Leap: How to Thrive in a World Where Everything Can Be Copied.
Howard Yu (New York: Public Affairs, 2018)
How has Procter & Gamble managed to remain at the top of its industry almost continuously since the establishment of the company in 1837? The company's core products are soaps and cleaning products that are easily copied by competitors around the world, but P&G has managed to establish itself as a household staple, through both innovative products and innovative marketing. Howard Yu, a professor at the IMD business school, maintains that P&G's secret is its ability to leap from one core competency and one identity to another as the world, markets, and competitors evolve around it. That is the central principle of Yu's latest book, Leap.
Leap is built on the experiences of companies like Steinway Pianos, CIBA-Geigy, P&G, Tencent, Google, Amazon, and Recruit. Yu presents Steinway as a classic example of a company that defined itself by its original product and was unable to leap to a new identity or new core competencies in the face of rising competition and changing markets. Steinway identified itself as the manufacturer of the best pianos in the world, which made it a preeminent company through the first half of the 20th century. But when competition arrived in the form of Yamaha, a mass producer of keyboards and pianos, Steinway remained steadfastly focused on small volumes of high-quality instruments. The story of Yamaha versus Steinway unfolds as a classic example of Clayton Christensen's disruptive innovation. But could Steinway have done anything differently?
Yu argues that the solution to encroaching disruption is to leap from one set of competencies to another, remaining a step ahead of the competition to avoid toe-to-toe price wars around products that are becoming commoditized. As exemplars of successful leaps, he offers companies like P&G and Novartis. As early as the 1896 introduction of Ivory soap, P&G began to realize that the story it built around a product was as important as the product itself. The massive success of Ivory soap stemmed from the purity of its ingredients, but also from deep study of consumer psychology, which showed the company how to place the product squarely in the center of the American consumer values of the time. In other words, P&G leapt from expertise in manufacturing and engineering to expertise in psychology, advertising, and marketing. The company's identity was not limited to its original core competencies--it was able to redefine itself as more than a soap maker and hence capture market share well ahead of its competitors.
CIBA-Geigy underwent a similar transformation as it leapt from products based on organic chemistry to the entirely new field of microbiology in the 1980s. Then, in 1994, it leapt again, through a merger with Sandoz, to become Novartis, focused on genomics and bioinformatics. As science, society, and markets changed, the company moved into the new sweet spots of discovery and value creation by leaping from one set of competencies to the next.
Executing such a leap requires reinventing the company's identity and competencies as the environment changes. Yu prescribes five requirements to enable a leap:
1. The company must understand its foundational knowledge and the trajectory that knowledge creates into the future.
2. The company must continually cultivate and acquire new knowledge disciplines--not just expanding on current expertise but mastering new disciplines that could change its trajectory.
3. The company must remain aware of and be prepared to leverage "seismic shifts" in the industry and society. Two that Yu identifies as imminent and universal across industries right now are intelligent machines and ubiquitous connectivity.
4. The company must experiment to gain evidence to support a planned leap.
5. The company must dive deeply into the execution of the leap. Top executives must apply their power to ensure that the leap is not deflated as it moves through the organizational layers.
Yu recognizes that the decades ahead will require leaps based on new leverage points that are poised to transform all kinds of industries. He identifies the leading three transformation drivers as ubiquitous connectivity, intelligent machines, and the changing role of humans at work. Whatever your industry, these forces are likely to disrupt it in the coming decade, pushing your company to leap to a new identity and create new core competencies to support that identity. Companies that cannot leap are not necessarily doomed to fail; they may simply retreat to a niche where their expertise is still highly valued. They may follow the path of Steinway Pianos, which hand manufactured more than 6,000 pianos per year at its peak and now uses the same methods to create 2,000 instruments per year. Steinway survives because it fills an important niche, but it is no longer a growing company. Yu's point is that competitive advantages are transient, and companies must build new advantages as the old ones lose their power. Companies must constantly prepare themselves to leap to new positions and identities if they are to remain in a leadership position.
Roger Smith is the CTO of Florida Hospital Nicholson Center. roger.smith@ flhosp.org
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|Article Type:||Book review|
|Date:||Nov 1, 2018|
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