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The last thing your organization needs is ‘more of the same’

May 23, 2011 Business Daily, Strategy

“The results of pursuing “more of the same” have proved to be disastrous. A comprehensive study of 20,000 US firms by Deloitte’s Center for the Edge (The Shift Index) shows:

– The rate of return on assets is only 25% of what it was in 1965.
– The life expectancy of a firm in the Fortune 500 has declined to less than 15 years and is heading towards 5 years unless something changes.
– Executive turnover is accelerating.
– The “topple” rate of leading firms is increasing.
– Only one in five workers is fully engaged in his or her work.

And yet most Fortune 500 companies continue with “more of the same”: pushing products and services at customers, of tweaking the supply chain, of parsing and manufacturing demand, of increasing efficiency through economies of scale, with the single-minded goal of making money (for) shareholders.

STEVE DENNING Forbes (11 March 2011)

Read the list excerpted above again. Business is in trouble, deep trouble. Compared to a generation ago, today’s average business makes a lower return, does not last very long, is more vulnerable to failure, struggles to hold on to top people, and can’t motivate 4 out of 5 of its people to engage wholeheartedly with their work.

Wow, that’s quite a list of indictments. Damning though it is, there is little sign that more than a few business leaders take it very seriously. They are slowly being cooked in their own fat, and will only realize the danger when it’s too late.

It’s a completely different landscape of business compared to when I was a boy. In those days, there were few rivals capable of providing decent products and services; there were regulations protecting large incumbents; customer expectations were low and their ability to shop around limited; and employees had limited options and generally stuck it out with one organization.

Where in the current tumult do you see any of those factors still being valid? These days, competition will whack you from unexpected directions; entry barriers have fallen everywhere; technological change can make you obsolete in the flick of a switch; and customers need to have a damn good reason to buy anything from you.

So what are we doing to protect our return on assets, to protect against failure, to develop unusual loyalty from employees and customers?

Sweet nothing, in most cases. CEOs still engage in cyclical and cynical empire-building expansion sprees; followed by brutal cost-hacking and retrenchment. They still spend more money building the froth in their brands rather than the substance. They still rely on physical supply and distribution chains, and deploy sharp practice to lock out competitors. They still find simply buying a good-looking company at a ridiculous price easier than building unique capabilities. They still give vapid speeches to employees rather make them an integral part of a big cause. They still worship at the false altar of shareholder returns at the expense of creating things that give meaning to the world.

They are stuck in business as usual, in other words. And they will pay the price.

If you want to be a great business leader these days, you have to join the ranks of the exceptional, not the just-there. For that, you must master three things: first, the ability to rally your troops and get unusual performance out of them; second, the ability to forge deep connections with customers and add genuine meaning to their lives; and third, the ability to anticipate and work with unbelievably fast technological change.

If you can master those three, you have a fighting chance. The job of business leader these days is to bring meaning to the world, not deliver shabby products and grubby attitudes. Those who can see that will thrive and leave a big footprint.

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