Wednesday, May 13, 2015

Longevity Factor #2: Protect and Build on Core Competencies

The second factor in the longevity model is how old companies develop their unique strengths.
Whether we're talking literally about a secret sauce, such as with the McInhenny Co. and their Tabasco sauce, or using the term to refer to a particular technical specialty or core competency, most of the companies that have survived for over 100 years attribute their success to the accumulation over time of some specialized knowledge, skills, or technology. The old companies believe their company ‘secrets’ or special methodologies make the organization and its offerings unique. Such a differentiation strategy sets them apart from the competition and is difficult for others to imitate, thus giving the company a sustainable competitive advantage. This approach to business, which offers differentiation from the competition and is difficult for others to imitate, is consistent with J.B. Barney’s resource-based theory of competitive advantage.

The beliefs held by the old companies that they have unique core competencies, that their products or services were difficult to copy, and that their offerings had a strong appeal other than price are not significantly different from those of a majority of younger firms. However, the old firms were more likely to build on their special skills or technologies in every aspect of their business, including the fine details of their offering, how they train and educate new employees, how they work with suppliers, and how they convey their uniqueness to customers as part of the sales process. Another area where management of strengths is unique among the older companies is in how they build on their core competencies over time. Though the old companies say there are some things that should not change (in product quality, raw and processed materials, and production and sales methodologies), they also report they are constantly working to improve their operations as well as develop and improve their core competencies. Members of the corporate century club know what is unique in their DNA and they cherish, protect, and build upon it.

These old companies are not dinosaurs – they would not have survived through world wars, economic depressions, globalization, changing social and cultural mores, and quantum leaps in technology that created whole new industries (and obsoleted others) if they did not innovate and change. But it is how the old companies go about changing that seems to make the difference. Collins & Porras described this unique approach to change in their book Built to Last: “Visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideas.” 

Old companies tend to take a long time when implementing major change. Because they want to carefully balance the old and the new, they feel they must first affirm their traditional past before altering what is necessary or embarking on something new. This balance of tradition and innovation is a carefully choreographed process designed to honor the past while recognizing the need to change in order to survive. Even though approaching change this way takes longer to implement, it appears to be a significant factor in their successful adaptation over time. By taking the time to first honor what was good about the past, then educating all constituencies (including employees, suppliers, and customers) of the need for change, as well as offering the training and development necessary for participants to update skills and technologies to change along with the company, the old companies are able to move forward keeping their support systems intact. As a college professor, I could not help but notice that these change management practices used by the old companies follow all the principles of successful change implementation taught in business courses. It is rewarding to see that sometimes what we teach is confirmed by successful, real-world businesses.

Old companies have precious histories and a heritage they protect at all costs. However, they do not stubbornly observe their traditions without challenge: it is their ability to change by first affirming their traditional past and then altering what is necessary – the balance of tradition and innovation – that enables their long lives.  This means it often takes them a long time to make major changes, but that is the way these companies successfully adapt over time. 

The longevity lesson: Don't walk away from your past when change needs to take place - build on it. (Don't throw out the baby with the bathwater, if you will.) A company's culture and core competencies are not things that never change or should not evolve: rather they are the building blocks to be used to make the changes. Change is absolutely necessary to survive over the long term - but how you change makes a difference. Drive for change by building on your company's core competencies and unique technologies rather than abandoning them – it make take longer to make the change, but will be far more effective in the long run. 

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