SURVIVING A CHANGING WORLD
Written By: Lane Summerhays
Some innovative changes are hard to recognize and accept. In 1829, Martin Van Buren, then governor of New York, wrote this to the President, “The canal system of this country is being threatened by the spread of a new form of transportation known as ‘railroads.’ As you may know, railroad carriages are pulled at the enormous speed of 15 miles per hour by engines, which, in addition to endangering life and limb of passengers, roar and snort their way through the countryside. The Almighty certainly never intended that people should travel at such breakneck speed.” (Sylvia Simmons,” How to be the Life of the Podium,” AMACOM, New York, NY.)
For decades, Kodak Coloramas were displayed throughout Grand Central Station in New York City. These enormous photographs displayed the Kodak brand to commuters, highlighting the creativity of great photography in memorable “Kodak moments.” At one point, Kodak held 90% of the US film market and was one of the world’s most recognized brands.
Successful companies can become too focused on their own success instead of focusing on the changing needs of consumers. Kodak failed because it did not recognize the potential of a disruptive technology that made its film business obsolete. That technology was digital photography. The irony is that Kodak invented the first digital camera in 1975. It did not pursue marketing the technology because it thought it would impair its film business. They incorrectly believed that their superior brand image and marketing power could direct consumers to continue to use their film products.
Sony and Canon embraced the new technology, and it soon changed the industry forever. By the time Kodak realized its mistake, it was too late. Kodak believed it was in the film business when really it was in the business of creating customer memories and stories.
Kodak is not alone in failing to recognize changes in its industry and competition. Almost 90% of the Fortune 500 companies from 1955 are out of business. Many different factors have caused highly successful businesses to fail, including Blockbuster (1985-2010), Toys R Us (1948 – 2017), Borders (1971 – 2011), Compaq (1982 – 2002), and General Motors (1908-2009).
In today’s rapidly changing world, it is important to invest time and resources in identifying and mitigating business risks. In just the last few years, we have seen a shift from shopping in brick-and-mortar stores to purchasing online. Covid has caused businesses to have employees work from home while Zoom, Microsoft Teams, and other software programs have enabled virtual meetings, which reduces the need for travel. Covid has also caused supply chain issues impacting the production of many products. These are just a few examples.
The process of controlling business risk is called “Enterprise Risk Management.” This process should be led by a senior executive with the participation of key employees.
SOME RISKS COMMON TO MOST BUSINESSES INCLUDE:
DISRUPTIVE TECHNOLOGIES What innovations are being developed that could make your products or services obsolete?
BUSINESS CONCENTRATIONS Having a large percentage of your business dependent on a few customers, vendors, suppliers, banks, or business segments ties your continued success to those few relationships.
LOSS OF KEY EXECUTIVES OR EMPLOYEES What happens in case of resignation, death, disability, or retirement of key personnel? Companies should have a succession plan for each key executive and employee.
INFORMATION TECHNOLOGY Are you adequately protected from cyber security threats? How is changing technology impacting the delivery of your products and services to customers? Are you keeping pace? Are you cost-effective in the development of new systems?
CHANGING ECONOMIC CONDITIONS What impact will interest rate changes, recession, or supply chain issues have on your business?
ABILITY TO HIRE TRAINED EMPLOYEES How can you fill vacant positions with qualified workers in a labor shortage?
GOVERNEMENT REGULATIONS What risks does my business face with changing Federal and State laws and regulations?
To survive or even thrive in this rapidly changing world, companies should evaluate these and other risks unique to their companies and industries. Once the risks are identified, a specific plan should be developed and implemented to mitigate each risk. Many of the large, successful companies mentioned above would still be in business today if they had only embraced an effective “Enterprise Risk Management” process.