Recently we were joining a discussion about investing in a new technology which would have disrupted the way the company was running internal processes. It was a lively discussion, one could feel the passion for change, not dominated by the technology alone but the potential to address many current and future challenges.
As the discussion progressed, we observed the leader and we couldn’t shake off the impression that he was starting to feel increasingly uncomfortable. The passionate meeting culminated with a statement from a participant that this technology would finally shift the company from the 1990s into the future.
There was a moment of silence, then the leader spoke for the first time. He asked with a very insistent tone: “What was so bad about the 1990s?” The discussion stalled immediately. Knowing the leadership culture in this company, with the reluctance to pilot and invest into new technologies outside their core operations, it was clear for everybody that the conversation has ended, and the idea was killed.
Many of today’s senior leaders rose through the ranks by delivering operational cost efficiencies and making incremental product improvements, especially in traditional industries. The focus on those two areas drove their decisions and permanently set their mindsets. Cost management is essential. However, data shows that a continuous overemphasis on cost can not only stall companies’ growth, it can also lead to an innovation death spiral and ultimately to their demise.
Since the introduction of the Fortune 500 index nearly 90% of ranked companies lost their qualification for the index or became extinct.
Research shows that the root cause for such reversals was top leaders’ reliance on improving results by relying on yesterday’s mindset and building the future by improving yesterday’s results.
These leaders did not see or accept the threats caused by changing realities and therefore were unwilling to invest in new initiatives. The disruptions caused by the changes strengthened more innovative competitors and opened the marketplace to new competitors. Most damaging in the long-term, their organizations lacked an on-going innovation process to capitalize on the continually evolving environment.
To learn more about how to prepare your company for change and disruption, watch this video (5:11 min) from the Stanford Business School: