Just a few years ago, executives of the Fortune 1000 were looking over their shoulders wondering whether the twenty-something CEO of a Silicon Valley start-up was about to displace their corporation, thanks to some perceived e-enabled strategy. Much of this fear proved to be a mirage. It was the established competitors who turned out to be the real problem. After all, Toyota and Honda have done more to displace General Motors than Autobytel or Amazon, and are likely to continue to do so. Yes, there will always be a few industries in the realm of technology in which start-ups can catapult themselves to the top overnight. But in most cases, the challenge is from other, more lasting, forces—threats of acquisition, shifts in demographics, changing customer needs, savvier competition, changes in supplier capabilities, new and emerging channels, the appearance and disappearance of government regulations, economic ups and downs, and the inertia of our own organizations. The bad news is that this set of forces will never vanish. As a result, our world is in perpetual motion—a phenomenon with profound implications for organizational strategies; namely, the very strategies that provide performance advantages over the competition have remarkably short life spans. For example, research conducted by McKinsey & Co. has determined that not a single company has continually outperformed the stock market over the long term. These studies have also shown that even survival can be challenging. Only 74 companies on the Standard & Poor’s 500 in 1957 made it to the same list in 1997. Of these, only one dozen outperformed the S&P over that time span. The implications are clear: leaders must constantly reconfigure their strategies and their organizations just to ensure survival.

The challenge for leaders is to build agile, perceptive organizations. One way to do that is to minimize bureaucracy. Another is to keep the organization exceedingly close to the customer in every possible manner. The third is to listen to voices on the front line in shaping corporate strategy; after all, they are usually the first to see emerging threats and shifts in consumers. The fourth is to protect the mavericks—the iconoclasts, those who often drive you crazy with out-of-the box ideas. The fifth is to promote people who support reinvention and innovation and back them up with rewards.

In addition, leaders must discipline themselves to continually re-examine their business models, engaging the entire organization to ask, Does our value proposition still make sense? What in our business model needs to be reinvented? Where are our non-customers going and why? The biggest problem with such an undertaking is that the most powerful individuals stand to lose the most in an organizational transformation. Often, they will resist the changes necessary to move ahead in order to avoid losing power.

Finally, there is the issue of organizational culture. In any change effort, culture plays a vital role, either as a facilitator or a barrier. Leaders must learn to harness the positive dimensions of a culture in the change efforts. Culture is much like the water in an aquarium. While it is largely invisible, its chemistry and life-supporting qualities profoundly affect its inhabitants. An organization requiring transformation is like an aquarium polluted by too many algae, and requires restoration of the right balance of elements in the environment. Leaders effecting an organizational transformation must understand the vital role the corporate culture plays in any change efforts. 
 
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