In
January 2016, 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.
https://www.strategy-business.com/blog/The-Courage-to-Change-Before-You-Have-To
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