Five reasons why today’s businesses are woefully unprepared to face real change

As we look to the future, we see the prospect of massive technologic change in several areas. These would be transportation (safer automated vehicles with a 96 percent usage rate rather than a 96 percent parking rate), energy use (distributed solar and wind energy, supplemented by accessible, reliable and long storage), health care (self-healing and life extension through bio-technology and genome research), material strength and resilience (nano-technology), machine learning (computers that “think” and learn) and at-home manufacturing (3D printers).

As a business school dean, what keeps me up at night isn’t change itself, but knowing how to prepare tomorrow’s leaders to steer their organizations through a minefield of real change.

We need to face the truth — we keep cruising on the tired maturity of a second Industrial Revolution that dates back to the late 1870s with the invention of the light bulb, telephone and internal combustion engine. To what degree does the industry landscape of today represent the kerosene lamp manufacturers, pony express operators, and buggy whip manufacturers of the late 19th century? Here are five reasons why today’s businesses are woefully unprepared to face real change.

  1. We don’t get it! We think we live in real change because of social media and Angry Bird games. But compare a person born in 1875 who lives 70 years to see real change (from horses to cars, wood stoves and kerosene lamps to central heating and home electricity, Pony Express to telephone, people actually flying) to one born in 1945 and living 70 years to today (central heating, driving personal cars on freeways, commercial air travel, central heating, plumbing, electricity, phone, etc. all virtually the same). The person born in 1875 lived through paradigm level change. Virtually everyone living today doesn’t know what real change is, so how can we be ready for it?
  2. The limitations of scientific paradigms. Thomas Kuhn’s work on scientific revolutions illustrated to scientists and academics of all stripes that a severe consequence of dominant paradigms is that vision is clouded and restricted to shoehorn any new discovery to fit the existing paradigm. For example, deep in the thick of the second industrial revolution, along comes the computer and Internet networking. Amazing new technology, and what do we do? We spent 50 plus years trying to make it a telephone. We are only now starting to realize what we really have.
  3. Stale theories. Sure, we have theories to guide us, but they are based on a world without real change. It is no surprise that today’s dominant management theory continues to be Michael Porter’s mid-1970s generic strategies, where firms choose to either differentiate or be cost-leaders. After all, we have had 70 to 90 years of “dress it up” or “dress it down” based on nuanced customer needs. What is worse is that academics and business leaders have stretched this relatively static concept further in pursuit of reaching the holy grail — sustainable competitive advantage. Theory is pushing rigid positioning at a time when we need to be more flexible and adaptable. Because we have not lived through change, we don’t have theories or guides to shepherd us through a major disruption.
  4. Reinforced behavior through education. The pattern is self-fulfilling and dangerous. Scholars observe organizational success (generally viewed as exceptional profitability), use the lessons from those studies to build theory, and use that theory to teach the next generation. Suddenly the limitations extend beyond the old guard to acculturation of young future leaders.
  5. We believe in fairy tales. We view the growth of firms as a two-stage process. Stage 1 is the entrepreneurial start-up; an unstable small team with few resources, facing great uncertainty, willing to take chances and fail, with hero-like worship if the firm is acquired. Stage 2 is rich, steady, reliable, dependable, risk-adverse, bullet-proof, with executives shunned if the firm is acquired. This is a fallacy. Every firm is at most a few years from bankruptcy. Research unveils that 87 percent of growth stalls for the largest firms in the world are caused by management actions (not external factors) with the most common threat being premium position capture (invincibility through a sustained competitive advantage)[1]. Don’t believe the fairy tale.

There is much to do. Let’s start with the simple act of teaching, reinforcing, and celebrating the entrepreneurial spirit in all organizations.

Jim Dewald is the dean of the University of Calgary’s Haskayne School of Business and an associate professor in strategy and entrepreneurship. Prior to entering academe, he was active in the Calgary business community as the CEO of two major real estate development companies and a leading local engineering consulting practice, and president of a tech-based international real estate brokerage company. He is the author of Achieving Longevity:  How Great Firms Prosper Through Entrepreneurial Thinking. 

[1] Olson, van Bever, Verry (2008), “When Growth Stalls”, Harvard Business Review