Why Change Matters

As I’ve spoken to owners of companies that are sorting out what they need to do to grow, I’m continually surprised by the unwillingness to change in order to move the business up another step. Some organizations believe they can grow without change. This is not possible.

It’s a fallacy that anyone can build a business and expect it to remain the same for twenty years or more without any interruption, other than steady growth. I often see old companies that still have a minimum of process automation at any level, and while profitable, they are often bleeding cash and don’t even know it. For them change looks too complicated. Wait until they try bankruptcy.

In 1999, Tower Records was grossing over a billion dollars. By 2005 they were bankrupt. The last Tower Records in the US closed its doors in 2006. In 1999, nobody saw it coming.

The first thing I assess in any company is their willingness to change and grow. I explain to the employees that from the moment I’m involved, that change will need to be a part of their daily comfort zone and if they don’t want change, chances are, they are going to eventually become obsolete and that will lead to involuntary and often unwelcome change and that will be worse.

Few companies survive for long without change and a company’s adaptation to this transformation is critical think of change like exercising any other muscle; if you don’t atrophy sets in. This usually shows up in business as some form of complacency and eventually competition takes over.

Tower is a perfect example. They were poised to control streaming. Yet in addition to MP3, of all things, a device company named Apple, came out of nowhere with iTunes. Amazon did their share of damage too. A completely new music distribution model took over. Keep in mind that Tower had all the record label relationships necessary to remain king.

In my post about CES, one of the big conclusions I make is that the speed in which technology is moving is now faster than most people and companies can adapt. This is a big deal. While many companies are looking for ways to catch up by fostering more innovation within their own organizations, many are doing absolutely nothing and are quickly falling behind.

I was once an avid speed skater and we’d regularly skate a marathon distance as a group twice a week to measure our training progress. If you fell behind the group, and were no longer able to draft with the group, you then consumed more energy without your drafting partners and you continued to fall even further behind. The amount of energy to catch up and surpass the lead group was often impossible to muster unless they tired and you had the energy reserves to pass them. Once you dropped off, you usually finished minutes behind the pack while exerting more energy than the group. If they were at all in shape to sustain their momentum, you were ultimately toast. Business is no different.

Often companies have no idea competition is catching up and passing until it’s too late. Every company seems to assume they are the smart ones and their competitors are all dumb. I see this mindset in every company, where they hate the competition and think they are smarter. It’s the wrong assumption to make every time. This is why so many smart companies recognize the importance of time.

Here is a very important point, in startups, according to Mattermark and others, what was once a series A round is now an angel round.[1] This means that new competition is coming and it will be cutting-edge. It’s coming so there is no denying it.

There is an outstand book, Big Bang Disruption by Larry Downes and Paul Nunes that talks about all the product categories that either shrank considerably or completely disappeared, sometimes in a matter of weeks, months or even days. They list products, such as books, magazine, maps, watches, travel games, dictation recorders, alarm clocks, day times, Walkman, etc., all shrank considerably or disappeared altogether, and this is at the consumer level. Think of all the suppliers who saw their customers disappear overnight, yet so many of these companies never thought it would happen to them, nor were they nimble enough to change on time. They were falling behind in the marathon and didn’t know it.

I’ve written before about management ignoring trends, but there are also cases where change suddenly happens without any warning. The impact of the iPad is just one example. The list of entire categories that disappeared is extensive and all you have to do is walk the isles of CES and see how much has gone away and how entirely new concepts have emerged that we didn’t even consider just ten years ago. This is why constant change matters so much. Change has to occur both internally and externally. Think of it as rapid evolution.

I really dislike bumper-sticker-management-terms such as “change agent” however everyone has to think about evolving their role into not just greater efficiency, but also how to adapt and try new ideas. Change shouldn’t require an “agent,” it should be a part of the culture. Change simply for the sake of change isn’t helpful either, however there has to be a pragmatic consideration of new ideas and the organization willing to evaluate new methods and concepts from a pure pragmatic prospective and adopt these changes with enthusiasm. Yes, change is often very uncomfortable, but it’s what makes everything better.

Here is another example, think of all the challenging times in your life and how they led to you taking action resulting in a better outcome for you! Now imagine if that change is a part of your business culture. Think of how fast you’d move.

After looking at dozens of companies over the years, the one impression that sticks in my head over and over is that so many companies didn’t change soon enough and I’ve already covered the topic of failed leadership who missed obvious signs of business disruption right under their noses.

