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Why are Some Companies and Leaders More Adaptable to Change?

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Posted by Rick Lepsinger October 4, 2018

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Change is difficult, even for some of the most successful companies in the world. With massive technological developments disrupting long-established industries, the average company isn’t lasting as long as they did in the past. A 2017 study by Credit Suisse found that the average age of a company listed on the S&P 500 is less than 20 years, down from about 60 years just half a century ago. Small companies face even greater challenges, with nearly half of them going out of business within five years, making adaptable leadership and agility more important than ever.

Organizations must be able to adapt to change if they want to survive and thrive in the future. In order to do so, they need to find and empower effective leaders with effective communication skills who know how to anticipate opportunities and build a strategy that capitalizes on them. These companies and leaders have a few important qualities in common that allow them to adapt to change more effectively than some of their peers.

They See Failure as a Process, Not an Endpoint

Most organizations talk a good game about promoting risk taking, effective communication in the workplace, and experimentation to foster innovation and promote new ideas, even going so far as to encourage employees to “fail fast” so they can learn from their mistakes. But much of this support for experimentation and tolerance of failure vanishes when those failures cost the company time and money. The problem is usually not that they don’t value innovation, but rather that they neglect to establish a process that manages the risks associated with failure. In the absence of this process, the people who implemented unsuccessful changes are the ones held accountable for the consequences in the form of negative performance reviews.

Organizations with adaptable leadership find ways to account for risk and better manage failure. Any failure is an opportunity to learn and identify potential problems that might not have come to light otherwise. The tech giant Google, for instance, has a famously detailed method for analyzing failures known internally as the “postmortem.” Their process focuses on creating a record of what happened, why it happened, how it was resolved, and what can be learned from the event. The review emphasizes learning and growth over blame, which allows employees to engage in the process without fear of retribution.

Managing failure has its risks, of course, but organizations that encourage leadership behaviors that disrupt the status quo are more likely to create dynamic cultures that can adapt more readily to changing circumstances. The importance of learning from failure is perhaps best articulated by a Honda executive commenting in the wake of the company’s high profile air bag recalls in 2015: “We forgot that failure is never an acceptable outcome; instead, it is the means to an acceptable outcome.”

They Anticipate and Respond to Trends

Assuming that the status quo will never change is a sure fire way to be caught off guard by shifts in the business environment. Just ask Blockbuster Video, which seemed incapable of imagining at its height in 2004 (when it had more than 84,000 employees and over 9,000 stores) that advancements in streaming video might render its entire business model obsolete. Or Borders and Toys R Us, both of which contracted with Amazon in the early 2000s to handle their online retail presence rather than developing their own strategy because they regarded ecommerce as an afterthought that would never threaten their legacy operations.

These companies made the critical mistake of falling into a “success trap,” basing their future strategies on successful experiences in their past. In doing so, they were operating with a set of assumptions about the business environment that were no longer true. By the time they tried to shift their focus and adapt, it was too late for them to catch up.

Successful companies with adaptable leadership don’t just think about what they need to do now to succeed, but also what they will need to do in the future. One of the key strategies to managing change is to prepare for it ahead of time and carve out a place for themselves. Despite failing miserably to capitalize on the mobile device market, Microsoft shifted focus to establish itself as a major player in the cloud provider market. And IBM, already famous for its radical transformation in the 1990s, is repositioning itself once again as a leader in artificial intelligence, hoping to gain an early foothold in markets that won’t fully mature for several years.

The strategies and leadership behaviors that made a company successful in the past will not necessarily translate to success in the present or the future. Changes in technology and customer preferences can have a profound impact on the economy, and organizations must do everything in their power to anticipate trends and develop strategies to thrive in those environments.

They Commit to Learning and Development

Successful companies understand that effective strategic leadership doesn’t happen automatically. It must be deliberately cultivated and developed. Only about eight percent of senior executives can be categorized as strategic leaders capable of facilitating change and driving long-term business success.

Organizations can begin by identifying high-potential leadership candidates and empowering them to take a more proactive role in shaping its overall strategy. Selecting candidates on the basis of tenure or task performance generally instead of leadership and interpersonal skills can often result in tired and overly cautious thinking, which can quickly cause the very high-potential employees organizations need so desperately to become disengaged and eager to leave for other opportunities.

Identifying and encouraging the development of these aspiring agile leaders ensures that companies are filling their leadership pipelines with candidates who have a strong desire to help the organization succeed and meet its goals. Companies need people who are driven by something more than personal accomplishments and protecting the status quo. By creating a work culture that emphasizes adaptable leadership and promotes development and strategic thinking, organizations can put themselves in a strong position to face the challenges of the future.

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Topics: adaptable leadership, adapting, change management

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