October 25, 2014

Small Business Advice

Firms that can adapt to change raise their potential for success

"It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change." ~ Leon Megginson

Jerry Osteryoung | 2/10/2014

One thing we can be certain about is that nothing is certain – no matter how much we plan.

While planning is critical and necessary, no plan is a guarantee. The difference between a good manager and a great manager is the ability to adapt when their plans do not shape up as expected.

In 2008, Blockbuster’s strategic plan stated, “The core values of the firm include an increased focus on retail, introducing innovative programs and expanding the in-store selection of movies and gaming equipment, including hardware, software and accessories.”

That same year, it also reported that the Blockbuster global network spanned more than 7,400 stores worldwide; the company operated about 1,600 stores through franchisees. Having such a large network of stores spread across the world enhanced its market and profit margins.

Meanwhile, management lamented, “the video-rental market in the U.S. is currently on a downturn and the most recent shift of demand is to online and by mail.”

By November 2013, Blockbuster had closed all of its stores.

Blockbuster’s unwillingness to adapt to a market where streaming videos and firms like Netflix were becoming more popular basically destroyed the company. What makes things worse is that Blockbuster was offered the opportunity to buy Netflix for $50 million and passed on the deal.

Another company that shared a similar fate is Circuit City. Its failure to adapt brought down a company that had been in business 60 years. By the time things came around, it was too late. Best Buy had already captured the market. Circuit City closed in 2009.

Yet another example of a company whose failure to adapt led to its own demise is Eastman Kodak. It disregarded the movement toward digital photography until it was too late to rally and recover.

I used to think the market rewarded firms that planned well, but after years of watching companies like these, I am now convinced that what the market really rewards is firms that adapt well. Just look at how Apple stock is starting to decline. That company is not really adapting to tougher competition and is rolling out very little in the way of innovation.

The market continues to make examples of companies that do not heed changing tides, so why, you might ask, are companies still going down this path? I think they all share a common trait: a blind allegiance to the technology or process of the day – the way things have always been, in other words – even in the face of obvious changes in the marketplace.

Blockbuster saw the direction of the market – it even started an online division. The emphasis remained, however, on the brick-and-mortar stores that initially allowed them to expand and dominate the market for so long.

Eastman Kodak arrogantly assumed it was so well entrenched that no one could ever surpass it. Circuit City was simply too little too late. It allowed Best Buy to get in and take the market.

Adaptability is critical for all businesses – large, and especially small. Small businesses must be much more adaptable because they do not have the cash reserves their larger counterparts do. They cannot afford even small errors in strategy.

Now go out and make sure that you make great plans, but more importantly, that you are willing to adapt to changing conditions and environments as they unfold.

You can do this!

Other small business advice columns from Dr. Osteryoung are here.

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an Amazon.com bestseller. He can be reached by e-mail at jerry.osteryoung@gmail.com.

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