Outlasting competition is difficult. Doing so over decades or a century is a monumental challenge. That's why companies of all sizes care so much about innovation, investing in emerging technologies, and fostering a startup mentality and culture.
In my work leading executive education programs at the Center for Effective Organizations at USC, I come across many great companies, case examples, models, and tools. I recently uncovered a book that addresses what I see as one of the most important mandates of modern business: how to avoid organizational lag and continually reinvent the business and the business model.
The book is Leap: How to Thrive in a World Where Everything Can Be Copied by Professor Howard Yu from the IMD business school in Switzerland. Yu explains why, in the midst of global competition, countless players have fallen, but some pioneering companies have managed to endure and even prosper over the course of centuries.
Yu describes how he grew up in Hong Kong and that there was a time when the city was the world's largest toy exporter. Hong Kong was also known as the "Pearl of the East," a major manufacturing hub for labor-intensive industries. But by the 1980s, Hong Kong's manufacturing cluster had all but imploded. Factories moved to mainland China, and with them, manufacturing jobs. It happened at a time when policy makers throughout the world still singularly praised outsourcing as the next best thing aside from sliced bread. It all happened decades before any free-market economist would become alarmed that China might one day catch up to the United States.
Perhaps because of his yearning for economic stability in his hometown, Yu found that today's pharmaceutical industry in Switzerland offers a timeless lesson for today's executives. He noticed that in contrast to the automotive industry, where global competition has decimated Detroit, relegating it to the American Rust Belt, the wealth in Basel, Switzerland, where Novartis and Roche are headquartered, seems forever bountiful. The city's inhabitants also enjoy the highest standard of living in Western Europe. And the way these century-old drug makers compete, those who continue to lead the latest developments in extraordinary cancer treatments and HIV therapy, is vastly different than the classic competitive strategy that every business school still preaches.
Jeff Bezos once said that "A company shouldn't get addicted to being shiny, because shiny doesn't last." Similarly, Yu argues that intellectual property, market positioning, brand recognition, manufacturing scale, and even distribution networks can never withstand competition for long. No value proposition, despite its uniqueness, will remain unchallenged. This all makes perfect sense in today's disruptive world.
Good designs and great ideas are copied regardless of patent laws and trade secrets. The only way to prosper over long periods then is to leap: Pioneers must jump across knowledge disciplines to create new knowledge on how a product is made or a service is delivered, as is the case in Swiss pharmaceutical companies. Yu shows through a historical analysis that the pharmaceutical industry has been leaping across knowledge disciplines--chemistry, microbiology, and genomics. The result? Innovation and new growth opportunities for the industry, and the geographic region--just like Silicon Valley has invented and reinvented itself over time.
According to Yu, in order to "leap," businesses must be aligned around five fundamental principles:
- Understand your firm's foundational knowledge and its trajectory.
- Acquire and cultivate new knowledge disciplines.
- Leverage seismic shifts.
- Experiment to gain evidence.
- Dive deep into execution.
Yu believes that the future is not entirely unpredictable and quotes Steve Jobs on the topic: "Things happen fairly slowly, you know. They do. These waves of technology, you can see them way before they happen, and you just have to choose wisely which ones you're going to surf. If you choose unwisely, then you can waste a lot of energy, but if you choose wisely, it actually unfolds fairly slowly. It takes years."
For Yu, the two intertwining trends that propel all companies into the 21st century are evidently the inexorable rise of intelligent machines (e.g., artificial intelligence) and the emergence of ubiquitous connectivity.
One example Yu cites is Japanese publisher Recruit Holdings, founded in the 1960s. As an advertising company publishing magazines, Recruit went online during the early days of the Internet and extended its advertising services into sectors including the real estate, bridal, travel, beauty salon, and restaurant spheres. And by 2015, as the company's digital platforms gained popularity, Recruit noticed the enormous amounts of online data on types of transactions and end-user behaviors. It then proceeded to establish an artificial intelligence research laboratory in Silicon Valley, where its management started to apply the latest technologies in data analytics and machine learning. All these changes are not because of an overnight revolution, but rather, ongoing evolution through committed experiments over decades.
So, here's the trick: Identify the big trends you want to ride, commit to experimenting with new ideas, and stay the course over the long haul. Sure, maybe that's easier said than done. But that's how you leap.
Note: This article contains affiliate links that may earn Inc.com a small fee on purchases originating from them. They do not influence Inc.com's editorial decisions to include mention of any products or services in this article.