The Shape Shifters: Continuous Change for Competitive Advantage

Part II

The following is Part Two of an excerpt from The Shape Shifters: Continuous Change for Competitive Advantage, the latest book from IW columnist John Mariotti, president of The Enterprise Group, Knoxville, Tenn. View Part One I live on a hill that overlooks a vast expanse of forest. In this forest there are trees of all different species, sizes, and ages. While I looked at this work of nature one day, it struck me that there was a message here that could be applied to organizations, especially business organizations. I began to focus on one tree, great in both height and girth. It was, I assumed very old. In fact, there were no small trees in the shadow of its huge branches. The large tree dominated its part of the forest. Its spread was so impressive that it completely excluded new growth (even its own seeds) from taking root in its shadow. But all around it, the trees were mostly of the same species, of varying ages and sizes, which obviously grew from the seeds of the great tree. Other plant life, too, flourished outside the tree's shadow, and the diversity was beautiful to behold. As majestic as the large tree was, its setting was only enhanced by the surrounding growth. Alone, it simply wouldn't have been as impressive, because there would have been nothing for comparison. One day, in the very early spring, a great windstorm swept through the forest. Never before has such a wind blown through the forest. Other strong winds had knocked down the smaller, dead, or dying branches of the large tree, and this natural pruning was healthy for it. But this stronger wind tore at the great limbs and branches of the tree as never before. By virtue of its size and age, the tree was rigid and unyielding, whereas the smaller trees were able to flex in the wind and remain unharmed. As the wind whipped the mighty tree, one of its large limbs broke, with a resounding crack, and fell to the ground. Once a strength, now its huge size and weight worked to its disadvantage. But soon thereafter, something different and new began to take place on the ground beneath where the large limb had hung: The sunlight and rain fell through and some of the seeds from the large tree that had fallen there began to grow alongside many other plants. This new growth was much different from the rest of the area around the big tree. It was very diverse and flexible; it was also aggressive, growing very fast, often doubling in height in a single year. Still, the large tree continued to dominate its part of the forest. Then another major storm came, and another limb broke off the great tree. It was as large as the first, and it was from a part of the tree near the first break. The very core of the great tree was now exposed. The first broken branch had lain on the ground for some time, and the burrowing, sucking, and chewing insects had found it. From there they had moved to the healthy trunk of the tree, where they found access to other old wounds. As seasons went by, some of these infested areas began to rot, and the parasites continued their slow, steady march. In contrast, the new growth around the great tree continued to flourish, gathering greater amounts of sunlight and moisture. As time went by, the old tree slowly gave way to the ravages of storms and parasites. With each broken limb and fallen branch, more aggressive new growth sprouted around it. The trees that had taken root in the area exposed by the original broken limb were now quite large, and still growing rapidly. They were now competing for the light and moisture with each other and not only the great tree. Finally, after much of the great tree's strength had been destroyed, it toppled over. Its once proud bulk lay on the ground, in somber, sad repose. A few of its roots remained linked to the soil, and some new growth appeared on its limbs each spring, but most of it was a broken and decaying hulk. The new trees that had sprouted in its space now blocked its meager growth from the sunlight and took the nourishment from the soil. As they grew taller and larger, it became apparent there was no longer room for all of them to become as dominant as the great tree had been. Like their predecessor, they could no longer flex with the swirling, stormy winds. Their upward growth had slowed, too. In such large trees, the sap took too long to get to the top for them to become flexible or grow much taller, although they spread their large, rigid limbs outward in an attempt to grasp more sunlight. Their deep roots had to reach even further down to nourish their large frames and cling to the territory they now claimed. They, too, were bound by nature to fall victim to the ravages of time, the strong winds of change, and the growth of the young and the flexible. Trees can not grow to the sky, and neither can companies. Their own size, bulk and inflexibility become their limitations. Thus, the "shape" of the forest is constantly "shifting." Old growth matures and dies off, and new growth takes its place. Nature's messages are subtle but powerful. Often, we ignore them. More often, we are simply unaware of the messages because we do not know to look for them. One thing is certain. We can learn from the laws of nature and the story of the forest. Markets have limits just as the forest does. The wise business person picks only a limited area of the "forest" to shape, lest he or she be spread too thin. Like trees, the competitors who can grow yet remain flexible will survive and prosper the longest. Many companies came to mind as I wrote this: Bethlehem Steel, PanAm, US Steel, General Motors, even Sears and IBM, to name some of the best known. These once large and powerful "trees" have met a variety of competition. Some withstood the competition and survived, but not without massive pruning and reshaping, Companies like Nucor Steel, Southwest Airlines, Toyota, Wal-Mart, Intel, and Microsoft are now the large trees in the forest. What will their life cycle look like? When will they succumb to the disease of bigness? How will they have to change, and will they do so? Perhaps the most well known and consistently profitable example of a shape-shift from one area of the "forest" to an entirely different one is provided by General Electric, under John F. Welch's leadership. In 1981, GE was a behemoth, deeply entrenched in cyclical, big-ticket, heavily unionized businesses. Welch decreed that he would simplify management and stay in no businesses where GE could not be either number one or number two. He bought RCA and NBC, and sold the unprofitable small home appliance business. He sold the consumer electronics business and pushed into financial services. GE currently leads all U.S. companies in market capitalization, and Welch's management has proven hugely successful for GE shareholders. GE under Welch has been termed the world's only $80-billion growth company. Even as I write this, Welch is reshaping GE again. Instead of depending on any tree to grow to the sky, Welch is constantly and continuously planting new trees and moving to new parts of the forest, while not abandoning the still healthy old parts. Welch is also bundling services around the products like the new growth surrounding the large tree. As Theodore Levitt so aptly described in his book The Marketing Imagination (The Free Press, 1986), Welch and GE are creating "...the enhanced product, the expanded product..." Only through a journey of constant shape-shifting can businesses capitalize on the changes occurring in the natural environment in which they must compete. In The Shape Shifters I describe why the changes are necessary, what defines the changes needed, how to get started shape-shifting, and then close with some final thoughts on where next. Let the journey begin.

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