Change is an opportunity

Summary: Nothing endures but change (Heraclitus). Change is a constant (Benjamin Disraeli). Companies can embrace Change as an opportunity by driving change than be driven by change.

California Academy of Science has a beautiful 3D video Bugs capturing the life changes from an egg to a caterpillar and then a butterfly eventually preyed upon by a Mantis. Businesses likewise are acquired and merged to scale up. Venture arms incubate firms in related industries to create real options. As in nature where larger animals are fewer in numbers, larger firms are fewer in numbers and entrepreneurs’ best prepare for such an exit in their entry plans. VC and PE firms enter with an exit plan and are flexible to change as events unfold.

Changes come in waves. Like waves, they vary in size. Surfers travel the world to ride the killer waves. The surfers’ skills are tested by catching and riding the challenging waves and ability to execute various maneuvers. The risk of entering the wave too soon is facing a wipeout. Wait too long and lose the feeling of being stoked. Businesses like Netflix capitalize the first mover advantage before the incumbent Blockbuster realize changing customer habits. However, fast followers like Microsoft are also able to cross the chasm and ride the wave due to a better management team or business model. Wireless service providers and insurance firms entering the Indian market now have most likely missed the wave and will be part of the coming industry consolidation phase. Depending on the investing style, some investors like Warren Buffet prefer the predictability of the trough of the wave while others like Jim Clark crave the New New Thing.

Imagine driving in the wild at dusk as a dense fog sets in dropping visibility. Such is the scenario when an industry or economy wide crisis happens. One approach to deal with such an uncertain change is to park at the side of the road and wait for dawn in the hope that the morning heat will burn away the fog. Businesses in the down cycle often take such a cautious approach reducing investment in innovation and marketing to their detriment. On the other hand, companies who have planned ahead drive change and benefit at the expense of others. Hopefully financial services firms are capitalizing the present crisis to retool their business models and develop systems for the future to emerge stronger.

Unbeknownst to the driver, it is at the pinnacle of the icy mountainside that the decline begins and the vehicle begins to descend down the slippery slope. A concerted set of actions can help the vehicle and companies stave off decline and reverse the descent. Can the US auto manufacturers not capitalize on their bankruptcy and federal assistance to energize their employees, suppliers and customers by running a contest to design ‘America’s Car’? It is time to go back to being a start-up again and fight back like an underdog in the true American spirit. Newspapers, book and music publishers can leverage the Internet to customize their products increasing distribution and revenue while reducing costs to reverse their decline. Newspapers can increase pricing, trim losses by reducing the number of pages and frequency and explore online delivery mechanisms. Music companies can enable customers create their custom CD on demand at a higher price, publish their own music and reduce artist search costs by having the crowd vote. Book publishers can adopt on demand printing technology to reduce holding costs while increasing pricing by allowing product customization and support print democratization.

Conclusion: Change is an opportunity. The fashion industry would not have a ‘Fall’ line but will instead have a ‘next week’s’ line. The auto industry would not have a next year model but will instead have a co-designed World Car. The IT industry would not have a multi-year next generation version but will instead have a last week’s Cloud Service.

Companies who are creative and flexible can and will drive change/ innovation in their industry and emerge as industry leaders.