Fast-growing companies have traditionally used a great innovation to push away from the launch pad. And then the entrepreneurs move into a next stage of growth with a focus on professionalising the business. But the traditional way of building a business can now be a trap. And ironically, innovation can become an entrepreneur’s greatest challenge.
We all know what happens as the company grows: innovation gets harder. Yes, you have more staff who can specialise and can uncover opportunities. But the bigger you get, the dumber you get, the slower you get. Just look at many of the largest companies in Australia.
It is hard to respond quickly, to turn the ship around, or in a new direction.
Change is now so constant, vision and strategy now have a shelf life and books are being written about transient competitive advantage. In fact they are declaring that Professor Michael Porter’s concept of sustainable competitive advantage is dead.
The hot new book on the business scene is The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, by Rita Gunther McGrath, a professor at Columbia Business School in New York and a leading expert on strategy.
She declares that strategy is stuck and that competitive advantage, which is at the heart of all strategy, is no longer relevant. And she says the practice of hiving off innovation as something separate from the business’s main activities needs a rethink, as competitive advantage is now transient.
Transient competitive advantage! I mean, business is hard enough without your competitive advantage being described like a fleeting moment in time and then vamoosh! Where did that go? It was just here . . .
You see, once you have become successful like the entrepreneurs in our Fast 100, you start repeating your success even though your competitive advantage may have vamoosed from under your nose. In fact, one of our columnists, George Beaton, puts it like this: “These days the formation of a vision statement from a legacy mindset is a dangerous thing.”
Who would have thought!
I caught up with online book retailer Booktopia’s Tony Nash the other day.Tony has been on the Fast 100 for five years in a row, so his business is almost a decade old and he absolutely has a legacy mindset.
I asked him how he avoids trying to repeat his success when doing so could put him out of business.
He says when he is creating strategy and is tempted to repeat his past successes, he stops and always asks himself: does it feel the same or has something changed?
That’s a good way to start thinking about your new competitive advantage.
But the biggest danger of failing to innovate is not that you will go out of business. It is this: lack of innovation dulls an entrepreneur’s soul. It depresses the entrepreneur’s spirit until the life is squeezed from us. I have heard this so often from entrepreneurs: It’s harder to get things done. It takes longer to introduce new ideas. I can’t respond as quickly as I used to. It’s time to get out. I’m not having fun . . .
Whaaaat? You have this fantastic company and you want to throw in the towel because you don’t come to work every day and have fun?
But I am being flippant. I know what they mean. And I tell you this because many entrepreneurs whose business has passed through early fast growth approach that stage. You have grown up, hired externally (often from a big business), you’ve introduced systems and processes, you get audited, deal with unions . . . and you start waking up and thinking, Where is the fun?
Don’t get to that stage. Because that means you have stopped innovating and your competitive advantage is disappearing as we speak. You have to keep your structure nimble, responsive, light, fast-moving, agile and transient.
Innovation has to remain at the core of everything you do, and that is what you must become – ruthless innovators.
Because that is how you keep on building your business. But most important, it is how you will stay loving what you do.
*Original Article by Amanda Gome: http://www.brw.com.au/p/entrepreneurs/amanda_gome_bigger_dumber_slower_8lcSDTK5LALbmTSNsSxIgK