Strategic Response – Can Organizations Live Forever?

The Challenge:

With continuous strategic innovation and world-class change management, can organizations live forever?

The Kepner-tregoe Response:

To maintain competitiveness, there is a point at which adaptive change won’t cut it and you must evolve.

This month’s announcement about the demise of the once mighty Eastman Kodak does prompt an interesting question about whether organizations can live forever.

We often hear the term ‘DNA’ applied to organizations as a way of characterising their fundamental nature, or to describe a component of their competitive success. But the use of this metaphor always starts me thinking about the immutable and rather uncomfortable truth that, as much as we might like to, we humans can’t change our DNA, which then raises the intriguing question: – what if organizations can’t actually change their DNA either and that like us, with age it becomes increasingly difficult to maintain health and vitality?

The received wisdom within management theory is that through continuous strategic innovation, organizations should be able to live forever. But can this really be true? If Kodak shows us anything, it is that markets can evolve in such a way as to make an organization’s DNA irrelevant. In other words, a time may come when the experience, passion for product, market intuition, competitive drivers, values and capabilities which, taken together, make up the character and nature of an organization, are no longer enough to allow it to survive.

So what should we learn from Kodak? How can we ensure that our organizations maintain vibrancy and relevance in a rapidly changing environment? I would argue that an answer lies in knowing and profoundly understanding the true nature of your organization’s DNA and then using this knowledge to recognise the point at which adapting your market offering is no longer enough to allow the organization to retain relevancy. A more fundamental form of evolution is required to ensure survival.

What is ‘organizational’ DNA?

Anyone involved in the life of an organization will probably appreciate that there is a distinctive momentum that maintains an organization’s unique sense of identity and purpose. This momentum does not necessarily come from a compelling vision articulated by a capable leader, nor from the impact of a notable brand shaping the way employees think and feel. It is influenced by both of these factors, of course, but it is in effect a fundamental design central to an organization’s being; an underlying logic that you become aware of every time you pick up one of its products or experience its services.

For me, this can be described as an organization’s DNA and it may limit the extent to which an organization can adapt to meet new challenges. Kodak adapted its product range almost entirely from film to digital over the last decade but clearly, when compared to others, its DNA was not suited to developing or positioning products that could compete and win in this new digital environment.

The importance of understanding your DNA

Leadership teams who do not take sufficient time to understand the true nature of their organization’s DNA and the influence it is likely to have in supporting or undermining a chosen strategic direction may create an unrealistic future vision which risks triggering an immune reaction from the organization and its customers. Such immune reactions are, of course, often imperceptible, gradually weakening the ability and resolve of the organization to compete at all…

Reading the genome

The first step in understanding how fit your genetic material is for a changing environment must be to read your genome. Will your shared experiences as an organization, your passions for products, markets or technologies, your market intuition, your competitive drivers, your values and capabilities, allow you to play in the new spaces demanded by your evolving markets?

In understanding the genetic characteristics of an organization, we find the following questions useful:

1. What was the idea that started the company? Typically, founders will believe that they have some particular insight which guarantees success. These convictions will often start to shape the DNA.
2. How was the idea originally applied? The initial approach to commercialisation might play as big a part in shaping the DNA as the original idea itself.
3. What gives people a buzz? Much can be learned from listening to an organization’s employees. If you go below the day to day conversations you’ll often become aware of a common denominator or emotional tie that binds the organization together.
4. Why do customers come back? Taking an external perspective is clearly important and customers will often provide organizations with truths about their DNA that they themselves cannot see.
5. What are the most successful and least successful new products? Looking at the performance of new products will help to provide an understanding of where the market gives you permission to play, as well as your areas of competence.

Using these questions to map the nature of your genome may give you faith in the vitality of your organization and confidence that continued adaptation of established products and services will keep you current and competitive.

Adaptation of products and services is, of course, the mainstay of organizational change. Whether it’s Coca Cola’s move to healthier soft drinks or Dyson’s move from vacuum cleaners to hand dryers, we can see these adaptive actions maintain a close association with the existing DNA of these companies and as such, are intuitively understood by both the organizations themselves and their customers. Consequently they are unlikely to elicit any immune system reaction.

But if you conclude your DNA can no longer provide the fundamental building blocks for success in your traditional product / market space, what then?

If you can’t adapt, you must evolve

Then, your future requires ‘evolution’ – defined as “the development of an organism or species from earlier forms”. In other words, the imperative here is for ‘chromosomal crossover’ to create new, more suitable, DNA. This will require the finding of a partner with different, relevant DNA with whom you can create a new, powerful creature evolved to meet the challenges of a new environment.

In such situations, there is an absolute requirement to get sufficient new DNA from outside the organization to fundamentally change the old – the old values, beliefs and norms must be overthrown to allow new DNA to be formed in such a way as to get the maximum benefit from the combining parties. Unfortunately, there are too many aging organizations that remain unwilling or unable to find a partner with whom to create their next generation, choosing instead to invest in increasingly uncomfortable, inappropriate and undifferentiated adaptations to survive, sadly resulting in consequences similar to those suffered by Kodak.

There are many examples of successful corporate evolution. Swatch was originally called The Swiss Corporation for Microelectronics and Watch Making Industries Ltd. and as the name suggests, resulted from the merger of Switzerland’s leading mass market mechanical watch maker and an electronics group to produce an organization fit for a market revolutionised by digital technology. Swatch is now the world’s largest watchmaker.