By Sarah B. Hood
Once, Kodak ruled the field of photography. Around the globe, the company name was almost synonymous with “camera,” and Kodak film was universally in demand.
But when digital cameras hit the market, Kodak was suddenly caught short; the company vision was so narrowly focused on a disappearing technology that it was abruptly left behind.
Kodak is not alone; many seemingly indestructible businesses have evaporated due to a failure to adapt and change, a phenomenon sometimes referred to as “founder’s dilemma” because it tends to happen when a business holds on too tightly or too long to its original defining vision.
“If you think of companies that have died over the last decade, what’s often happening is they are being displaced by people they didn’t even think were competitors as these companies were rising,” said Marc Epstein, co-author of the book, The Innovation Paradox: Why Good Businesses Kill Breakthroughs and How They Can Change.
He names numerous businesses that have succumbed to the rise of Amazon, Apple or Netflix, like Borders bookstores and the Blockbuster video rental chain.
“Nokia and Blackberry were the dominant companies, and they were displaced because they missed this whole smartphone thing,” said Epstein. “Borders missed it because they saw Amazon as a small competitor. Barnes and Noble said, ‘People aren’t going to want to buy books by mail.’”
Avoiding founder’s dilemma
Becoming too invested in a narrow company definition can be a blinder to future, necessary innovation.
“Basically, it’s a company that’s trapped in a paradigm or a definition of what it is,” said Ian Chamandy, who founded Blueprint Business Architecture with partner Ken Aber. “[These companies] have a definition of who they are, and they don’t know any other way or they can’t see any other option or opportunity.”
If Blockbuster had understood its core activity as providing access to entertainment rather than renting out videos, he says, they might have “bought Netflix for $10 million when it was a start-up.”
Chamandy and Aber help businesses to better define themselves, so “when opportunities come up in the future, they will see these opportunities as lying in their wheelhouse,” said Chamandy. “If you’re the HR director, at the end of the day you’ve got to get the CEO to agree to do this, because defining the company is the CEO’s job.”
He describes an actuarial firm that had specialized in the disappearing field of defined-benefit pensions. Chamandy and Aber told them, “You need to be able to articulate your DNA in seven words or less, and when you do that, that will tell you what to do in the future.”
Instead of limiting the definition to defined-benefit pensions, Chamandy advised them to see their primary function as “helping businesses obtain a greater degree of certainty” about the future, which opened up wide new horizons for a company with shrinking prospects.
Identify the company vision
“All founders of any enterprise have a vision; the question is, how clear are they with it?” said Adriana Girdler, chief efficiency officer at CornerStone Dynamics, which helps leading corporations streamline internal processes to work smarter and improve productivity.
Girdler encourages companies to define a vision that is clear and detailed, but not so specific that it could limit growth potential in the longer term.
“A lot of corporations have a one-line vision statement and you can interpret it any way you want, but if you’re really going to grow, you need to have more detail – and be inspiring, too,” she said. “It’s something you should look at every day. You really have to understand who you are and what motivates you. Good times are easy. It’s when times are tough that you have dilemmas and big decision-making points; what are you going to use to guide you through those tough times? It’s your vision.”
And, she says, HR has a key role in keeping that vision in focus.
“HR has the ability to say ‘We’re not going to hire people unless they’re in line with our vision.’ HR is really in a key strategic place; the HR department acts like a quality check to ensure the company is following the line of the vision, [although] ultimately, the company president has the key responsibility, and if that’s not happening, there may be the need for some education.”
Who am I?
“Most companies don’t have the foggiest idea of who they are,” said Chamandy. Frequently, the definition is “trapped in the head of a charismatic leader” and risks being lost if there is no succession plan to pass it along. It’s up to HR, he says, to make sure that intuitive understanding of the organization’s core function is clearly articulated to every person in the business.
“People tend to be trying to meet short-term goals, and they lose this ability to move towards breakthroughs rather than incremental development,” said Epstein. In order to be able to take advantage of opportunities for change, he says, HR must “provide some slack that’s going to allow employees to work on things that might be longer term. And when you’re shooting for breakthroughs, you’re going to have a much higher level of failure, so you have to be ready to accept failure.”
Epstein names Google and 3M among companies that leave 10 or 15 per cent of the workweek “basically unassigned” in order to encourage the kind of breakthroughs that are more often generated by start-ups.
“This is really at the heart of what HR needs to be doing [to encourage innovation],” he said. “Make sure that the organization’s systems, structures and rewards are aligned around what you really want.”