Why do some companies prevail in wave after wave of new technology while others are wiped out by the first new one that comes along? It's all about the way a company's leaders think and how that thinking shapes strategy and execution.
I called this way of thinking "strategic mindset" in my recently published book, Goliath Strikes Back. Different strategic mindsets lead to different business outcomes. One "right" one -- "create the future" -- drives an innovative firm to keep coming up with new industry-leading products. The wrong one -- dubbed "head in the sand" -- can drive a once-successful company slowly into the ditch.
I wrote the book this year to counter the tired trope that big companies will inevitably be disrupted by aggressive upstarts. I found some validity to this dynamic -- but only for incumbent CEOs with that head-in-the-sand mindset.
Most interestingly, I found many cases where a struggling company has enjoyed a sustainable growth spurt because of the leadership of a new CEO with a "fast follower" mindset.
A case in point is Best Buy, which now enjoys considerable advantages over Amazon in consumer electronics retailing. In 2012, its CEO, Brian Dunn, departed after Best Buy posted a $1.7 billion loss and he was said to have had a "close relationship" with an employee.
Dunn's successor turned around the company. How so? Hubert Joly -- CEO from 2012 to 2019 -- realized, along with other key insights, that with 70 percent of Americans living within a 15-minute drive of Best Buy stores, consumers could order online and pick up at the store within an hour.
Such contactless pickup has helped Best Buy prevail during the pandemic -- especially with Amazon struggling to meet the two-day delivery premise of its Amazon Prime service.
The point is that CEO mindset matters tremendously for the future of your business. Here are three things you should do to make sure that your company will have the right CEO mindset in the future.
If your company is competing for customers from a revived incumbent such as Best Buy under Joly's leadership, what should you do? Here are three lessons for leaders when Goliath strikes back.
1. Analyze why the incumbent is gaining market share.
I wrote my book because I wanted to take a deeper look at the idea that upstarts disrupt slow-footed incumbents. What I found is that some incumbents have gotten much more agile than they used to be (while other incumbents have fallen further behind).
Just because you compete with a large company, it doesn't mean that you are losing market share to that incumbent. However, if you are losing customers it is essential that you find out why.
To get answers, conduct independent research. As I wrote in November, interview at least 20 customers and find out what factors they use to decide between your company and the fast-growing rival.
To understand why your company is losing market share, ask customers to score your company on each factor and on how well it performs key activities such as product development, customer service, and manufacturing.
2. Investigate the mindset of the incumbent's CEO.
Do the competitive disadvantages highlighted by this analysis stem from weaknesses that you can strengthen or does the CEO of that market-share-winning incumbent enjoy a superior strategic mindset?
Here's how to find out about your rival CEO's mindset: Study interviews with the CEO and people who know them, speeches they gave to students and their employees, their track records in previous leadership positions, and transcripts of quarterly investors conference calls.
3. Assess whether your company has the right strategy and CEO mindset to fight back.
This analysis could have painful implications for you. Last month, I discussed how a head-in-the-sand mindset is deadly to a company's future. If that's how you think and the CEO of that growing incumbent has a create-the-future or fast-follower mindset, your company will not survive the competition.
That's what happened to Art Van Furniture. Its founder, Art Van Elslander, was a locally celebrated entrepreneur who built a chain of furniture stores.
As competitors like Ikea and Wayfair won market share, Van Elslander refused to appoint a successor who could adapt the company to these changes. In 2017, he sold the company to a private equity firm and it went bankrupt this year.
The hard conclusion? If you are too much like Van Elslander, secure your company's future by replacing yourself with a fast-follower CEO.