How strengths of the past can constrain the future
In his excellent 2007 book of the same title, Marshall Goldsmith popularised the phrase, “What got you here won’t get you there”. His thesis, built on many years of coaching executives, is that, as one climbs up the corporate ladder, it’s increasingly our interpersonal behaviours, rather than our technical expertise, that drives our success.
The capabilities that got us here, for instance: managing teams, running stores, revitalising departments; are not the ones that will take us from being a competent manager or executive, to becoming an outstanding CEO. Incremental improvement in them might help us get to the top of our current game, but to succeed at the next level, requires a different game plan, a paradigm shift in our self-development.
What Goldsmith has observed to be true for an individual, is very often the case for an organisation. There are a bunch of capabilities and disciplines that can serve a company well through its early growth, or through testing times, but later, those same characteristics can hold the company back from making it to the next level. So far, in my work with organisations, I’ve found nearly a dozen recurring themes - practices that may have been essential in getting a company “here” but are now holding it back from getting “there”. Here are two examples of what I mean:
Building on success:
A temptation in any company is to do more of what works. For a while this can add value, but after a while it leads to diminishing returns, proliferation of range, increasing investment to squeeze out the last few drops of an opportunity. A retail sector that has crippled its margins and competitiveness through near-constant promotion is just one example of the potential doom-loop of excessively building on a successful model.
I’ve seen similar effects in FMCG businesses, restaurant chains, training businesses and manufacturers; in each case increasing complexity, diminishing returns, and making the business harder and harder to change. The antidote to the success trap is “distinct” innovation: prioritising the pursuit of new ideas in areas distinctly different from its historical successes. The question I’ve often used to uncover it is this: What portion of your revenue comes from things that are neither a continuation nor an extension of things the business was doing three years ago, but are “distinct” innovations?
Playing to strengths:
In the past, by continually playing to their strengths and building bigger and bigger competitive barriers to entry, businesses could aim for what Michael Porter described as lasting competitive advantage. But times are changing. Uber wasn’t put off by the taxi market’s barriers to entry, it simply crowdsourced its way around them. Uber’s advantage came from fundamentally re-imagining the customer experience: simple booking, choice of vehicle, tracking, visibility, payment and so on.
Any cab company could have anticipated and pre-empted Uber’s advantage, but none had the vision to develop enough strength in technology. And cab companies aren’t unique; most of the businesses I’ve seen who’ve been adversely affected by an innovative new competitor would have been able to say the same. The litmus-test question is this: What portion of your strategic development requires you to build completely new strengths to transform the customer experience, rather than playing to your existing strengths for marginal improvement?
The bigger picture:
My broader question to you though, is this: where have you seen this pattern? Where have you experienced a business’s prospects being constrained by ideas, practices and processes that may have helped it to get “here”, but have prevented it from getting “there”? I’d be very interested to hear your examples.