerry controlled 50% of the global mobile phone market.[3] When touchscreen technology became the clear direction for mobile phones, BlackBerry dug its heels in and insisted physical keyboards could compete with touch. After having lost nearly all its market share in 2017, BlackBerry finally left the smartphone manufacturing business and conceded defeat.

Do you embrace new technology and view it as an opportunity to support your company?

New Government Regulations

New regulation passed on the federal, state, and even local levels can have profound impacts on your business that force you to adapt. Government regulation is a double-edged sword. On the one hand, government involvement can be beneficial to a brand. On the other hand, the government can interfere and cause serious business problems. In the case of Pan Am, government regulation played a part in both the company’s success and ultimate failure.

During its rise to fame, Pan Am built a competitive advantage around government regulations that basically gave the brand a monopoly in transpacific and transatlantic flights.[4] Pan Am couldn’t envision a deregulated industry, so it never expanded its catalog of flight routes in anticipation of potential future competition. When the Airline Deregulation Act passed in 1978, competing airlines could suddenly fly the same routes across the Pacific and Atlantic that Pan Am once had all to itself. Pan Am was caught off guard and could never recover; the damage had been done.

What laws and regulations govern your company? How would you adapt if these government policies changed?

Burgeoning Market Opportunities

Sometimes valuable new market opportunities come up that might require you to make changes to your business in order to capitalize on the circumstances.

In 1998, Yahoo had the chance to license an innovative search engine technology from developers Sergey Brin and Larry Page (who later founded Google together), but the tech company was too narrowly focused on its own projects to see the huge potential of this opportunity.[5] The problem was that Yahoo was unwilling to pull resources away from its income-generating products in favor of building upon this burgeoning search engine technology. Four years later, Yahoo realized the mistake it had made and tried to buy Google for $3 billion, but Brin and Page would accept nothing less than $5 billion. Yahoo acquired less sophisticated technologies at a cheaper price to try to piece together a search engine while still maintaining its dying core business model. Yahoo’s failure to abandon its old way of doing business and jump headfirst into the up-and-coming search engine market eventually led to the company’s current state of near-irrelevance.

Are there opportunities to tap into a new market and grow your business? Do you have the wherewithal to act on these opportunities?

Now I want to hear from you! How have you managed change in your company? Did you adapt and thrive? Or did you act too late? What nuggets of wisdom can you share to help other business leaders create a culture that embraces change?

[1] https://money.usnews.com/money/blogs/flowchart/2010/09/23/how-netflix-and-blockbuster-killed-blockbuster

[2] https://www.forbes.com/sites/forbestechcouncil/2018/05/01/how-not-to-end-up-like-toys-r-us/#777425c163de

[3] https://www.theguardian.com/technology/2013/aug/13/blackberry-how-business-went-sour

[4] http://articles.latimes.com/1991-01-09/business/fi-7339_1_united-airlines

[5] https://www.fastcompany.com/40544277/the-glory-that-was-yahoo