Adaptive Space

Adaptive Space

Recently, I’ve been reading a book, “Adaptive Space,” by Michael J. Arena. I heard Arena speak at a conference several months ago and was so taken with his remarks that I purchased his book.

Arena was formerly the chief talent officer (think human resources) at General Motors. He recently moved to Amazon Web Services as its vide president of talent and development. He has been up close and personal to organizations that are changing rapidly.

The whole thesis of “Adaptive Space” is that organizations that don’t adapt will die. If they don’t choose to positively disrupt themselves, they will be disrupted. I totally agree.

Arena began proof of his thesis with the Blockbuster vs. Netflix example. Those of us of a certain age can remember when Blockbuster owned the video rental market. You would go to the Blockbuster store, peruse the shelves to see what movies were available, and hope that your preferred movie was in the case on the shelf. You would then rent it for a couple of days and rush to return it in order to avoid very high late fees.

The founders of Netflix, however, thought there was a better way to rent movies. In 1997, they offered customers the ability to order a movie online, receive a DVD in the mail, and then return it when the customer wanted to return it—with no late fee. Disruption to the movie rental business occurred!

How did Blockbuster respond? It ignored Netflix. It figured it had a little empire going and Netflix was just like a flea on a dog—a little irritation.

But it didn’t take long for Blockbuster to realize that Netflix was disrupting the market. As Blockbuster continued to plod along, with executives patting themselves on their backs for how well they were doing, Netflix continued to adapt to changing market conditions. In 1999, it went to a subscription-based model with a one-month free trial. Less than 20 percent of the subscribers canceled after the first month and Netflix had 1 million subscribers by 2003.

Blockbuster took notice and offered its own online service a year later, but it was too late. By 2007, Netflix had moved into streaming video, which created its own set of challenges, so in 2010, it split the video streaming and DVD-by-mail businesses. Then it went into creating original content in 2013 and is now a major player in the entertainment industry.

How did Netflix do all of this? It was agile, while Blockbuster rested on its laurels.

Is your organization more like Blockbuster or Netflix?

I work in higher education. We tend to be more Blockbuster-like and, while some faculty and staff might be entrepreneurial, those with ideas for change tend to be told NO when they espouse doing something different. What is your organization’s place in your industry? Are you considered the Netflix, with new ideas to be tried, or does your senior leadership tend to shut down new ideas?

Take heed from “Adaptive Space” (page 25): “Most organizations don’t suffer from a deficit of ideas …. Ideas are cheap, and people are excited to share them. But we also know that when new ideas are offered, the most common response is to shut them down …. Organizations can’t help themselves. They do what they are designed to do—they are set up to drive operational efficiencies. ... In fact, many of them have perfected the operational system at the expense of agility. And when we do this, we are exposing ourselves to tremendous risk. In today’s environment, the old adage is increasingly true: adapt or die.”

While I know most of us don’t work for Fortune 500 companies, perhaps this statistic about these companies might shock you into becoming more agile: According to Innosight, the average length of time a company today will spend on the S&P 500 is 14 years, down from 33 years in 1965. What? Just think about the decline of such former giants as Motorola, Eastman Kodak and Sears. If it can happen to them, if can certainly happen to your organization.

So how can your firm become more agile? Mr. Arena spends the rest of his book sharing his insights as to how many firms have done so. His thoughts are worth considering.

Lynne Richardson is the dean of the College of Business at the University of Mary Washington.

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