Just as human beings are organisms that grow, change, and adapt, so do successful businesses. In 1970, the US futurist Alvin Toffler published Future Shock, a book that predicted the coming phenomenon of “a perception of too much change in too short a period of time.” The pace of change, he said, would also spread to the world of business, as companies were forced to adapt their products and processes to maintain advantage in an increasingly competitive market.
Toffler’s ideas of the effects of rapid technological change were viewed at the time as far-fetched, but with the invention of computers and the Internet, change has accelerated even more rapidly than he predicted. Toffler presciently claimed that we would live in a state of “high transience,” in which we would give ideas, organizations, and even relationships an evershorter amount of our time. Social media websites are witness to this idea in action, providing a platform for the new ways we have begun relating to one another; they also demonstrate new ways of starting, growing, and building businesses.
In 1989, US computer scientist Alan Kay claimed that it took 10 years for an innovation to go from the laboratory to everyday life, but by 2006 Twitter had managed to cut this down to just four years. Products can now be bought online from anywhere in the world, and customer feedback is instant and global. The challenge for companies to adapt and reinvent is huge.
Products and processes
The personal and business landscape has changed so radically since the 1960s that no industry or corporation has proved immune to its effects. Consider, for example, the music and movie industries. New technology has completely, and very rapidly, changed the way that movies and music are purchased and consumed. For the big movie and music businesses (and all their associated suppliers and producers), survival has required a high level of reinvention and adaptation.
This reinvention has come in the form of both new products and new processes. Product adaptation involves updates and redesign essentially, innovation and invention. The movie industry has undergone many transformations since the early days of black-andwhite moving pictures, or “movies.” It has reinvented itself through technology (from adding sound to creating “impossible” computergenerated images); marketing devices, such as monthly access cards; events, such as outdoor screenings; and the growth of the multiplex to multiply visitor numbers and reduce turnaround times. The newest product aimed at luring viewers away from illegal downloads and back into movie houses is Stereoscopic 3D itself a reinvention of an older idea.
Around the turn of the 21st century, the music industry was also struggling because of the drop in sales of CDs, and began to refocus on live music and merchandise. However, both the music and movie industries found new life through digitization, such as Apple’s iPod and iTunes. This revolutionary combination of product and process Apple’s hardware and software made legal downloads of music and movies more attractive than illegal versions. In 2013 the Apple iTunes store offered 60,000 movies across 119 countries, and 35 million songs.
Innovative methods
Process adaptation involves finding new ways to do things; it involves introducing or removing processes. Competition from online sales and pirate streaming continue to affect movie distribution companies such as Netflix. The response of this highly popular video streaming service was to make all the episodes of one television series (House of Cards) available for download simultaneously; the rationale being that the risk of piracy would be lower if consumers were able to legally buy all episodes at once.
For Netflix this bold strategy was not just a radical new process; it was also an adaptation of the company’s entire business model. Still in the adolescent stages of growth, in 2012 Netflix was primarily an online streaming service, but for House of Cards it entered the world of production. By producing and distributing, Netflix was able to capture more profit and gain more control over content. Netflix did not
Product adaptation in the music industry demonstrates the steady use of new technology from gramophone to vinyl, cassette, CD, minidisc, and MP3 digital music file as companies have sought to broaden the market for music.
know if the House of Cards experiment would work. It did know, however, that in order to maintain the momentum of early growth, it needed to adapt and reinvent—in this case reinvention as television producers as well as distributors.
Internal changes
Reinvention and adaptation can also be internally focused on systems, recurrent tasks, or operational activities. Whether improvement of this type is based on data from formal process improvement frameworks (such as Total Quality Management) or simply on the experience and intuition of managers, internal process adaptation allows companies to maximize revenue while also reducing costs.
The McDonalds McSnack Wrap, for example, takes staff only 21 seconds to make the shorter the preparation time, the greater the number of customers that can be served by the fewest staff. At R Griggs Group Ltd, manufacturer of Dr. Martens shoes, a reinvention of internal systems allowed the company to exploit global sales opportunities. In 1994, due to the brand’s growing popularity, demand far exceeded manufacturing capability. Poor planning and coordination led to delayed production and lost sales. The solution was a reinvention of internal systems based around an integrated IT system. The product itself the classic “1460” eight-laced leather boot changed very little, although more designs were later added to the product range. The key change was the adaptation of internal processes, which ensured supply could match demand.
