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Adaptation and Innovation: The Business’ Survival Weapons By D.Manggala (September 23, 2003-Issue in Global Competitiveness course) Executive Summary It is important for managers to understand that successes in the past will not guarantee the same success today or in the future. The way company’s work and structured that created a big success ten years ago can be a source of trouble today. There is no magic formula for developing business strategy or business structure because it differs from time to time and from one place to other places. If a company had some competitive advantages over other companies it must still need adaptation and innovation to survive in today’s competition because the source of competitive advantage has always changed over time. From the history perspective, there are a lot of examples of the failures of companies because of inability in adaptation with the changing time. Many companies are also failing to compete internationally because it cannot fit with the environment in different country. The failure to fit with time and place means the total failure for a company and will make the company kicked out of the competition. Business managers need to understand that a company can survive by doing continuous improvements. In other words, the weapons for survival in business competition are adaptation and innovation.

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Verizon has launched its new plan to roll out fiber-optic connections to every home and business in its territory in the United States. BusinessWeek called this ambitious and high cost project as “a project that might reasonably be compared with the construction of the Roman aqueducts”. [1] Why does Verizon need to spend $20 to $40 billion for the next 15 years for this project? The answer is simple, to win the competition. In its CEO words that if your company is a market leader “part of your responsibility is to reinvent the market.” [2] Verizon’s CEO understands that business and firms must always change its strategy and the way its works from time to time. Today’s winners will be tomorrow’s losers unless they perform continuous improvement on its strategy, structure and operations. In shorter words, adaptation and innovation are the keys for winning the competition.

It is important for managers to understand that successes in the past will not guarantee the same success today or in the future. The way company’s work and structured that created a big success ten years ago can be a source of trouble today. There is no magic formula for developing business strategy or business structure because it differs from time to time and from one place to other places. If a company had some competitive advantages over other companies it must still need innovation and adaptation to survive in today’s competition because “the source of competitive advantage has always shifted over time.” [3]

Business managers need to learn from the history and see how the past’s glory can be the source of failures. Landes explains clearly how competitive advantage in factor conditions (natural resources) in South America could not make South America got advantages; even worst, South Americans are far left behind from its neighbor the North Americans which have less resource. [4] This example does not only explain the failure to use competitive advantage properly, but also the failure of adaptation with place and time. Another example of such failure is the US steel industry. Burnham explains that the steel industry has been suffered because of “its past successes.” [5] Furthermore, Burnham states that US steel industry has been so success that made the government protects this industry because of many workers absorbed by this industry and such success created romantic relationship between the US government and the US steel industry. The US government protection to the steel industry finally made this industry suffered today because the industry has never learn to change improve itself. Naturally, people do not want to change especially if they are under comfort zone. Again, the inability to do continuous improvement as adaptation to the changing competition in different time and place will end up in total failure.

The requirement for a firm to apply different structure in different place and time has disscused in Porter’s Model. According to Porter, one of the determinants of a nation competitive advantage is firm structure, structure and rivalry. [6] Porter gives some examples about the differences between company structures in different industry in different places.  For example, Italian firms usually are small or medium size which often avoiding standardization while German firms are strongly focused in standardization. It means when a manager want to expand its organization from one country to other country, it must learn the local structure and adapt with it to get the best structure. Coca Cola may be the best example of a company that successfully operates and sales its products almost in every country in the world. The way how company works and structured is also differs from time to time. The Scientific Management” that was effective in early twentieth centuries has become ineffective by early 70s. It has been replaced by Human Relations Approach and Modern Management Approach. The point is the best system is changing from time to time. Since there is no universal answer that can be applied anywhere and anytime, the best way to survive in the competition is by continuous improvement. Even though this looks simple, but in reality it needs a deep understanding of management function. The skill to coordinate resources (people, machine, capital and energy) is very vital for manager to do improvement. Coordination is an important issue especially for a company that growing from a small-start up company to a larger company. As a prerequisite for improvement, the company must ensure there is a good flow communication, materials and orders across the entire company. [7]

Lantech is a good example of a company that was having problem with coordination as the company became bigger but then successfully achieves a significant success by the ability to learn in the changing world. The commitment of its management for continuous adaptation and innovation has made Lantech get significant result in its production and defects reduction. [8] Every great company has understood the importance of continuous improvement in strategy, structure and operations. The process is not in months but in years or decades. For example, Wal-Mart began its concept in 1945 and took 25 years to grow to 38 stores. With the continuous innovation in its strategy and the way it operates then Wal-Mart has successfully become one of the biggest company in today’s competition with 3,000 stores and more than $150 billion in revenues. [9] Many big companies could not survive today because they were unable to recreate its strategy for the changing competition and the changing world. The US Steel may be an example of this failure as discussed in the previous paragraphs.

In conclusion, adaptation and innovation are very important for business firms to survive in the competition. Business managers must understand that there is no fix formula that universally can be applied anytime and anywhere. Today’s best strategy could be nothing tomorrow. Company’s structure that is successful in the United States can be a real chaos in Indonesia. The most important thing is the ability of every manager to understand the business and learn from the situation that in turn will come up with strategy, structure or operation’s practice that will fit with that particular time and place. The failure to fit with time and place means the total failure for a company and will make the company kicked out of the competition. To survive in competition a company must do continuous improvements which based on adaptation and innovation.

Works Cited

Burnham, James B. “American Steel and International Trade: The Challenge of Globalization.” Center for the Study of American Business 1998. Rpt. in Readings for Issues in Global Competition. Ed. Professor James B. Burnham. Fall 2002.

Collins, Jim. Good to Great. New York: HarperColins, 2001.

Landes, David S. “ The South American Way” and “Celestial Empire: Stasis and Retreat.” The Wealth and Poverty of Nations 1998: 311-349. Rpt. in Readings for Issues in Global Competition. Ed. Professor James B. Burnham. Fall 2002.

Letterer, Joseph A. “Systematic Management: The Search for Order and Integration.” Business History Review 1961. Rpt. in Readings for Issues in Global Competition. Ed. Professor James B. Burnham. Fall 2002.

Pfeffer, J and J.F Veiga. “ Putting People First for Organizational Success.” Academy Management  Executive May 1999. 13(2),37-38. Rpt in Required Readings Booklet for Managing a Diverse Workforce. Ed. Dr. Jay Liebowitz. Fall 2003.

Porter, Michael. “Determinants of National Competitive Advantage.”  The Competitive Advantage of Nations 1990:69-130.Rpt. in Readings for Issues in Global Competition. Ed. Professor James B. Burnham. Fall 2002.

Rosenbush, Steve. “Verizon’s Gutsy Bet.” BusinessWeek 4 August 2003.

Womack, James P. and Daniel T. Jones. “ Beyond Toyota: How to Root Out Waste and Pursue Perfecti on.” Harvard Business Review September-October 1996. Rpt. in Readings for Issues in Global Competition. Ed. Professor James B. Burnham. Fall 2002.