About a year ago, my husband and I took a trip to Malta, a country in the middle of the Mediterranean.  I will never forget what one of our taxi drivers said as we were discussing some of their country’s issues: “You have to have a problem to know a problem”.  He was referring to a major over-population issue the country was having since they were the one of the most populated countries in the world.

Think about this for a minute.  If you know you have a problem in your business, life, country, then that’s the first step to finding a solution.  However, organizations often don’t realize they have a problem until it’s too late…and that is a bigger problem.  We are in an era of continual disruption of industries with the pace of advancement and technology moving at a rapid-fire pace.  Companies that have been around for decades are not immune.  New companies are not immune.  No industry is immune.

Big bang disruption refers to the rapid rise and fall of a company.  Fitbit (and I used to have one), for example, scaled up incredibly quickly, but wasn’t ready for their next innovation.  Although I would still describe them as a successful company, they peaked in September 2016 and their quarterly revenues have fallen year over year since then.  Is Fitbit still around?  Yes, but there are many competitors now.  The list of companies that have been uprooted due to disruption is endless regardless of whether a product or service driven company.

The CPA profession, which I am intimately familiar with, is undergoing major disruption.  For years, the two main lines of service were audit and tax.  Those two service lines still exist, but are not the core of the profession anymore.  They have been commoditized and are quickly becoming the least growth oriented and profitable segments.  Clients’ expectations for greater value, changes in the environment, and artificial intelligence have all contributed to this change.  CPA firms that don’t continue to innovate will find themselves not only outdated, but potentially out of business.  On the other hand, firms that have continued to innovate based on the changing environment will take over their business in addition to thriving on their new menu of service offerings.

For their fiscal year ending in 2017, Deloitte had another record year of growth.  Their increase in growth is broken out as follows:

Risk advisory services, 12.9%

Consulting services, 10.2%

Tax and legal services, 6.6% (higher than most firms due to their global initiatives)

Financial advisory services, 5.8%

Audit & Assurance services, 1%

The average life span of an S&P 500 Company was 67 years in the 1920’s and is only 15 years today.  What will that time span be in 10 years?  How will your company survive?

I believe in keeping it simple and summarize the following three necessary components to create and sustain a dynamic organization for years to come.

  1. Innovation

Larry Downes and Paul Nunes, experts in the field and authors of “Big Bang Disruption”, state that the most successful and respected companies rarely survive their first act or crisis.  Creating your next product or service well before your first one is in decline is key.  Innovation must begin well before market saturation of your existing product/service.  As soon as a product or service is released, the competition will already be planning how they can create a better, faster, cheaper product/service.  Don’t wait until they catch-up.  If they catch-up, they will have momentum and will overtake you.  The rest is history.

  1. Allocation of resources

The allocation of resources to your first product and to your future products/services through innovation is key to sustaining success.  It’s critical that you don’t overleverage your resources based on your anticipation of explosive growth as a result of the initial reaction by the market.  Once an initial launch takes place with a great customer reaction, companies often make the mistake of allocating all their resources to building and delivering the product/service.

The eventual outcome is the inability to pay down the financed debt on the initial product due to other competitors that will quickly compete with you and reduce the anticipated growth you expected.  The second outcome is the lack of resources now available to fuel innovation, resulting in a one and done.  Extremes?  Not likely.  The key to growth and sustainability is allocating your resources from the very beginning between innovation and your current product/service delivery.

  1. Build a system of interrelated product and service offerings

When you’re structuring your organization from the beginning, think in terms of an ecosystem and not a single product or service.  If you’re a service organization, build a system of interrelated services.  From those service offerings, determine possible products you could launch down the road.  This is one of the most critical elements to long-term success.  Larry Downes and Paul Nunes could not have explained it any better:

“Companies that go on to launch a second product, enter a second market, or lead a second technical revolution do so because their founders structured them not as one-offs to solve a specific problem, but as engines of innovation…”

The process of creating and sustaining a long-term viable organization can be summed up simply:  “Don’t put all your eggs in one basket”.

Legg Consulting Group serves as a trusted advisor helping organizations to solve complex problems across multiple disciplines and industries.  We can be reached at 540.422.5970 or clegg@leggconsultinggroup.com for questions or strategy consulting services available for your business.