While Volkswagen was considered the largest automaker just a few years ago, it has now been overtaken by the Japanese manufacturer Toyota. Although the German company is holding its own in the new electric vehicle market, there are other companies that are even better—even faster, even more innovative.
What happened?
VW CEO Herbert Diess has made efforts to drive innovation. However, the idea of developing in-house software failed in its implementation. Cars are no longer just cars; automakers are now technology companies. Despite having the right mindset, Diess failed in the execution. Many experienced executives don’t even get that far. It’s said that in traditional, still-successful companies, the courage to innovate is often lacking from the very beginning.
Disruption: Why Companies Are So Hesitant
A study by the renowned Bocconi University of Economics in Milan identifies five reasons why most companies fear change. Over the course of several years, a team of four researchers interviewed countless experienced executives—identified the root causes—and ultimately developed a guide for easily implementing disruptive changes.
The 5 reasons why innovative ideas are usually not properly evaluated in companies:
1. Traditional thinking. New ideas are met with skepticism when faced with entrenched ways of thinking.
2. Lack of diversity. Decision-makers who share similar values are less likely to reflect the opinions of the target audience.
3. Limited practical knowledge. Compared to those with hands-on experience, experts lack a close connection to customers.
4. Subjective interpretations. The perception of new ideas is often shaped by personal bias.
5. Poor timing. A positive decision in favor of one project usually leads to a negative evaluation of the subsequent one, regardless of their order.
The “Fortune” 500 & Their Strategies
But even if the majority finds it difficult to be open to new ideas, that doesn’t mean this is the case for everyone. The U.S. business magazine “Fortune” publishes an annual list of the 500 companies with the highest revenue in the U.S. and globally. It was found that a surprisingly large proportion of the companies listed in 2020 had already been on the list as far back as 1995.
This means that established companies are holding up better than previously assumed.
Of these 500 companies, only 17 were founded in the last 25 years. These include Facebook and Tesla, for example. Established companies, therefore, are still holding their own against the test of time. An industry structure analysis of these companies identified four key strategies that were employed. These are:
Fight back. Reorient and discover new industries and business areas.
Expanding strengths. Building on already proven strengths and successes and further promoting them.
Withdrawal: Using mergers and acquisitions to withdraw from shrinking markets.
Reorient: Applying core competencies in new, transferable markets.
(A McKinsey study sees significant opportunities primarily in offensive strategies—in this case, “Fight Back” and “Build on Strengths.”)
What’s Important for You as a Leader Right Now
Don’t worry—disruption is unfolding more slowly than expected. However, it helps to remain vigilant and open to innovation, to leverage digital technologies, and, in particular, to build on the company’s existing strengths. Because even if change is happening more slowly than expected, it is still taking place.
The “Fortune” 500 companies have recognized that, fundamentally, it’s about having a strategy and acting with an eye toward the future. A strategy sends a clear signal to stakeholders, potential buyers, and successors. Aligning your company with the future increases its value.
Positioning Companies for the Future – Increasing Long-Term Value
The aumento value check assesses your company’s value and, in particular, its future-readiness. The check identifies opportunities and potential and enhances resilience to crises. Additionally, it identifies potential risks early on, as well as the reasons why your company may be struggling with innovation.
