The Paradox of Change

Over the past twenty years, one of my clients grew a start-up company into a $5 billion multinational enterprise. When they started out, they were one business in a single city; now they have multiple brands competing against global powerhouses with deep pockets and proven execution. Reflecting on their simple beginnings, the road traveled and the challenge of competing in today’s markets, they considered what it would take to remain on top while they continue to grow. Perhaps astonishingly, their beliefs about what it will take to be successful in the future are the same beliefs they articulated twenty years ago, when the business was a fraction of the size and complexity. 

In fact, whenever I listen to leaders describe the ideal future for their business, I hear the same thing, regardless of whether they are big or small, profit or not-for-profit, start-up or established, and regardless of the industry. Of course, the future always involves wild success – strong financials, a world class brand and a loyal and enthusiastic workforce. But what’s really interesting is that the drivers of success always include the same elements. Invariably, leaders attribute success to their ability to stay focused on just two things:  executing the basics and staying relevant.  

Back to Basics

Upon taking the reigns in 2006 as president and COO of McDonald’s, Ralph Alvarez described the company’s strategy for moving forward. In a nutshell, he said they were going to focus on the quality of their food (making sure the fries are hot, for example) and the timeliness and friendliness of their service. Mr. Alvarez expected this strategy would boost comparable sales and set McDonald’s on a continuing upward trajectory. When I first read the strategy, I admit I was a little mystified and unimpressed.  I asked myself: In a restaurant company, what else IS there besides food and service? How could a focus on such basic elements of a business be considered a strategy? To a student and practitioner of strategy, I thought there should be more to the strategy than that. But McDonald’s was on to something. In the last quarter of 2007, revenue was up 5.7% compared to the previous year, and operating income was up more than 22%. McDonald’s showed that not only is focusing on the basics a necessity of staying in business, but it can work as an effective strategy, particularly when the competition is looking the other way.

Know Thy Customer

When I work with very large companies, I am always amazed at the amount of money they spend on marketing campaigns. Many of them spend millions of dollars every year just to make a fleeting impression on the minds of potential customers. Marketers allocate enormous resources to understand the desires and trends of customers, and more to evolve their product to meet those needs. As an example, Whirlpool once hired anthropologists to study how families used their washing machines and found that women were not the only ones who did laundry in dual-income families. In response to that discovery, engineers developed color-coded controls for their washers and dryers, which made it easier for all family members, particularly those with little experience, to do the laundry. 

However, marketers can make the mistake of confusing a fad for a trend, or of responding to the market in a way that ignores what their company was supposed to stand for in the first place. Consider the 1985 introduction of the New Coke, a sweeter variation of Coca-Cola. The move resulted in what could only be described as a consumer revolt against the company and forced the company to reintroduce its original formula after just ten weeks.

Staying relevant is a process of continuously learning about what customers want, need and are interested in, and then slowly evolving your product in order to meet those wants, needs and interests. If you stop learning from your customers, you risk missing the boat on the next “must-have” feature or benefit of what you are offering. On the other hand, if you constantly change your product to try to meet every fad that comes along, you will fail to build a solid, core product and will find it hard to standardize processes that control quality and drive efficiency.  Obviously, the rate of necessary innovation varies by industry.  For example, smart phone companies must innovate products on a shorter R&D cycle time than a restaurant company or a homebuilder in order to stay relevant.

Balancing Change

Focusing on the basics and remaining relevant to customers each contain their own challenges. Executing the basics requires processes, discipline and accountability. Remaining relevant requires involvement, comparison and innovation. But doing both is a bit of a balancing act. And it's a bit of a paradox.

That’s because focusing on the basics is primarily about doing the same thing over and over again and getting really good at it. Staying relevant is about offering something new, so it’s about doing different things or doing something differently. Because your product offering impacts the operations that produce your product, when you change your product offering, you need to change it deliberately, carefully and with a keen eye on how it will impact resources. Develop a plan for implementation that ensures your new processes will meet your standards for delivery, quality and financial performance. If you take the time to understand the basics of your business, continuously evolve your product to remain relevant to buyers and manage your processes to maintain efficiency during change, you will set yourself up for success today and into the future.