Beware Irrelevance - part one
I've been thinking a lot about risk on my travels and I'm coming to the conclusion that most organizations have got it all wrong...read on...
Credit risk, interest rate risk, foreign exchange risk—these are all risks that are familiar to managers. Most organizations have sophisticated mechanisms for measuring and managing such risks. Of course, sometimes these procedures breakdown as was spectacularly demonstrated by the absence of effective credit risk assessment in the U.S. mortgage market between 2003 and 2007. However, as the world becomes increasingly interconnected and communications are near instantaneous a whole new class of risk has emerged that requires close attention by managers—that is the risk of irrelevance.
Managers agonize over the threat from competitors, analyzing every piece of new intelligence for insight into a competitor’s intentions. The big competitive rivalries are like heavyweight-boxing matches used to be when Ali fought a continuous war of words, and the occasional actual fight, with Frazier and Foreman: over-hyped, vitriolic but great spectacles. Think of Coke and Pepsi, Bud and Miller, Apple and Microsoft, BBC and ITV, and the Beatles and Stones. In each case the players are partly defined by their rivals.
Rivalry is a powerful motivating force, driving each player to push harder for an edge, but it can also be distracting. Did Coke and Pepsi spend so much time watching each other that they were slow to recognize the redefinition of the soft drink market as bottled waters, iced teas and other non-carbonated beverages took hold? For decades, U.S. car companies fought each other for market share and largely ignored the growing threat of import models and major airlines disparaged upstart Southwest for years before recognizing that it was their own model that was broken.
However, being vanquished by a rival is often not the primary risk an organization faces. Far more dangerous is becoming irrelevant in the eyes of your customers.
To be contiuned...