Innovation is difficult for any company – no matter how big or small. Often times the drive to continue to execute and succeed outweighs innovation and game-changing creativity; particularly in companies that are already well-established. Yet, there is always a way to innovate and optimize existing business. A few years ago, I joined a 50-year-old company that was a communication and financial printing business, in addition to being a platform for enterprise collaboration and due diligence.
As CEO, I had direct insights into how each piece of the business had both interesting and competitive challenges, as many were in a slight decline and at risk for technical or regulatory disruption. After a few months, it was clear we had come to a crossroads – we had to decide the fundamental direction of the business. After much discussion, we ultimate placed our bets on our technology platform. While the transformation, which included several divestitures, was not always easy, this line of thinking put the company back on a path of growth and profitability.
As we continue entry into the fourth Industrial revolution, which is a blur of the digital and physical worlds, older organizations still have the ability to adapt and succeed. However, to be successful, they must undertake a continuous business revolution that fosters transparency and trust, embraces technological disruption, and still puts a strong emphasis on the customer experience. These are my top tips for company CEOs and leaders looking to innovate their current business model.
Examine Existing Legacy Products and Services
“We’ve always done it this way” is a phrase that should raise a red flag, no matter what industry you’re in. Most people are creatures of habit, and working against existing organizational inertia means having complete buy-in at all levels – from the mail room to the board of directors. To be successful requires open and near-constant communication on items such as where the company currently stands, why it is vital for the company to adapt to change, and how, at every level, each employee can significantly add to the company’s transformation.
The process starts by having a difficult, but realistic conversation with management and leadership about the limitations of your legacy services and products. Can they be reinvigorated with investment? Is a spin-out or divestiture more realistic for capturing remaining value?
Handle Assets Carefully
To gain maximum value from declining assets, a divestiture or asset sale is always an option. Yet, this has the potential to create uncertainty within the business and amongst staff, particularly those likely to move to the acquiring company.
Over the past few years, I have completed several divestitures which I can confidently state resulted in a healthier core business and positive outcomes for employees. Yet this was not without a downside, as the emotional situations associated with divestitures needed to be handled carefully, and with clarity. Divestitures that are successful are the result of the hard work by those who must perform the monotonous unraveling of systems and lifting of data records.
Lean into Company Strengths
While it may not seem entirely possible, older organizations do have the ability to successfully adapt to the changing times. Yet there is a significant distinction between reinvesting a current company to become a tech business, and enhancing an existing business using technology. Older organization can adapt to the changing times; but there is an important distinction between reinvesting your current business to become a tech company, and enhancing your current business using tech.
The latter strategy requires you to think about what existing technology you can integrate in the short-term, but also have a vision for emerging technologies that will grow with your business. For example, something like artificial intelligence might not present an immediate solution to your current business model, but, in the long-term, it could give your company a competitive edge. New technologies not only provide a wealth of opportunities for businesses to enhance their current operations, but also create the potential for new revenue streams. For example, at Merrill Corporation, several years ago our team decided to invest in new infrastructure for our Datasite platform. Today, that decision is driving positive change for our customers in the due diligence space, and will soon address the inefficiencies still present across the M&A lifecycle.
Think Milestones, Not Marathons
One thing to keep in mind is that transformation does not happen quickly. Companies that are currently on the upswing likely experienced several years of painstaking work. As a leader, it is important to think of transformation as a journey, not a race. Races have defined endings, while transformational change is a continuous mindset without a concrete end date. We must challenge the status quo every day. While technology may be providing the fuel for this revolution, ultimately, it will be the human elements of transformation – skills, hopes, passions – that determine where a company will be and what it will achieve.
One way of nurturing ongoing change is progress reporting. Defining and observing key transformation milestones is an essential part of transformation, and the key to maintaining engagement. With the right partners, persistence and plan, older companies have the ability to pivot toward a technology-enabled future – they just have to get out of their own way.