The
Courage to Change Before You Have To
In
January, GE announced plans
to move its headquarters from Fairfield, Conn., to
Boston. The move to the Seaport District, the city’s innovation hub, is
symbolic of the digital transformation the 123-year-old company has undertaken.
Central to GE’s transformation plan is the
decision to integrate its software unit, global IT and commercial software teams,
and cybersecurity capabilities into a new digital business unit. GE’s goal is
to make its industrial products “smart”: Connected to the company’s ecosystem
of apps, these machines will communicate automatically when they need
maintenance, thus eliminating downtime and lapses in productivity. With this
move — arguably GE’s most ambitious undertaking since its Edison Engineering
Development Program — the company is aiming to become the dominant player in
the industrial Internet of Things.
GE is not the only company with an ambitious
transformation agenda. GM, with its research in driverless cars and US$500
million investment in Lyft, is moving into the rapidly changing ride-sharing
industry.
The companies understand that customer
expectations are changing dramatically. GE sees that with machines getting
smarter, customers are looking for greater productivity, while GM sees that
with the advent of driverless cars and ride-sharing services, people are
becoming more interested in transportation and less in car ownership.
In
this sense, GE and GM resemble the visionary self-made billionaires my
colleague Mitch Cohen and I analyzed for The
Self-Made Billionaire Effect: How Extreme Producers Create Massive Value (Penguin, 2014). We interviewed 16 of them in
person, including Jeffrey Lurie, film producer and owner of the Philadelphia
Eagles; Glen Taylor, founder of Taylor Corporation, one of the largest printing
and electronics companies in the U.S.; and Joe Mansueto, founder of
Morningstar.
When asked how they came up with the ideas
for their blockbuster products or services, nearly all of the billionaires said
they knew what their customers were going to want long before the customers
themselves. They had what we call “empathetic imagination”: They understood on
a very practical level how technological, social, and market changes would
affect customer needs, and they had the imagination to envision the products or
services that would meet them.
This ability to predict the next big thing is
characteristic of the most successful entrepreneurs, regardless of industry.
Lurie, an avid sports fan, recognized in the early 1990s that with the advent
of cable TV, football games were likely to become the next great TV
entertainment. “Nobody really saw the fact that the NFL was producing hit
television shows that were starting to dwarf anything that Hollywood was
producing.... [With cable] the distribution of this was just beginning…. I felt
there was going to be a significant paradigm shift.”
A similar story can be told about Taylor.
While working at a local printing shop, he saw that wedding invitations were
the company’s sole source of profit, and could be the source of a burgeoning
business. Taylor asked his friends what they wanted in wedding stationery.
“They said, ‘I want stationery that matches my dress.’ Or, ‘I want something
pretty on it other than just two rings intertwined,’” he recalled. “So I went
out and developed those products that the bride said she wanted.”
Mansueto likewise had an innate sense for
what people would want. As a mutual fund investor in the early 1980s, he used
to read the quarterly prospectuses published by investment firms. Poring over
them one day, Mansueto realized it would be incredibly useful to have all the
information about similar funds in one publication, along with a quick
assessment that compared them. “Gee, this could be a business,” he thought.
The GE
and GM senior executives taking their companies down new paths are also
empathetically imaginative. They, however, face a challenge that the
billionaires we studied weren’t up against. Whereas entrepreneurs like Lurie,
Taylor, and Mansueto designed their businesses from scratch, established
companies like GE and GM have to take
an entrenched business model and transform it. That
requires wholesale reinvention, which is one of the greatest business
challenges there is.
It’s difficult not just because it requires
major changes to practically every aspect of the organization — it also means
placing a bet on customer preferences that are far from certain. And it means
choosing to undertake an tremendously costly venture, before a crisis makes it
necessary. In short, it takes courage, which I believe is the hallmark of great
leadership.
What gives the GEs and GMs of the world the
courage to reinvent themselves? The answer is complicated, but one thing is
clear. They do it because they have a relative view of risk, like the
entrepreneurs we analyzed. Case, Lurie, and Taylor all believed that what they
stood to gain — an enormous untapped market — far outweighed what they stood to
lose.
So, as you search for the next big
opportunity, it’s worth asking not only what it is, but whether you have the
courage to seize it.
John Sviokla
http://www.strategy-business.com/blog/The-Courage-to-Change-Before-You-Have-To?gko=61fa6&utm_source=itw&utm_medium=20160705&utm_campaign=resp
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