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Flexibility to Avoid Failing

Published June 30, 2016

Engineers know that if a building is designed in a rigid manner it will fail under the pressure exerted by trying and changing events. I feel the same is true of companies. Have you witnessed the rise and fall of companies or organizations that get so entrenched and inflexible that they will not or cannot respond to a changing market or turn of events? None jump to mind? How about Eastman Kodak, Blockbuster Video, or Borders book stores.

Kodak in the 1970’s, controlled 90% of all camera and 85% of all film sales only to file for bankruptcy in 2012 for not being flexible and adapting to a digital camera market they helped to  create. Blockbuster had 9,000 locations in 2004 and a chance to buy Netflix in 2000 for $50 million and declined. Netflix became the king of streaming and RedBox took over the movie market by offering movies at a lower cost due to reduced overhead, Blockbuster was defunct in 2013.

Borders, a great example of active inertia (doing the same thing we have always done, the same way we have always done it, by the same people that have always done it) or being inflexible, outsourced all online sales in 2001 to Amazon weakening their position in the marketplace while strengthening Amazons. By the time Borders took the online sales in house and adapted to the marketplace in 2008, it was too late. Amazon had captured their business and ultimately Borders filed for bankruptcy in 2011.

A final example of active inertia is Firestone tires. Firestone was acquired by Bridgestone after failing to respond to what they knew was coming, the radial tire, even though their data and reporting told them that continuing to make non-radial tires would put them at risk of failure. As early as the 1960’s, radial tires were in Europe and came into the US in the 1970’s. Firestone did create some radial plants but continued to manufacture non-radial tires even though they weren’t selling as they had sold in the past. They manufactured so many non-radial, non-selling tires they had to rent warehouses to store the unsold tires further increasing their overhead. They failed to adapt their product and their leaders failed to change despite the fact that the data told them they needed to, which ultimately led to the sale of Firestone to Bridgestone.

So what do these examples tell us about our own businesses? Don’t be complacent, hard headed, or lazy? I think it tells us much more. If we understand our market and the product we deliver it doesn’t preclude failure if we don’t see the big picture in market trends and remain flexible enough to change with what the data tells us to do. Businesses should continually evaluate all kinds of data from job costs, pursuit/win ratios, as well as overhead costs to goods sold ratios. It is with that data that management decisions are made to keep competitive in the marketplace and moving forward. Additionally, keeping an eye on the competition to be sure, but with the philosophy that the rearview mirror is only 5% the size of the windshield for a reason. Businesses will continue to excel by employing the absolute best people, cross training for additional flexibility, and executing the opportunities they create with precision and efficiency. These philosophies allow businesses to expand individual personal talents for additional flexibility in the future, all the while preparing a more solid foundation for years to come.