I grew up in The Netherlands, in a rural area between Rotterdam and The Hague: Westland. This area is well known for it’s greenhouses. It’s one of the most important regions for greenhouse horticulture in the world. It’s the area where a lot of the world’s flowers and vegetables are grown. Something its inhabitants are extremely proud of. This didn’t happen by coincidence. Local culture is characterized by a “don’t talk, act!”-attitude. Growers in Westland have a love-hate relationship with their daily grind. It’s hard, but brings them a lot. “Toil never hurt anyone” was the mindset my grandfather, a grower himself, lived by. So did his father and his father before him. It was this particular mindset that made a lot of growers in Westland very successful, but ruined many as well.
About 10 years ago, something unexpected happened. One after another, vegetable growers had to file for bankruptcy. In the years between 2009 and 2013 the biggest crisis to date hit the sector. Growers were doing what they were always doing. They worked hard and long hours to produce the best products they could. Yet, all of a sudden, they were not able to earn back their investments anymore. Even by doubling their efforts, they couldn’t keep their businesses afloat. Their strategy, the strategy that worked for decades, in an instance lost it’s effectiveness.
The odd thing is, many growers saw their bankruptcy coming. Year after year, they saw their costs rising and their returns diminish. Yet, they did nothing to avert disaster. They assumed the tide would turn again. After all, they’ve had tough years before and recovered from it the next. Even those that realized that the tide wasn’t going to turn anytime soon, were not changing their ways. Most reverted to doing what they always did when faced with set backs: work harder. As it turns out, rejecting tactics that have proven to be successful in the past – yet aren’t anymore – is hard.
It’s interesting to see this isn’t only true for growers in Westland that have been in business for decades. It also applies to young, small companies and big successful multinationals alike. If you don’t believe me, checkout the stories of Kodak or RIM (manufacturer of BlackBerry phones). These organizations all share a common trait. They relied on previously successful strategies to run their business. Yet, the moment they realized their strategies weren’t working anymore, they were too late to adjust course and avert ill fate. Many tried, but knowing how to adjust course and what to do, if all you’ve ever known to work proved to be invalid, is almost impossible.
The world is speeding up. In the 1950’s, the average age of S&P 500 companies was 60 years. This number has fallen to 25 in the 1980’s and even below 20 in 2012. On top of that, the adoption rate of new technologies is unprecedented. It took stoves almost 50 years to reach 60% of American households. In contrast, it took the microwave just 11 years. Cellular phones needed 9 years to get that far, but this pales in comparison to smart phones. In a little over 4 years time, 60% of the American households owned a smart phone. Organizations need to prepare for these rapid changing environments. Markets are getting less predictable year after year. Even stable, incumbent industries need to arm themselves for disruption. Think about telco’s that lost almost their entire SMS business to Whatsapp. Cab drivers that have to face Uber or hotels that see their guests move to Airbnb.
The way organizations are structured nowadays is heavily influenced by lessons learned in the industrial age. With the emergence of steam engines and power tools, mass production became a new concept. Processes were designed, assembly lines set up and workers were given clear work instructions. To cater for all this command-and-control hierarchies were created. A big pro for this setup was that it allowed organizations to become very efficient. Although times have changed tremendously since the heydays of the industrial age, many companies still follow a similar approach to structuring their organizations. Efficiency seems to be the most important thing for many companies. As a result processes, procedures and work instructions are typically considered the holy grail for efficiency, and in its wake, success. Don’t get me wrong, there is absolutely nothing wrong with a focus efficiency, it can be a very big competitive edge. But consider the aforementioned RIM for a moment. You can be efficiently producing BlackBerry phones all you want, but what if nobody wants them anymore?
In a fast-paced world, businesses can’t rely anymore only on assumptions rooted in success in the past. In fast changing, unpredictable environments, organizations need to change their products and processes just as quickly. Product portfolios should be revised all the times. To support this, organizational restructuring should be a continuous, never ending effort. Organizations need to shapeshift all the time. And to prepare for an uncertain future, organizations need a Shapeshifting Strategy.
A shapeshifting strategy describes how an organization copes with a fast changing environment. Like all strategies, it’s not a formal document. It’s the sum of all actions an organization takes, its (lack of) structures and its culture and true values. How does the company balances efficiency vs innovation, assembly lines vs multidisciplinary teams and control vs autonomy? How does the organization spot threats and opportunities and follow up on it? Does it experiment or change everything in one go? Does it dare to follow new paths and abandon old successes? Can employees speak up or are they expected to stay in line?
There is no magic bullet. There is not one way to implement a shapeshifting strategy. Simply adopting lean or an agile method is not a shapeshifting strategy. As valuable as these frameworks can be, they can be just as dogmatic and hindering as the age old command and control hierarchy can be. At the same time, a clear hierarchy can be useful as well. The crux is, organizations need to find a balance between structures and reassess these all the time. Maybe today you need control in your warehouse, Lean in your planning process, and cross-functional Scrum teams for product development. Yet, tomorrow it might be wise to start an experiment to come up with a solution for a new problem. One for which you need to put some product development guys together with some planners and order pickers in one team and let them figure out their own process. Remember, form follows function.
If the growers that went bankrupt would have had a shapeshifting strategy, changes are they would be still in business today. They might be growing different vegetables or flowers, maybe they would have developed some new type of crop. Or perhaps they would no longer be growers after all. They could even have repurposed their greenhouses for something else: indoor playground, scientific testing grounds or storage for unwanted film rolls and BlackBerries. And what about you? Will you be in business 5 years from now? How did you do this? What is your shapeshifting strategy?