Ignoring External Change Risk Often Proves to be Fatal

Lack of corporate flexibility and agility in the face of change that is accelerating exponentially amounts to ‘Ignoring External Change’.

This is a shortcoming that has already led to the failure of many SMEs and leading companies; two of the latter most mentioned being Nokia and Kodak.

An organization will only become flexible and agile if its leadership;

• Embraces the need to regularly mentally step outside the corporate environment and consider how its customers could avail of the utility (value) it provides differently,
• Genuinely listens to its employees, customers and consultants, and
• Abandons the notion of ‘sacred cows’ so that no aspect of the business is exempt from change.

A fallen star

In 2013 Nokia lost its status as the industry leader having fallen in smart-phone ranking to 10, from Number One in 2011.  This led to the sale of its Devices and Services business to Microsoft in April 2014; subsequently Microsoft made 1,350 people jobless in Finland where Nokia had once been the corporate star.

In May 2013, Julian Birkinshaw (Professor of Strategic and International Management at London Business School) published an article in which he analyzed the reason why successful companies like Nokia, that are aware of the changes going on around them, own leading-edge technology and employ expert marketers, “nevertheless fail to convert awareness into action”.

Birkinshaw’s conclusion is that such companies lack “the capacity to change in a decisive and committed way.”  He continues:

“The failure of big companies to adapt to changing circumstances is one of the fundamental puzzles in the world of business.  Occasionally, a genuinely ‘disruptive’ technology, such as digital imaging, comes along and wipes out an entire industry.  But usually the sources of failure are more prosaic and avoidable — a failure to implement technologies that have already been developed, an arrogant disregard for changing customer demands, or a complacent attitude towards new competitors.”

Survival of the fittest

It is clear that the inability to flex an organisation in order to change quickly enough to catch each shift in its market, potentially threatens its survival.  The increasingly potent and very real threat posed by Ignored External Change is a risk that hovers ever present, menacing every business.

Dealing with the dangerous inertia that all too soon becomes the norm in most successful businesses requires the identification of the ‘enemies of agility’.

Birkinshaw identifies five in his article:

• Ossified management processes
• Old and narrow metrics
• A disenfranchised front line
• Lack of diversity
• Intolerance of failure

Although these enemies of agility are often identified in the aftermath of the failure of a once successful, seemingly unassailable, enterprise debilitated by its lack of ability to change, the costly lessons taught by such examples as Nokia and Kodak are widely ignored.