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The Winds of Change & Disruption (The New Ways Of Work - Part 1)

This is the first in a series about the new ways of work. This article discusses the drivers of change that are impacting companies, and the need for a new way of operating companies.

The CEO of a successful and growing company was lamenting that after many years of steady growth his revenue had slowed and he was not sure why. The company had continuously improved its management, talent, sales, and operations, so it was a surprise to him to find that revenue had flattened. When he looked around at his traditional competitors, their growth was slowing as well. It seemed like the whole industry was having problems.

The CEO was exploring a few options to combat this challenge. First, he was considering how best to take cost out of the company's operations so at least his bottom line would remain strong even as revenue slowed. This he knew, however, would lead to decreasing financial value for the company, and a slow death over time, if he did not fix the top line growth challenge. It was the first time in awhile that the CEO knew he needed to do something very differently, but he just didn't what, and without knowing the root causes of the problem he was uncertain how to get started.

This scenario, and others like it, are playing out for established and growth companies all over the country in most industries from tech to manufacturing, and from small companies to the largest ones. The invisible hand of change often caused by technological advances is causing business disruption. It starts very slowly, almost imperceptibly, and then, Bang!, it is on your doorstep and things start to snowball. (For a comprehensive analysis of how disruption starts gradually and then speeds up suddenly click on this link.)

The retail industry is a good example of how disruption happens. Most retailers saw how the internet could become a viable channel for sales. Some even embraced the change by creating a website to sell their products direct to consumers online. Others took an additional step to embrace omni-channel sales. These steps, however, didn't solve the problem. Most retailers just didn't understand the broader implications of these hidden winds of change for their business.

In truth, the changes were much greater than they imagined. The Internet allowed consumers to efficiently compare prices and offerings online, which changed the power dynamics from retailers to consumers. In addition, eCommerce companies such as Amazon with lower operating costs put pressure on prices. Amazon also disintermediated company websites, and drove consumers to their site. As a result, retailers had to put their products on Amazon's website as well as their own and give Amazon a cut of the sales.

Another big shift was the changing demographics of the consumer. The consumer of the future, Millennials and Gen Z, value convenience more than previous generations. They prefer to shop from their couch than getting in their cars and touching the merchandise. They know they can return their purchases easily for free if they want to, so why make the effort to go into a store.

Retailers are not the only companies impacted by changing market dynamics driven by technological change. Even the largest and most successful companies in the world are impacted. Take for example companies in the S&P 500, a listing of some our largest and most successful companies. In 1958, corporations who made the S&P 500 list on average stayed on the list for 61 years. By 1980, it declined sharply to 25 years, and by 2011 companies only remained on the S&P 500 list for 18 years. It is currently estimated by the year 2027 three-quarters of today’s S&P 500 will be replaced.

With this basic understanding of the external causes of disruption, what can leaders do to position themselves for future growth and success? That is the subject of "The New Ways of Work Part 2 - The Leadership Challenge"

Iinnovate Leadership Network helps companies implement strategic change to succeed in today's rapidly changing innovation economy.

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