Source | www.gsb.stanford.edu | Lee Simmons
Change is hard. Even mighty firms, with all the necessary resources, perish because they never manage to respond effectively to a sudden shift in their environment — like, say, the rise of the web. (Remember Blockbuster?) Or web 2.0. (Remember Yahoo?)
But why is that? Why do companies so often fail to adapt? It’s a vital question in today’s fast-moving world. Surprisingly, says Julien Clement, assistant professor of organizational behavior at Stanford Graduate School of Business, we still don’t really know the answer.
There’s no shortage of ways to fail, of course. Companies can respond with a flawed strategy. They can be hamstrung by vested interests or internal politics. Or they can simply fail to execute for lack of unfamiliar new skills. But at a more basic level, firms need to recognize the need for change. And as anyone who’s ever had a job knows, organizations tend to operate with a kind of blind momentum, often paddling furiously in the same direction as they sink into insolvency.
Clement found that rigidity especially perplexing. With all the smart, experienced people who make up any established company — not just in the C-suite, but also those on the front lines — why are they slow to change course? Why, he wondered, did firms so often respond to big challenges in small, inadequate ways?
Researchers have long been stymied in solving this puzzle. There are detailed case studies of companies that have failed to navigate shifting currents, but these are unavoidably subjective and anecdotal. It’s very difficult to study how companies adapt systematically, Clement says, because you need both a large sample of firms and a reliable way of quantifying their choices.