Risk-Free Society: Why Struggling Companies Resist Change

Regular readers of this blog will by now be well aware of our fascination with at least some of the work of the impossibly-named Tyler Brûlé, still Editor-in-Chief at the self-styled briefing on global affairs, business, culture and design that is Monocle magazine and with an increasingly intriguing residency at the Financial Times. A recent column of his in the latter publication (Differentiate – or die, published in the print edition of 18th/19th August 2012) laments the lack of differentiation in industries which are under very significant structural commercial pressures such as magazine publishing and air travel. Brûlé avers that ‘any company…with a strong point of view, solid product, good customer service and great branding’ should have more than a fair shot at attaining high levels of business success; to adduce the legendary Swedish academics Jonas Ridderstråle and Kjell A. Nordström, in the domain of commerce, sameness sucks.

Given this, one would think that there would be every incentive for relatively or absolutely unsuccessful companies to change, yet the reality is, for the most part, one of continued inertia. Why is this? We at Mediolana have had more than a few ideas on this subject, but here are three of the most compelling:

1. Risk. As some of the more lucid accounts of recent and ongoing financial crises have illustrated, risk-taking is rarely valued in most organisations when the going gets tough. Individual actors and groups within companies may run their corporations into the ground with risky and even unethical behaviour in an apparently economic benign climate, but few seem to bother with higher-level thinking when the commercial outlook begins to dim; survival rather than innovation is the name of the game, with top talent often pioneering the rush to the exits.

2. Social Distance. In far too many companies – particularly, though certainly not exclusively, those run along Anglo-American lines – the division between management and factory floor has become a dichotomy of phenomenal rigidity, with much of the human capital in organisations being effectively destroyed by the ghastly inequities that exist within them. With CEOs in the United States creaming off millions of dollars for every US$10,000.00 allocated to ‘ordinary’ workers, the reign of the omniscient company boss is turning into an era of micro-level idolatry – but these gods may not hold all the answers to our corporate imprecations.

3. Difficulty. Many consumers will know from experience the difference between, say, travelling by an airline from the Gulf (Emirates Airlines) or ASEAN (Singapore Airlines, Malaysia Airlines) and a national or regional carrier from the USA or Africa. Suppliers of aviation services probably have an even better idea. But to replicate (let alone implement from first principles) the attributes that Brûlé cites as being central to business success is actually extremely difficult for most companies to do in practice. As is increasingly apparent, most countries excel at some things and not at others, particularly at specific points in time. China PR is not the world’s greatest democracy; Mexico will win no prizes for guaranteeing the basic security of its citizens. Yet on many levels these are regarded as great countries which can and perhaps are supplanting their developed world competitors. What chance have mere companies got of possessing optimal product, branding and customer service at the same time, let alone those facing more testing conditions than their industry average?

 

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4 Comments

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4 responses to “Risk-Free Society: Why Struggling Companies Resist Change

  1. When you’re not doing well in business then capital and confidence can be in short supply, and both are needed to go out there and do something different. Also ultimately there is a high failure rate in business for new ideas. One has to go through learning how to implement new ideas which is tough to undergo. How much resource, time and effort to spend outside core activites is often almost impossible to know precisely. Big players like MacDonalds and Google often get this wrong, so it’s no wonder that smaller players shy away from too much innovation.

    • Very true. It is difficult enough to make things work in the best of times, but in the present ‘denied environment’, fear rules and conservatism is often perceived as overlapping with sensible business strategy.

  2. Supply & Demand or Demand & Supply? It is also up to the consumer to take some risks, which they often don’t. We get what we deserve…

    • Consumers should definitely consider being more adventurous, but they also need the kinds of reassurance that Brûlé describes. A lot of barriers to new products and services could be removed by better presentation, for example.

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