Rosabeth Moss Kanter described the laggards as being “behind the competition” and having “more internal struggles about change.” And when they did bring in new technology “it cost them more, and they often didn’t get the benefit.” Now, in more detail, she explains the typical stages of these laggard companies. Edited excerpts follow.
Stage 1: Denial
It didn’t mean not doing anything. It meant dismissing the importance of any other option because it doesn’t apply to us, doesn’t apply to our industry, doesn’t apply to our business. We know our customers better than anybody else. We’ve been in business a long time. Therefore, our response to new phenomena, new possibilities, a new development, is we’ll do a little something but it might be off in the corner, done casually, part-time, without taking it very seriously. And let’s keep it away from the core; people are very busy. They have to keep doing what they’re doing.
The best example that we all know about is the online bookstore wars. The response of the world’s greatest, largest bookstore chain was, “We invented the industry. We have wiped out all those other little independent bookstores. Therefore, we know this. No one’s going to buy online, but anyway that’s not our business.” The brother of the CEO took on the Web as a casual, part-time effort. They hired some consultants but didn’t take any of their advice.
Denial comes from several things. It often comes from arrogance, it comes from tradition. There’s an attempt to force-fit new business ideas into what we’re already doing. It also comes from an assumption that one can’t act unless one has a plan. But it’s also a leadership attitude: The CEO’s and top management would say, “Unless I can see it and know exactly, predictably what’s going to happen, there are too many models to choose from. We don’t know which to choose, so let’s do nothing.” Uncertainty paralyzed those companies. They didn’t even try anything.
Stage 2: Anger and Blame
Sometimes companies would see that somebody else was starting to eat away at their customer base, or was starting to get ahead of them a little, and they would move into this phase of anger and blame. If they are starting to succeed, it must be their fault. They’re doing something unfair. And this was the response the U.S. auto industry had to the rise of Japanese competition in the early 1980’s: “Let’s go to the federal government and get some protection because they are behaving unfairly.”
In the case of the online bookstore wars, Barnes & Noble saw that Amazon was taking hold around 1996, so they sued Amazon. Now there’s a really productive response to change. It was a fight over slogans: Who was “world’s biggest bookstore” versus “earth’s biggest bookstore?” It was totally silly. They’re both lucky it was settled out of court. I use this example because it’s so classic. It is an American response. And sometimes you do have to protect your assets, but don’t place your bet on stopping competition dead in its tracks because they’re behaving unfairly.
Stage 3: Superficial Change
Now they see that this new phenomenon is serious, so they better have one of their own like everyone else has.
So they engage in cosmetic change, superficial change, and add on to their existing business. That add-on might be a separate division, a separate venture. But this superficial change doesn’t really cause any change in the core of the business. It goes on as it always has. I liken this to putting lipstick on a bulldog. Think about that for a moment. You have this big and ugly organizational beast. The problem with putting lipstick on a bulldog is that, first of all, it’s very hard to wrestle the bulldog to the ground long enough to put the lipstick on. All you have when you’re left is you have the same big ugly beast with a little lipstick on it. And, finally, it makes the bulldog very angry.
It’s also very hard to get approval for something that’s going to be just a separate add-on, that’s not going to do anything at all in the established mainstream of the company. It’s hard to get that to happen. Then when you have the add-on division—and what happened especially with the Internet division—is that it made the rest of the company very angry because it seemed it could spend as much as it wanted. Often it didn’t work very well and it created incredible antagonism because of having totally separate cultures and no benefits coming back into the mainstream. Not only that, but it often cost a lot more because it meant running two parallel systems. This was extremely costly because you needed to duplicate everything. And there was really little impact on the mainstream business. So that was not a very effective change journey.