Every once in a while, I run across a company that is doing just fine, and has been pretty successful for a long time.
These companies scare me. Nothing creates failure like success, and the temptation to rest on one’s laurels has heralded doom for many a fine organization.
These days, people at least accept the idea that old strategies don’t always work. In the 1990’s, this was attributed to the “new economy”. In 2009, it was attributed to the bad economy. The reality is that old strategies almost always stop working, eventually.
There are three key reasons why your currently successful strategy is likely to break in the future:
The first is a pretty obvious reason, if your strategy is built around technology. Even if it isn’t, technology can do an end run around your product or service – just ask all the struggling tax service firms that are trying to replace low-end work lost to simple computer programs. Even more insidious are technologies that suck the life out of your customers’ markets – it’s possible you won’t see those coming until it’s too late.
The second threat, imitation is a serious problem if your strategy becomes too successful. Not surprisingly, competitors can sometimes see when your approach is akin to a license to print money, and you can bet they will want in on that action. This doesn’t mean they will succeed – witness the ridiculous failure of most U.S. airlines who attempted to emulate Southwest Airlines in the 1990’s. But even a failed attempt to imitate you will suck profits out of your market, and it will spoil your customers into thinking there will always be bargains waiting for them. In the worst cases, everyone does get the basic idea behind your strategy, and the thing that originally set you apart becomes commoditized, which can be a nearly permanent problem.
The third threat, replacement, is sometimes – but not always – the result of technology, so it has a special status. Anything that customers might use to replace the value you offer – not just your product – can cause a replacement problem for your strategy. For example, hugely discounted airfares in the 80’s and 90’s replaced a main driver for need in the passenger rail and bus industries (price).
In each of these situations, playing the game as if it has not already changed can be a recipe for disaster. Homing in on the issue – technology, competitors, or replacements – can give you the edge you need to keep going, but sometimes a complete re-thinking of your strategy is in order.
There is no question that this re-thinking can create a stressful time for an organization. Not only that, but the re-thinking is not guaranteed to lead you to a suitable new strategy without some trial and error. This is one reason why most of the really successful companies we have helped through this transition started while things were still going well. Trial and error is much more affordable if your company isn’t on the ropes. Even if you are on the ropes, a well-directed re-thinking of your strategy is likely to get you back on a positive track, so don’t delay the hard work that this calls for when you see the warning signs.
Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc. He can be reached at .