Strategy & Leadership

Challenges for market leaders in 2016

April 28, 2016

Global

April 28, 2016

Global
Shilen Patel

Founder

Shilen is the founder of leading innovation, acceleration and corporate venturing agency Independents United which works with major brands to help them innovate. 

How legacy thinking can damage your business and how to overcome it

We are currently living through a period of seismic change and people are becoming familiar with competitive new market entrants such as Amazon, AirBnB and Uber. Ceaselessly, the question is being asked; how can market leaders respond to these changes?

A successful response needs to build on an important imperative - breaking free of “legacy thinking”. This type of thinking refers to ideas that were created during the Industrial Revolution and have been refined in the centuries since. It has led to tried and tested strategies such as “be the first”, “be the biggest” or “be the fastest”. Now, such an approach may lead to a company’s downfall.

Today we live a world where the rules that are built on ‘post digital’ principles are in constant flux. Technology is making it ever easier and cheaper to enter new markets and ever harder for market leaders to maintain a competitive advantage. To ensure survival, organisations need to proactively adapt to this new emergent world by shaping their own future.

In this respect there are three key areas that CEOs need to focus on:

Innovation beyond existing products

Established companies tend to focus the majority of their innovation resources on existing products or services and through leveraging current technologies. This incremental innovation often shows little difference between past goals and future objectives.

Technology isn’t just creating incremental change - it is creating whole schisms which are happening at incredible pace and on a massive scale. Importantly, it is changing the fundamental nature of business - how people work and what constitutes the best talent, as much as the production processes embedded in a business. Regardless of the focus of an organisation, technology and data are key components these days. 

A good example of a company that is thinking more radically is BMW. It is responding to the changing needs of the millennial generation by creating technological and data inspired solutions around ‘personal mobility’. This type of thinking is evident in the recent announcement of their intention to launch a “premium Airbnb for cars” service - fleets of cars available for rent directly from BMW on a per minute basis.

Leveraging entrepreneurs

Legacy thinking dictates that companies should try and innovate using only internal processes, expertise and resources. However, while established companies are good at scaling products and services efficiently they can be poor at inventing brand new creations and can struggle to market them successfully.

Luckily, entrepreneurs are brilliant at this. They’re also extremely good at spotting opportunities and are prepared to work hard to turn emerging ideas into nascent business opportunities. It is for this reason that there has been a huge rise in corporate venturing over the past decade across all industries, with more and more big corporates looking to work with small start-ups.

Modern leadership for better innovation

Legacy leadership is often associated with power hierarchies- rigid processes and top-down management where “command and control” is the end game. This type of leadership is mainly suitable for stable and predictable environments, not for any environment of change. Organisations have to be agile, open, collaborative and highly networked to be successful.

In order to shape the future, leadership will need to embrace this highly ambiguous and complex new world. “Bottom up” leadership will be required to support flexible and highly adaptable teams where processes are always evolving.

To survive this, market leaders will need to start experimenting and adopt a constant state of “beta testing” with a huge bias towards action. 

 

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.

Enjoy in-depth insights and expert analysis - subscribe to our Perspectives newsletter, delivered every week