Adapting in a recession
Internal process adaptation is even more important in markets where demand is static or falling. Operational efficiencies, rather than revenue growth, are the key to profit. For insurance companies, for example, scope for new product adaptation is limited, so competition is price-based especially in a recession, when customers are particularly price sensitive. The key to maintaining profitability while remaining price competitive is continual process improvement the reinvention of internal systems that deliver the same product to customers, but at a lower cost and, therefore, increased profitability. The days of the door to door insurance salesperson have long since been replaced by telesales and an e commerce approach.
Reinventing the company
A notable company that has successfully reinvented itself is Samsung Electronics. Established in 1969, Samsung Electronics is a subsidiary of the Samsung Group, which aimed to exploit opportunities in the emerging technology industry. The company began with black-and-white televisions and moved into home appliances during the 1970s. In the 1980s, production grew to PCs and semiconductors.
In 1986, Samsung released its first car phone, the SC-100. The product was a disaster the quality was so poor that many customers complained. This reputation for poor quality blighted Samsung for much of its early life, since consumers regarded its goods as inferior to premium Japanese products.
On June 7, 1993, chairman Lee Kun-Hee gathered senior Samsung executives and declared that the company needed to reinvent itself. His famous instruction “Change everything except your wife and children” shows how seriously he took the situation. Lee also recognized shifting market dynamics, telling colleagues that the company needed to “produce cell phones comparable to Motorola’s by 1994 or Samsung will disengage itself from the cell-phone business.” The “new management” initiative that followed, supported by product and process innovation, put the emphasis on the quality and innovation that Samsung is now renowned for, and galvanized Those its foundation for future growth. Samsung’s transformation was not yet complete, however the Asian financial crisis of the late 1990s forced the company to reinvent itself yet again. Adapting its process turned Samsung into a more market-focused and consumerfriendly brand. Since then the company’s efforts, particularly in the cell-phone industry, have been based on constant attrition, reinvention, and adaptation.
Long term survival
Few businesses survive without adaptation or reinvention. Products such as Kellogg’s Cornflakes and Heinz Beans products that have not changed in decades are rare. Even when a product has not changed, many of the processes used in its manufacture, distribution, and marketing have altered dramatically. The factories of 100 or 50 years ago were very different than today’s, where many tasks are automated and fulfilled by computers and robots. Promotions have also adapted to fit changed consumer demographics, globalized markets, and customer preferences. Even established brands cannot avoid reinvention.
Truly successful business transformation is rarely due solely to discovering and commercializing bold new ideas, technologies, and products. The most successful businesses know that reinvention is a continual process. Social media, for example, has created a market shift that has required businesses of all types to adapt; even record labels now embrace the promotional value of websites such as YouTube.
The ecosystem in which a business operates is rarely, if ever, static. Corporations exist in these ecosystems as living organisms that must adapt to survive; great leaders know that failure to adapt leads to extinction.
Lee Kun Hee
Born on January 9, 1942, Lee Kun-Hee is Chairman of the South Korean conglomerate Samsung. Holding an economics degree from Waseda University in Tokyo, Japan, and an MBA from George Washington University in the US, Lee Kun-Hee joined the Samsung Group in 1968 and succeeded his father as Chairman on December 1, 1987.
Samsung is the quintessential example of a chaebol, a uniquely Korean conglomerate that mixes Confucian values with family ties and government influence. Under Lee’s stewardship, the company.
Has been transformed from a Korean budget brand into a major international force and, alongside Sony, is one of the world’s most prominent Asian businesses. Samsung Electronics, the conglomerate’s most famous subsidiary, is a leading developer of semiconductors, TV screens, and cell phones—with its smartphones even outselling the iPhone in many markets.
The Forbes 2013 Rich List recorded Lee as the world’s 69th richest billionaire, and the richest Korean.
