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Tsunami of Change

Tsunami of Change

We, as a species, have been through many changes throughout history and for the most part, change has worked as an agent for progress. And for some reason, change seems to behave like a wave. Just like those big waves we see on Hawaiian beaches, they first build up, then hit the shore with force after which there seems to be a short period of calm and quiet until the next wave starts to build up again.

Some would argue that changes civilized societies went through have produced casualties though I'm just not sure if "casualty" is the right word for it because I think in almost all instances, the writing is on the wall but who's reading it?

I don't think I need to convince anyone that we are, yet again, going through another change, both in business and society.

Retail Sector and Amazon.com

We hear that many retailers are struggling to survive. Some shopping malls are closing and yet Amazon and some other online retailers like AliBaba and Rakuten are thriving. I've heard some people take an accusatory tone with Amazon as if the success of this one company is the reason why a lot of retailers are going out of business. I'm certain that some would be willing to blame it all on Amazon.

I don't see Amazon as the "wave" so to speak. I see it more like the surfer riding the wave. Had Amazon not come along, would there not be another successful online retailer with the vision and the ability to see opportunities along the way and take action to capitalize on them? That's same as saying, if it wasn't for Thomas Edison, we wouldn't have electricity today or if Christopher Columbus had not risked his life to discover new lands and prove that earth was not flat with monsters on its edge, the United States would not exist today. I think this limited and limiting thinking is the main reason for casualties. Unlike some, I would blame our tendency to want to stay in our comfort zones, rather than lack of resources or some other external factors.

Steve Jobs, iPod and iTunes

As they say, hindsight is 20/20. Mix the following ingredients and you get a revolution in the music industry: Steve Jobs, Apple, iPod and iTunes. There is, however, a really interesting lesson here.

There was one company uniquely positioned to revolutionize the music industry and it was not Apple. This company had all the necessary elements to start a wave of change in how people bought and enjoyed music but it did not. This company was Sony.

Here's why Sony was uniquely positioned to start the wave: through its Sony Electronics division, the company had the expertise to build the necessary devices to bring music to millions. As a matter of fact, this is exactly what Sony had done in the late 70s with the Walkman. What's more important is that without the "music" one could not revolutionize the music industry and through its Sony Music and Entertainment division, the company had contracts with the most popular musicians and the legal rights to distribute and sell their music. Arguably, no other company had these two critical components which gave Sony an incredible advantage over anyone else.

So, why did Sony miss this opportunity? Here’s my argument: there was a trend in business in the 80s and 90s to create “profit centers” in companies. This is exactly what Sony had done by creating these mostly autonomous divisions that worked for their own individual success. Both Sony Electronics and Sony Music and Entertainment had their own CEOs and management teams that focused on maximizing their own profits. This is where Steve Jobs did something extraordinary for its time. He argued that there was one Apple and all its internal divisions should work together for its success.

Interestingly, in an interview, Steve Jobs indicated that the most difficult thing he dealt with was not creating the iPod or iTunes but convincing record label executives that it was time for a change!

Where is the Kodak Moment?

When it came to photographic film, there was one company that came to everyone's mind: Eastman Kodak. So much so that it inspired Paul Simon to write “Kodachrome”, a song which climbed to #2 in American Billboard Hot 100. Kodak absolutely dominated the photo film industry globally. However, once the digital photography revolution started, Kodak started to struggle and in 2012 filed for Chapter 11, bankruptcy protection.

All the while, one of Kodak’s main competitors, Fujifilm not only survived the wave of change but continued its growth and produced highly successful digital cameras then onto other successful digital imaging products.

This may be an over-simplification but I would argue that while Kodak primarily saw itself as a maker of photographic films, Fujifilm recognized it was in “imaging” business. According to the Wikipedia article, Fujifilm started developing a transition strategy for their business as early as the 80s which shows their insight as well as their vision. Producing photographic film mainly required chemical engineers while producing digital imaging products primarily required a completely different discipline and set of skills i.e. electronics and software engineers.

Get Lighter, Faster and Agile

So, how does a company take action in dealing with change? I think one of the first places to start is in the operations of a business. I think this is important because coming up with the right strategy for the next phase may take time to get it right so it’s important to move in the direction of getting lighter, faster and more agile in preparation for the transition.

Though, these are very generic ideas, I think they can be used as a framework for transforming a business:

  1. Better Insights: Any business collects data on a daily basis e.g. customer data, sales data, etc. Most of the data collected are used for basic daily business operations. I think it’s very important to collect as much data as possible so that deeper and more meaningful insights can be produced.

    Typically speaking, most companies are not equipped to do this. They may not have the necessary technology requirements to handle more data to produce better insights. For example, a lot of companies still buy and operate their own servers and run -- many a times at least one or two generation old -- databases. This takes me to the second point:

  2. Move to the Cloud: I’ll make a very ambitious statement here. Your corporate network should start to look like your home network. A device or two that connects your office to the Internet and that’s it!

    Establish your infrastructure in the cloud and get out of the business of buying and managing hardware. With the unlimited resources cloud providers will offer you, your business does not have to worry about things like lack of storage, necessary computing power or not having the latest and greatest software.

  3. Task Force Approach: Most CEOs seem to feel this pain: they have a few projects of their own that they feel will help them shape the company's future but the internal team is too busy with running daily operations to get to these important projects. Interestingly, this situation creates frustration for both business leaders and internal employees who feel their CEO's lack the understanding of their daily pressures.

    I think the right approach here is what I call the task force approach where businesses hire qualified consultants to handle those projects. In particular, I’m talking about the first two points above: moving to the cloud and getting better insights. These types of projects are usually handled better by outside consultant who come in with a singular purpose and a well defined scope.

Ultimately, business leaders really have no choice. If they want their companies to stay in business, not just to survive but to thrive, they will have to accept change and take a lighter, faster and more agile approach.