Resistance to change is more commonplace in smaller communities where the risk of losing one’s job has catastrophic consequences. Some believe that change ultimately leads to reduced workforce and I believe just the opposite, I think it’s the catalyst for growth. I’ll use car manufacturing as an example.

Change in the auto industry has brought us things like, power windows, air conditioning, GPS, electric seats, heated seats, satellite radio, power locks, backup cameras and sensors, in some of the cheapest models. Why? Because as they came up with ways to build cheaper cars, they didn’t just stick with what was preexisting. Instead, they added these features to their cars to make them a better value. All of those parts have to be manufactured, and engineered somewhere.

A great company doesn’t reduce their workforce at every turn in automation but instead finds ways to leverage those displaced employees into new roles to capture more business. As a CEO, the objective isn’t the elimination of jobs but rather the leverage of the workforce into more business. This often means a continual investment in retraining valuable employees and leveraging that talent into new opportunities.

A product I recently owned for three years, that should last much longer than the three years, failed due to very bad design through the use of cheap materials. Yet the replacement was identical to the old product without fixing the original problem. This is another case where something is deemed good enough. I could almost predict how this company runs and, after a little digging, sure enough, it’s an old founder who believes that once a product is created, they don’t need further innovation. He couldn’t be more wrong and they have lots of stagnant products still in production and the company doesn’t grow. I will take my business elsewhere, and so will others and they will go out of business.

The biggest single advantage a smaller company has over a large company, is the ability to move quickly. The decision process in large organizations can sometimes take an eternity when in a small organization, there is far less process and the ability to quickly adapt to changing markets. While big companies may have more muscle, a little company can give it a heck of a run, as long as remains nimble and can quickly adapt to customer needs. This is why so many small companies end up several steps ahead of large organizations. My advice to large companies is to figure out how to become nimble.

Part of the way in which I persuade people to participate in change internally is that I keep telling the employees that if things go in a direction that’s less appealing for their career, it’s not the end of the world, because it’s likely temporary as the organization continues to evolve and we will always work to find the right role for people. Why wouldn’t we? Ask any founder of a company and they will all share stories about roles they had to undertake that they didn’t love as their business grew, yet at the appropriate time, the right people were moved into those roles they loved. When I share this concept with employees that the roles will continue to evolve, I meant it.

There is another outstanding book titled “The Alliance” by Reid Hoffman that suggests tours of duty for employees. The book talks about getting employees to think in terms of short term projects to achieve objectives important to the company. It’s also a fun way to work.

Change should not be something companies fear, but something they embrace and practice. Failing to recognize its importance will eventually lead to stagnation and eventually failure.

I grew up in a small town that had a riverfront of industry and as a kid, I’d watch one industry after another fail because they didn’t change. I’d ride my bike out to see one factory after another get torn down and turned into a parking lot. There are entire towns all around the US that are wiped out because they didn’t see change coming. It seems to happen a lot in small towns that are somehow insulated by the speed of competition, then suddenly they are gone.

Growth and change can be incredibly invigorating, much like exercising and getting in shape. It can turn a boring day into something interesting and exciting for all employees. It doesn’t have to be something that induces chaos. It can be refreshing and a lot of fun at the same time.  Yes, sometimes it can be hard to sell to employees, but that should be a huge warning sign that the culture is drifting in the wrong direction.

It was one of the key elements to every turnaround I’ve ever done. I try and identify the sandbaggers and either get them to join the fun our I get them out of the organization. The success of the turnaround depends on it. I never like to fire people. It sucks on both sides, but often it’s what’s necessary if people are unwilling to grow.

This was a tough article to write because it’s become somewhat of a taboo subject. Boards often freak out about the idea of a new CEO stepping in and shaking things up. Yet, in my experience, obsolescence is the real reason to freak out, not change.

Sports Authority just announced they are closing all stores.  I guess they weren't the authority after all.

[1] https://mattermark.com/everything-awesome-everything-awful-2/?utm_campaign=Editorial&utm_content=Mattermark%20Daily&utm_source=email&utm_campaign=Mattermark+Daily&utm_source=hs_email&utm_medium=email&utm_content=28371531&_hsenc=p2ANqtz-98ESDrGzyY-HDHsgrwbkcuCl8L5BuR8P4Irgi4wLyywoMuwUqMtM87UXbjqw1IanBV70Zv5zsAn31fg8W9TT6Kxy73pA&_hsmi=28371531