The Value Being An Adaptive Company

How adaptive can a business be in the face of rampant change? The recovery is building – the local economy is showing some life.  But business is no less stressful and certainly no more predictable than it was when Windshift conducted its first Right for the Times study in 2009. For most firms, business is hard, or at least, harder than it once was.

Our 2015 How to be Right for the Times study showed that many established brands find it difficult to resonate with the younger half of the population. Entire categories — like banking and motor vehicles — now struggle to rise above commodity status. Other industries are under threat from disruptive technologies or new pricing paradigms, offering, as Scott Galloway puts it: 60% of a great brand for 10% of the price.

H&M has just opened in Auckland – that’s their strategy. Zara is here too. So what will their competitors do now? Adapt to the situation or fade away? Even technology companies, the great disruptors themselves, feel the force of hyper-competition. Those that are [or aren’t] part of the current ‘conversation’ rise [and fall] in prominence.

Avoiders and Embracers

When there’s general uncertainty, and a huge range of potential options it becomes difficult to know what to do to respond to disruptive competition. Many companies default to inertia, conservatism or frugality. They hold onto their cash and stick to what they know, hoping that all the volatility and complexity will cancel itself out so their profits can start to grow again.

That’s not a bet I’d make. Sitting tight and failing to adapt is like stopping in the middle of a race. Understanding your strengths and finding new and better opportunities to use them is a better strategy.

At the other end of the spectrum are the firms that fully embrace uncertainty and disruption. They diversify their efforts and spread their messages or initiatives across a wide range of opportunities, in the hope that at least one will work. This is the venture capitalist strategy and it can work if you have patience and deep pockets.

It can be spectacular if you happen to find – and dominate – a rich vein of change, as Uber did and Lyft didn’t. Unicorns [exceptional performers] are great, but if you back the wrong horse it hurts. Like a cat trying to catch a laser pointer, you can find yourselves hitting first this opportunity, then that, but never really sticking.

Meet the Adaptive Companies

Between the two extremes of Avoiders and Embracers are the Adapters – firms that try to minimise the downside of disruption and maximise the upside.

For example they might cut the middle man out of their customer relationships and go direct. They reduce their costs, and insulate themselves from voices telling them that advertising is the future. This can work if they become integrated and ultra-responsive to those customers. But they also run the risk that their resources or expertise in-house will not be sufficient. If their focus is too narrow they may miss out on emerging opportunities or to fail to notice looming threats.

Other Adapters become very distinctive, ‘niching down‘ to the point that it becomes extremely clear to potential customers that they are the ones you go to for some very specific products and services. There is a risk that your specialisation may become obsolete, but short-term profitability is likely to compensate.

Alternatively they may build small monopolies of expertise or create compelling small-scale ‘network effects’. Google and Facebook have done this on a large scale and now have the deep pockets needed to try and fail at whatever they like. But before they got there, they were very clear about who they were and who they weren’t.

Yet others focus on building relationships and working as part of longer supply chains or in the network economy. They may collaborate in projects or form loose relationships with other like-minded groups or entrepreneurs. These chains and networks offer no lasting security but they do build a buoyant capacity to shift gear and adapt.

Creating Momentum

The flow on effects of each of these strategies create their own momentum. In some cases, like the shakedown that’s going on between mass advertising and social media, it seems there‘s a much more efficient business model just waiting to be born. If only birth wasn’t so difficult.

In other cases, unceasing volatility and reduced certainty builds jaded but resilient firms that can pivot in their sleep. Pivoting has created a veritable boom in the ‘re-imagining’, ‘restructuring‘ and ‘mergers and acquisitions’ industries.

There are definite rewards for those individuals, firms, organisations and countries that do embrace and adapt to change. But there can be difficult consequences for a society built on [baby boomer] assumptions of stability. Skills become obsolete, incomes can stagnate. Inequality and a two-paced economy is almost inevitable. We see that most clearly in the vast gap opening up in the US between Silicon Valley and the old industrial heartland .

However, with the momentum it has built up it’s clear that the pace of change will not relent. Our only option is to understand its rules and learn to prosper under these conditions.

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