A recent Harvard Business Review article* asks us to consider the great innovation stories of the past decade, such as Google, Netflix, and Skype, and to ask ourselves why wasn’t Google created by Microsoft? Netflix by Blockbuster? Skype by AT&T?
These innovations didn’t come from established giants, but from newer, smaller companies. The explanation is simple: the older companies are too tied to their historic business models, and don’t realize that these models are perishable. The newer companies don’t have the restrictive business model handcuffs on them that the older companies do.
What’s the lesson here?
It’s obvious: What your company did yesterday has little to do with tomorrow’s success. Are you living in the past? Do you develop your business strategy for the future based on what has already happened, not on what will happen? If so, you are really hampering your ability to grow, compete, and innovate.
In many coaching sessions with CEOs, I often hear how they are making strategic decisions based on things that have already happened, not on things that can or will happen. The problem is that we are committed more to the past than to the future. We make decisions based on investments we made in the past, people we hired years ago, a product we launched that’s failing, policies we created over the last decade, etc. On the surface, this seems to make perfect sense. We are where we are because of all of these actions. Shouldn’t they influence where we are going to go?
Sorry, but the answer is a resounding “No.”
Organizational memory helps with preservation, but it encumbers creation and innovation. We use excuses such as: “We invested in this product, and we need to get our money’s worth out of it,” to justify continuing down the same path. We enforce policies and procedure that were developed years ago when circumstances were different. Do they even make sense today? We rely on a business model that worked when the competition was nominal, but has no relevance now when the market has become commoditized and rampant with competition.
The Future Starts Today
I have to coach people to let go of the past and focus on the future. I tell them that the past was great. It got them here. But they need to realize that the future starts today. Each day starts fresh. What happened yesterday is over and gone. We have to make decisions looking forward not backwards. We need to think in terms of where we want to be, rather than where have we been.
There are so many rapidly changing factors in our environment, that hanging on to the past debilitates us. Here are a few examples of changing factors that your organization might face: new technologies, shifting consumer patterns, volatile economic conditions, commoditization, new competitors in your market, new emerging markets, globalization, new social media, etc.
If you are not forward thinking, these new developments will sneak up on you and leave you in the back of the pack, trying desperately to catch up.
Here are some tips that you might find helpful:
1. EACH DAY that you come into work, forget about what was done yesterday. Yesterday is history and has little bearing on tomorrow. Think about what needs to be done today as if you were starting fresh. Make your decisions based on what you see ahead, not what you see in the rearview mirror.
2. Bring in new people. Promoting from within is great, but it fosters stale thinking. Supplement your current staff and management team with new blood. People who aren’t tied to the past are more likely to be creative and propose new ideas and strategies. In fact, the younger the person, the less likely they are to be tied to the past.
3. Don’t let previous investments determine your future. Money that has already been spent is a “sunk cost,” and is permanently lost. Once you have spent it, it’s gone. Sunk costs are past opportunity costs that are partially or totally irretrievable, and therefore, must be considered irrelevant to future decision-making. The term actually comes from the oil industry were the decision to either abandon or operate an oil well is made on the basis of itsexpected cash flow, and not on how much money has already been spent in drilling it. That money is gone, whether the well produces oil or not.
As CEO, it is your responsibility to ensure that people forget the past and look to the future. You must set the tone within your organization. If you don’t practice this philosophy, no one else will.
*“The CEO’s Role In Business Model Reinvention” Harvard Business Review January-February 2011