While studying the evolution of animal species, Charles Darwin made some incredible insights that translate remarkably well to the world of business. Here is one of my favorites:
"It is not the strongest of the species that survives, nor the most intelligent; it is the one that is most adaptable to change."
This is a fascinating statement that has important implications for both the large and the small.
For the large companies, the message is simple: change or die. You may be in a great competitive position today but that will certainly change in the future due to new competitors, technologies, and market requirements. Most executives know that their companies need to change, but let’s face it, change isn’t easy. Real change that affects business models and fundamental product strategies is very difficult to manage, especially when done under the public eye. Moreover, change requires motivated employees, and success tends to breed complacency and lack of urgency throughout an organization. Ironically, sometimes the best thing that can happen is a “shock to the system” – e.g. a rapidly deteriorating competitive position or revenue stream – that forces significant change. IBM in the 90’s was in that boat, and rose to challenge by reinventing the company around solutions and services. For most others, the need to change is not as strong, and they’re more likely to adopt an evolutionary path, embracing change at the margins but still fundamentally committed to old business models and old ways of doing things. Companies like Microsoft fall into this bucket.
For the start-ups, this is the opening. As the incumbents change slowly, start-ups have the opportunity to significantly disrupt the status quo. The key word here is “disrupt.” If you’re doing something that’s a little better than what’s out there already, you’re not doing enough. It needs to be big, because the large players will have the evolutionary enhancements on their roadmap, and you’ll get otherwise crushed. Importantly, by doing something disruptive – redefining the economics, breaking the rules – your incumbent’s strengths can become weaknesses. Think about Dell in the 90’s. They redefined the economics of personal computers through their direct-to-customer business model. Existing PC vendors had large, established channels, which is normally a strength, but in this case, became a significant weakness. They were locked into a business model that was fundamentally inferior to that of Dell’s.
Fast forward ten years and the tables have turned. Channel-focused vendors are beating up on the direct-to-customer vendors. Now it’s Dell’s turn to change or die.
-Raj
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