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Adapting to Fast-Changing Markets and Technologies

EXECUTIVE SUMMARY

 

Introduction

Some firms are adept at anticipating and exploiting the opportunities created by technological innovation, while others struggle and go out of business. Successful firms rely on the dynamic capabilities of sensing, seizing, and transforming to stay ahead.

Sensing in Fast-Changing Environments

Sensing emerging threats and opportunities is fundamental to a firm’s ability to adapt. Successful sensing can be understood through two interrelated learning processes -- peripheral vision and vigilant learning. Peripheral vision is the capability to sense signals in the fuzzy zone outside the firm’s area of primary focus. To seek clues and warning signs, watch to see what the outliers in an industry do, and examine the choices of defecting customers. Vigilant learning refers to a heightened state of awareness and curiosity, characterized by alertness, and a willingness to act on partial information. This is an exercise in perspective, requiring managers to immerse themselves in the lives of current, prospective, and past customers, learning latent needs and extracting early insights into emerging customer segments.

Seizing: Developing Opportunities

Detecting changes in the environment is only the first step. The probe-and-learn approach and flexible investment strategy can assist firms in taking action. The probe-and-learn approach relies on small, well-designed experiments that explore new strategic initiatives. For example, rapid prototyping can greatly aid complex design decisions. Less promising experiments can be thrown away, so a culture of “failing fast” should be encouraged. Smaller experimental efforts allow for the type of sequential investments that reduce risk. The flexible investment strategy allows firms to engage in small bets to preserve the right to make a further strategic move, but without any obligation.

Transforming: Internal and External

Sensing and seizing capabilities help create business opportunities for firms, but their full commercial potential can only be realized when the organization itself transforms. The processes of organizational redesign and external shaping are essential. Organizational redesign demonstrates the power of restructuring: one common example is General Motors’ decision to transition to a multi-divisional form with diversified offerings in order to compete with Ford in the 1930s. Cadillac, Oldsmobile, Chevrolet, and other divisions within GM were allowed to operate with more autonomy, improving agility. In addition to internal redesign, transforming can also involve external shaping -- a renegotiation between the firm and its business environment. This process relies on external networks -- for instance, improvements in knowledge sharing and communication is enabling new opportunities for integrating consumer-generated intellectual property and ideas in the process of co-creation.

Implications

Ideally, sensing, seizing, adaptation, and transformation should be less tailored to the firm’s current capabilities and more to future trends and uncertainties. Guiding this type of change will require strong leadership, as the process of evolving a firm -- particularly on the level of organizational structure -- is always a challenge.