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  • Evolving When Change Poses a Competitive Threat
  • Since change is inevitable, businesses must determine how to respond. Responding in an effective manner is especially important when change impacts the competitive landscape to the point where the business is unable to thrive as it once did. When this happens, dire consequences can ensue if change is not dealt with properly.

    How should a business respond when change poses a competitive threat?

    Generally, huge jumps into new areas should be avoided. It is far better to respond in an evolutionary manner, if possible. I talk about this in my Winning Moves® Special Report "Evolution, Not Revolution." I also discuss the importance of gradual evolution in my July 2011 newsletter article titled "How to Change When a Company Can't Grow the Way It Used To."

    That newsletter article discusses how Southwest Airlines had to change to continue growing when it faced market saturation in second tier airports, its traditional stronghold. Unlike Southwest, however, many companies have to change not merely to continue growing, but to address serious competitive threats. For some, the changing external conditions may even seriously threaten survival of their current business. But, no matter how serious the competitive threats, evolutionary change offers tremendous advantages and is generally the preferred approach. This is the case because a more gradual evolutionary approach builds upon strengths and knowledge that are already there.

    One type of change that often threatens businesses is technological change. Changing technology can lead to market disruptions that threaten entire industries. Today, those technology threats are often internet related. And, companies that evolve relatively gradually in response to the threats are more likely to succeed than are companies that try to cope with technology's impact with a big jump.

    An example is Wal-Mart. Like many bricks and mortar retailers, Wal-Mart faces a potential competitive threat from Amazon. In response, Wal-Mart has placed greater emphasis upon the on-line side of its business. According to a recent Wall Street Journal article ("Finding Value for the Money at Wal-Mart" by Spencer Jakob, November 15, 2012), Wal-Mart's on-line efforts appear to be going well. News sources also reported that Wal-Mart was second only to Amazon for on-line retail site visits on Black Friday.

    Wal-Mart's initial success with the internet is likely bolstered by being evolutionary, as opposed to a big jump. The approach is evolutionary because Wal-Mart has a history of placing a strong emphasis upon applying technology to its business. Years ago, Wal-Mart's use of IT for computerized tracking and management of inventory was far ahead of what other retailers did. So, although doing a number of things right made Wal-Mart a retailing powerhouse, Wal-Mart's technology strengths helped move it ahead of competitors who adopted technology more slowly.

    Thus, when responding to internet-based competitive threats, Wal-Mart's previous strengths applying information technology to its business can be an advantage. As long as Wal-Mart's strength entails an overall technology sophistication that it applies, not just an expertise with older inventory systems technology, Wal-Mart may be far better equipped to address internet competition than many companies are.

    Wal-Mart's potential evolutionary advantage shows up in the kinds of questions that must be asked to address internet based competitive threats. For Wal-Mart, key questions are: How can we build on strengths we have already had applying technology to our business? How can we extend our technology strengths to newer areas like the internet and smart phones? Essentially, Wal-Mart's challenge entails extending its previous strengths to more current technologies.

    This contrasts sharply with the kinds of questions many other companies must ask regarding the internet. Lacking Wal-Mart's technology strengths, these companies need to ask questions like: How do we develop enough capability with the internet, although we have never been particularly strong with technology or IT before? Are there other strengths we can leverage? For example, perhaps there might be some direct marketing skills or other marketing strengths that could be advantageous in the on-line arena. Or, perhaps there might be strengths associated with product exclusivity which, according to the ´╗┐Wall Street Journal article "Big Box Stores Wrestle E-Commerce Gorilla" by Miriam Gottfried, November 26, 2012, Wal-Mart rival Target strives to tap. By doing so, Target may build upon its prior know-how with fashion.

    Nonetheless, companies that did not previously emphasize technology are most likely to fare well if they can find some way to build upon prior strengths. If not, they face a greater learning curve while striving to address internet based competitive threats. As a result, they may struggle to respond and may be more vulnerable to on-line competition than Wal-Mart.

    In conclusion, an evolutionary approach is the preferred response to change. Whether the business is threatened by changing technology or by some other kind of change, evolutionary responses generally work best.

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