Back in 1994, Gary Hamel in his HBR article, Strategy as a Revolution, stated: “Never has the world been more hospitable to industry revolutionaries and more hostile to industry incumbents.” Almost three decades later, this statement rings true even more. The 33-year average tenure of companies on the S&P 500 in 1964 narrowed to 24 years by 2016 and is forecast to shrink to just 12 years by 2027. It doesn’t take much to think of industry giants that suffered untimely bankruptcies or exist today as a mere shadow of their former selves (Kodak, Blockbuster, PanAm, Borders, Toys “R” Us…).
We studied companies that have enjoyed longevity of more than 50 years to understand what they do differently. Those that experience healthy long lives demonstrate what we call strategic incumbency. This involves two processes:
Focusing on the first process, here is an exercise to test whether your organization has become too passive. Look at each of the following passivity traps and ask if your organization is ensnared in them:
If you recognize that your organization is falling into one or more of these traps, you are in danger of becoming a passive incumbent. Passive incumbents tend to be the “guardians of the past”, favoring the status quo and fighting market share battles within traditional industry boundaries. You need to rethink your legacy business models, be willing to step out of your comfort zone, discuss the “undiscussables”, and get ready to experiment to address the changing needs of your customers.
What you need to do first, however, is to change your mindset and attitude to that of an active incumbent. The following table shows how you can start to make the shift:
Passive incumbent assumptions
Active incumbent attitude
We know our customers and provide them with exactly what they want
Customer needs, expectations, and demands are changing every day
We know our competitors; they are trying to steal market share from us
New, competitive threats are appearing from non-traditional players
Our business model is right; we just need to make it more efficient
New players with radically different business models are gaining success
We can compete in new markets with our old model
“One-size-fits-all” model no longer works
Our name/brand will protect us
Rise of insurgent brands and falling brand loyalty is a reality
We have time
Unprecedented pace of change, time is a luxury
In the next discussion, we will look at whether your company is suffering from inertia.
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