Strategy & Leadership

Strategy: the art of adapting

October 20, 2016

Nowadays, entire industrial sectors are constantly changing, but nowhere near all businesses adapt accordingly. Evidently, real strategic change is easier said than done. Why is it sometimes so difficult even for the smartest decision makers to recognize, accept and set in motion the necessity for change? Research insights provide tools for strengthening adaptability.

Charles Darwin was right: ‘’It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change’’. That applies to animal species, but also to organizations in the most diverse of industries. History demonstrates that over time, plenty of branches of industry have experienced fundamental changes and that only a few businesses survive such changes.

Newcomers and businesses that adapt, know how to deal with organizations that continue to do more of the same. So for instance, today's automakers are still in a state of shock, now that Apple and Google have set their sights on autonomous cars (or more precisely: their operating system). Yet it does not hold that "the more innovation, the better". Take an example from a little longer ago: do you still remember Palm Inc.? In the 90's of the last century, that was the first company to place PDAs (personal digital assistants) on the market. Something which eluded giants such as Nokia, Microsoft and HP. However, the revolution that Palm had unleashed proved to be its demise.

The more than 2700 breweries that, according to industrial evolution researcher Glenn R. Carroll, were active in the USA in the second half of the 19th century were also unable to adapt and have disappeared. A thing worth knowing: the first brewery in what is now the USA, was established in New Amsterdam in 1633 (we will come back to that later). Since the 90's, only a handful of companies have obtained a monopoly in the international beer industry, including the USA. They understood in time that the past decades were all about scale and marketing. Whether that will remain so is of course the question: just consider the emergence of the numerous microbreweries.

Evidently a significant number of companies find it a difficult task to adapt to a changing environment. A survey by the Center for Strategy & Leadership (report: Development of Strategic Ability) among more than 180 companies shows that at least two fundamental barriers can be overcome. The first is a cognitive barrier: the strategic notions that dominate in the branch. To a significant degree, these "glasses" through which managers and entrepreneurs view strategic problems determine the opportunities they perceive and which innovations they will embrace. The tricky thing is that many of those notions may be quite entrenched. Then it is no easy matter to focus sharply on the opportunities provided by new developments and the associated business models, let alone getting people to participate in those new ideas.

Then there is also a second hurdle to be taken: the implementation barrier. Sometimes company managers are able to see the opportunities offered by new possibilities. The way in which strategy formulation is created in the organization may strongly hamper the implementation of innovation and change. In a branch of industry such as the Dutch installation sector for instance, the notion of stewardship appears to be dominant. So changes in strategy that are not in line with thinking in terms of "minding the store", long term manageability and involvement with workers have little chance of success. It is at odds with the notion of adaptive thinking in terms of exploration, revolution and shaking up the organization.

The adaptation of fundamental changes close to the organization demands the ability from managers to break through their own mental barriers. Only then can innovations be embraced and used. Research into industrial evolution shows that this is no easy task, but it is worth the effort. Otherwise there is a risk that the company will go under and disappear due to a strategic "misfit". It seems as though this has been the fate of the first, and what for decades had been a successful, brewery which was established in New Amsterdam in 1633. The British took over the Dutch settlement in 1674 and called it New York. Adapting to the British preference for ale without a head and bitter to boot would have asked too much of the cognitive and implementation skills of America's first brewer.

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