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FT editor Roula Khalaf selects her favorite stories in this weekly newsletter.
The writer is the author of ‘Uncharted: How to Navigate the Future’.
Years ago, when I was running tech startups, I met with senior Disney executives to talk about the streaming technology our business was developing. Their courtesy quickly failed them. He needed to understand, they insisted, that his precious creative assets were the work of geniuses whose art he could never appreciate.
They would never deign to allow their masterpieces to appear on the philistine Internet. Like many in their industry, they then spent years trying to catch up.
These wealthy, successful executives were neck-deep in the trap of the status quo: Because everything was going so well, they saw no need to change. It is a common phenomenon.
When Netscape went public in 1995, Microsoft did not have a web browser in development. Google’s only serious foray into social media came with Google+ in 2010, three years after Facebook launched and too late to take off. Since then, Kodak and Intel have become legendary examples of failure to adapt. Even a cursory study of the current business environment suggests a widespread lack of learning.
I remain horrified by the willful blindness of companies with no decarbonisation strategy, no carbon budgets for staff or even recognition that they have a carbon footprint.
Similarly, while executives are quick to claim that they have mastered artificial intelligence, it is difficult to find a single company with a coherent strategy for upskilling its workforce. Instead of debating the number of jobs that could be lost due to rapidly evolving technology, they could develop new capabilities in their best and most loyal employees, knowing that smart people will take the lead if employers don’t. Instead, paralysis is common.
But not everywhere. Companies alerted to the trap of the status quo can escape it. For years, 3M was famous for its apparent ability to innovate quickly. The more prosaic reality was that I was experimenting all the time. Many of these attempts at innovation went nowhere. But rather than burying the failures, they were analyzed to identify what change in market conditions could make them flourish. When conditions changed, old failures often became quick successes.
What 3M does in innovation, the SSE energy business does with projects: identifying critical emerging trends and making big bets from the start. Chief strategy officer Sam Peacock says looking at a range of potential new technologies provides strategic flexibility.
In 2012, a huge investment was made in Greater Gabbard, which for years was the largest offshore wind farm in the world. This joint venture with RWE Renewables allowed SSE to gain experience early on. This proved costly in the short term, but helped the company scale quickly when prices began to fall. Today, SSE’s project portfolio includes carbon capture and hydrogen.
“When we see strategic alignment,” Peacock says, “we’re not afraid to pursue it. You develop the relationships, experience and supply chain to move quickly when the time is right.”
There is a subtle judgment, he says, between entering the energy transition too early (Ørsted) and doing so late (Big Oil). He calls the SSE a “1.2 strategy” and emphasizes the human capital it builds. “Once you start moving, people want to work for you to be a part of it,” he says. “You attract ambitious and knowledgeable people and you build a center of gravity.”
In my experience, it is rare for employees to not spot trends early and wonder why their management isn’t taking action. Drawing on collective knowledge can identify and motivate change.
When Pixar executives realized that their films were becoming more expensive and taking longer, thus threatening the company’s spirit of boldness and innovation, they could have embarked on conventional cost-cutting. Instead, they proactively engaged the entire workforce to identify changes across the company’s processes that accomplished more than the leadership team had imagined. And no one had to sell change to the people who had designed it.
All of which shows that the status quo trap is not inevitable. So why aren’t more companies emulating the bold ones rather than the passive ones? Incrementalism could promise the high degree of certainty that some CEOs and investors crave. But it cannot offer the levels of initiative and ambition necessary to overcome challenges that, such as the climate, water, food and inequality crises, will not disappear.
Many so-called leaders spend more energy looking for alibis (shy investors, an uncreative workforce) than they do ideas. Others are tied to ingrained mental models that block imaginative thinking. Executive teams often demand full information before daring to change, blind to the fact that by the time it arrives, they are already behind.
They should take seriously the theme of the great Italian novel, The leopard: for everything to remain the same, everything has to change.