The two questions companies should ask to stay relevant

“Someone always sees it.”
“Someone always sees it.”
Image: AP Photo/John Bazemore
We may earn a commission from links on this page.

The specter of becoming an industry has-been, the former trendsetter that completely lost the plot, hangs over every successful business. You might call it the fear of Kodak-ing, or pulling a Sears.

At the Brightline Initiative’s Strategy@Work conference in New York last week, Rita McGrath, a professor of at Columbia Business School and a strategy consultant to CEOs, shared her perspective on what large companies should do to avoid such disruption. A takeaway from her research, she said, is that leaders should always be asking two questions:

  1. Who is listening to that one person in your company that sees change coming before everyone else?
  2. What talents or resources exist in your already powerful firm that could be leveraged, and that would allow the company to stay relevant?

“Snow melts from the edges”

As it happened, McGrath had just returned from Japan, where she had shared a panel with a Fujifilm executive who had essentially steered the photography-focused company toward cosmetics and biotech (paywall), in time to save the company from a near certain end.

“Someone always sees it,” McGrath told the strategists and project managers in the New York audience. “Someone in your organization is paying attention to what’s happening long before it’s obvious to everybody, and one of my questions would be: Who’s paying attention? Who’s listening to that person who says ‘You know, there’s something really weird going on out there,’ or ‘There’s a trajectory that we should be following.’”

McGrath further explained to Quartz at Work where to look for these people. Often, she says, they’re engineers or technologists who stay abreast of developments in their field and can see, logically, where things are going next. What a scientific thinker might not do “is connect that knowledge to what it means for your strategy,” she says. But “if some gigantic constraint is going to be removed, they can tell you, ‘Oh, this is what it may be.’ So that’s one place I would start looking.”

She also offered this important reminder: “Snow melts from the edges.” Company leaders have to get out to the fringes of their organization to see what’s really going on, she said, noting out that most don’t bother. “They sit in their offices and do meetings all day and they’re not really seeing what the customers are saying, what the pain points are, and where the frustrations are. And that’s what you need to be doing in person.”

If you don’t, an innovative disruptor might do it for you.

Why think like a startup when you’re not a startup?

The fashionable response to the ever-present threat of disruption these days is for someone within a large organization to call for a Skunk Works project. Everyone wants to go off and be Steve Jobs, incubating a concept like Macintosh in isolation from the rest of Apple, McGrath said. But such renegade, in-house product strategy teams often dismiss the powerful experience, skills, or knowledge the broader company has to offer.

One of her consulting clients took the approach she endorses instead: looking inward. The company, UPM, which once stood for United Paper Mills, makes paper and wood products. Several years ago, McGrath said, the CEO took a look and said, “Paper, two-by-fours—probably not growth industries. What is it that we’re uniquely good at in the world?” as McGrath tells it. “And the answer they came back with was enzyme technologies.”

Having years of experience turning tree bark and other materials into paper had allowed UPM to develop microbial technologies that were advanced and relevant in a world looking for alternative forms of fuel. The CEO split the company up, running the legacy firm for cash and starting a division charged with figuring out “what enzyme technology means for our future.”

Now UPM is also a leading developer of biodiesel fuels, she says, which also illustrates another one of her points: We tend to think of stability and change as  binary terms, that you have periods of stability followed by periods of change. In reality, both are always happening concurrently, if you know where to look.