In 1975, Steve Sasson, an employee of Kodak, invented the digital camera. When he approached his employers with the concept, they said, “That’s cute. But don’t tell anyone.” The senior leaders at Kodak believed they were in the business of making camera films.
Then in 1981, Sony introduced an electric camera. Kodak’s retailers asked Vince Barabba, the head of its marketing intelligence, whether they should feel concerned about digital photography. After extensive research, Barabba concluded that digital photography would soon replace Kodak’s film-based business. Kodak had ten years to prepare itself for the changing trends.
What did Kodak do in those years? It paid lip service to the importance of disruption but clung to its film-based business. It did many things to avoid the future instead of preparing for it, like buying and selling chemical businesses (often in pieces and for losses).
And it paid the price.
The stories of Apple and Amazon are a stark contrast. After Steve Jobs returned in 1996, Apple revolutionized not just itself but also the entire market. Amazon went from strength to strength (even during the dotcom bubble burst) under Jeff Bezos.
In other words, the success or failure of an organization’s ability to reinvent itself depends on its leaders.
Traits of Leaders Who Reinvent Themselves and Businesses
Reinvention is not an overnight process, nor is it easy. In the post COVID—19 era, everyone is emphasizing the importance of reinventing their business. But few are talking about how to do it.
At the heart of a business’ ability to reinvent itself lies its leaders’ ability to reinvent themselves, to die and be reborn every few years.
Like individuals, companies reinvent in one of two cases: in a crisis, or in the face of new opportunities. If a crisis forces a company to change, it indicates a problem with the leadership. If a new opportunity makes a company change, it indicates a forward-thinking leadership.
What distinguishes forward-thinking leaders from the rest? In my years of studying businesses deeply as a value investor and guiding hundreds of entrepreneurs associated with SME Value Advisors, I’ve noticed three key traits.
1. A Future-Oriented Perspective
Kodak founder George Eastman’s future-oriented vision was critical for the company to thrive for as long as it did. He gave up a profitable dry-plate business to move to film when he realized that film was the future. He invested in color film even when its quality was inferior to black and white when he sensed that color photography was the future.
The same trend played out many times where leaders gave up traditional core businesses, reinvented themselves, and reaped the rewards. Each of them had an eye on the future despite being involved in daily operations. The ones that didn’t, paid the price.
Good leaders set aside time to educate themselves. They also build their version of Emperor Akbar’s durbar – a battery of brilliant minds to engage with. I try to emulate them by setting aside 20 percent of my time each week to educate myself about the future and encourage my team to do the same. The outcome of this is that we constantly embark on wonderful adventures at SME Value Advisors.
If you mindfully ponder over ways to improve your core competence, build complementary competencies, and apply them in ways that create value for your stakeholders, you’ll build a robust future-ready business.
But how will you find the time for this? The answer to this pressing question lies in the next point.
2. A Robust Delegation Process
At a subconscious level, all leaders understand the importance of delegation if they want to move to bigger things. But they struggle to practice it because of their obsession with perfection.
Obsessing over important details is good. But doing it in everything creates two huge problems. First, it ties leaders into everyday operations since they assume that they’re the best at everything. Second, it builds a disengaged workforce that only follows orders and takes no initiative.
A leader’s true value is not in doing things better than his people. It’s in thinking, giving a direction, monitoring situations, and preventing things from going wrong.
When building SME Value Advisors, I found the right people to delegate tasks to and leveraged their competencies. If this sounds easy, it wasn’t. I’m still learning. While hiring someone, I check for five key traits – integrity, intelligence, energy, discipline, and dedication. Then I build systems and processes to enable them to achieve what they set out to do. This leaves me with time to do things that add value to the firm, like deliver keynote speeches, build strategic relationships, and more.
When you delegate your existing tasks, you build engaged and committed teams. You also prepare yourself to do the third thing that effective leaders do well.
3. A Readiness to Cannibalize Their Products
The “preserve what we have at all costs” mindset makes leaders work hard in the present moment. But when the direction of the wind changes, they’re often left stranded. Kodak, General Motors, and other companies that faded over decades are tragic examples.
Most leaders focus on their products and competition. But astute leaders focus on their customers. They understand that customers don’t buy products or services, but solutions for their problems. With time, customer behavior evolves, which means the solutions must evolve as well. If this means businesses must cannibalize their own products, so be it.
White-goods, automobile, and electronics companies are good examples of businesses that constantly kill their own products and create new ones to retain (and increase) market share instead of retaining their products and killing market share in the process.
To build a competitive edge that keeps you ahead of the curve and makes your organization thrive in the long term, you must cannibalize your own products.
In 1955, the lifespan of the S&P 500 companies was 61 years. In 2015, that number stands at seventeen years. Any company that doesn’t move with the times perishes.
The three key traits of leaders who reinvent themselves and their companies are:
- A future-oriented perspective. You can build this by setting aside time each week to read, think, and engage with sharp minds about the future.
- A strong delegation process. When you build a strong team of trustworthy people, you can delegate effectively and move to bigger tasks.
- A readiness to cannibalize their own products. If your current products don’t serve customer needs, replace them. Your products are not an end in themselves, but a means to help you retain (or increase) your market share.
What other traits have you observed in leaders? Do share your thoughts in the comments. I would love to hear from you.