Platt Perspective on Business and Technology

Connecting everywhere and all the time, and its impact on structure in markets and organizations – 6: transitioning through change as a strategic, operational initiative – 3

Posted in business and convergent technologies, strategy and planning by Timothy Platt on September 30, 2011

This is my sixth installment in a series on organization and change in the context of everywhere, all the time connected marketplaces (see Business Strategy and Operations, postings 187, 189, 190, 193 and 197) and my third in that to specifically look at the process of organizational change per se.

In my most recent installment before this, Part 5: transitioning through change as a strategic, operational initiative – 2 I began a discussion of two general scenarios in which both operational process, and structural organizational change would be needed, there focusing on sudden, emergent challenges. I am going to continue that general discussion here, turning to the more insidious challenges of gradual loss of effective focus and marketplace efficiency. This is, to quote that posting:

• The more easily overlooked but at least potentially even more dangerous challenge of gradual drift, with tipping point thresholds where loss of effectiveness and competitiveness can seem to suddenly develop. Think of this as situations where a business drifts off course and then suddenly seems to be heading over the edge of a cliff.

This is not an easy or clear-cut topic to systematically write about and for a very simple reason. There are many, many ways that a business or organization can drift away from effectiveness and into genuine marketplace risk, just as there are many possible business models, sources of unique value proposition and sources and paths to competitive advantage. Basically, I am writing here of a situation where outside circumstances from the marketplace change but the business does not see this or respond, or where scale or other internal features should be changed but are not and once again in the face of what should be clear if perhaps slowly developing evidence.

I would take that out of the abstract by citing a particular family owned and managed business that did not make it and as a long term result of bad decisions and failures to act, long made and often repeated. This is an example I have at least briefly made note of before, early in my writing this blog, but it is one that I have thought of many times. And it began with the beginning of the twentieth century as a man who came from a family of leather workers set out to build his own company, to make harnesses and other leather trappings for horses and wagons and with time belts and other leather trappings for people too. This company came to develop a solid reputation and market share in the production of hand tooled premium quality leather belts in particular and that became their mainstay product line. And the founder had two sons who he brought into this business, with a goal of their succeeding him in leading it.

With time one son became company president and the other came to be their board chairman. And for a period of time this business continued to flourish. When the first automobile seat belts were developed, this company made an early entry into that field too, so these two sons of the founder did see a need to innovate to stay competitive. But starting early and probably well before they took positions of leadership there, they persistently saw their main product line as a hand tooled, labor intensive product, and as more an artisanal product – while still expecting to see their company maintain a significant mass-market share. And other companies arose that realized the only way to compete in a mass market context for a product like belts was to machine manufacture, and with increasing amounts of automation and with less expensive materials going into the finished product.

This company had very skilled and experienced artisans making progressively higher and higher price point products, and certainly when their output was measured against that of their competition. The retail outlets that once carried their products and lines drifted away, turning to the less expensive but still attractive and usable machine made alternatives that were being marketed to them.

I add that people age and with time retire and it was becoming increasingly difficult to find workers adequately trained and experienced in the old ways – and just as difficult to keep the old machinery that was used functioning as parts wore out and repair was needed.

They did make a real effort to branch out into seat belts, as noted above, but this was still a tiny market as they tried this well before any laws were passed requiring cars to have seat belts or people to use them. This business venture did not work for them, even as their traditional business lines were facing stiffer and stiffer competition.

A decline in effectiveness and into marketplace irrelevancy probably never happens for any one, single reason and that is also a part of why it is difficult to encompass this topic in any single, simple best practices narrative. The case study I cite here, call it the Tergus Corporation (Latin for leather), did many things wrong, each individually and collectively, synergistically contributing to its fall. The two sons who took over control of this company did not reinvest back into it to upgrade their manufacturing base for their core product lines, and they did not actively reach out to find and bring in new talent and new types of talent needed if they were to remain competitive. Instead, they continued to take out personal profits on an ongoing basis as if the family business was still a market leader and in a strong position to remain that. And the overall effectiveness and viability of Tergus continued to decline until they suddenly hit a wall that no amount of rationalization could set aside – they found themselves facing serious cash flow problems and having to lay people off.

Should this have been visible and noted before they ran into severe liquidity problems? Probably and even where the crisis came about concurrently with the sudden loss of a major chain department store’s business – they decided not to continue carrying Tergus products as their customers were not buying them, looking for less expensive alternatives instead. And a larger competitor bought this company out, or rather what was left of it – a largely hollow shell of what it had been.

I began Part 5 with a door closer example when discussing sudden, emergent crises and I did the same here too, and basically for the same reason – to highlight the potential consequences of actions and decisions made and not made. This happened to be a case study-based story about a family business but for this posting and this series this example is not about family businesses, as any basic type of business in any industry to slip down this type of slope until it hits the edge of a cliff and there is no way back.

I am going to turn in the next series installment to look at businesses and other organizations that drift into trouble but not necessarily into a lethal downward spiral – and with a goal of provoking thought about identifying problems and problem sources early enough to be able to address them. Then, as noted at the end of Part 5, I am going to put this entire ongoing discussion into the context of ubiquitous computing and communications and discuss how our rapidly evolving connectivity and information context is changing change management.

You can find this and related postings at Business Strategy and Operations, and also at Ubiquitous Computing and Communications – everywhere all the time.

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