Navigating business transition
Any company with the right idea can leapfrog a leading player, but how that company manages through a transition, such as digital transformation, while innovating is a key determinant of longevity and success.
“There’s a lot of enabling technology that’s happening to allow small companies to scale much quicker, which makes them dangerous to large companies,” said Ian Smith CA, Founder of The Portfolio Partnership.
“Size doesn’t guarantee success because smaller companies with the right value proposition grow quickly and are very credible to the customer,”
As the speed and frequency of technological advancements increase and computing power creates an accelerated catalyst for change, transition cycles shorten - outstripping our human capacity to manage, monitor and govern it.
“Managing through technological disruption and breakthroughs can require strong moral leadership as changes test leadership’s resolve”, said Ian.
Some companies that are seemingly nimble actually have hierarchical structures – the decisionmakers are in one room, and it’s more command and control.
These companies may not be very innovative, but they’re able to move quickly because employees obediently follow orders and resources are thrown at a problem. Whether this strategy results in long-term success remains to be seen.
Along with innovative ideas, navigating through transition requires companies have the right corporate structure and management.
The right core values
A corporate culture is created through action and a steadfast set of values. “If you have a company with values and a consistent culture, it’s easy to move because you’re moving strategically and not culturally,” said Rick David CPA, Chairman of UHY International and Chief Operating Officer of UHY Advisors, Inc.
When the culture and values are set, companies are better equipped to offer different products and services that are true to their values. A company’s core values are what attracts a certain type of employee because that company will try to operate and behave in a certain way.
“That company will have a way of doing things and will put things inside a process so that they can try to advance and innovate as they continue to operate,” said Ian.
Staying true to the mission is integral to engaging employees because staff morale drops when companies don’t follow their core values – what matters most is what a company does when no one’s watching. Cultures need to evolve over time, but core values should stay constant.
“While technology and change speeds things up, the actual activities of a company don’t need to change so quickly,” said Ian. “The challenge to management is how to position their core values to remain effective in periods of accelerated change.”
Agility helps to see ahead of the curve
Analysing the market and trends to adjust product roadmaps to better meet customer demand is a skillset that ultimately builds agility into a business – a company can’t live off its legacy products. “Companies spend billions on R&D and on executing what they think will be the next game changer,” said Ian. “Just because you’re making money at the moment with your products and services today doesn’t guarantee success tomorrow because change comes hard and it comes fast. Today’s organization needs to be built around change, and it has to be built into the DNA of the company.”
An innovative company with a fast information flow won’t be outsmarted. Communication between different departments is key.
“This concept of a company operating in silos going into the next 20 years will crush companies – you have to be able to flow information across departments because this is what makes the company sharper upfront and allows significant projects to be defined and executed and aligned to the strategic plan,” said Ian.
The product management team’s insights won’t help the business unless the sales team can incorporate that knowledge into its strategies, for example. That communication gap creates lost potential and is a real weakness.
As technological change accelerates, businesses need to continually assess the market for product innovations while executing on their core values. This way, the transitions from one trend to the next will have more likelihood of success.
While finance doesn’t drive change, it does keep score. “In the end, they’re the ones who will report on how well the transition is working,” said Rick. Finance has a role in saying how revenue changed and why that change happened, and finance can never communicate this enough so that people understand the effect of a transition on the bottom line.
A bedrock of a mission statement
“A mission statement is what a company does, and one that’s adoptable will help a company transition through changing times”, said Rick.
Companies can pivot easier when they don’t have much overhead, but that adoptable mission statement helps an established company transition to different products and services to meet changing market demands. Identifying these opportunities is one thing – capturing them to profit from them is another.
Don’t be afraid to break eggs
“Sometimes going into the future isn’t smooth, and sometimes, technology isn’t your friend,” said Rick. Understanding what consumers want drives product and service innovation, which can mean completely rethinking products and services.
Netflix, for example, started out in the video rental business – they provided entertainment options to consumers by overnighting DVDs from their library of content. Since then, they’ve transitioned their delivery to online streaming while also producing original content and they release an entire season at once so consumers can watch on their own time.
Despite these product changes, they’ve stayed true to their mission of providing entertainment products to customers.
“Things are going to change, and you have to change with it,” said Rick. “You can change quickly, but you can’t lose your values, like serving others or acting with integrity. When you have those guidelines underneath, it’s easier to make changes.”