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When economist and Nobel laureate Milton Friedman said that the only reason for a business to exist was to make a profit, his pronouncement was embraced by CEOs and business owners who treated it as gospel. They saw it as their license to do whatever needed to be done to make a profit. But they — and Friedman — were dead wrong, says leadership and management expert Jason Jennings.
"When a business exists only to make money as its first objective, the business is ultimately destined to fail," Jennings told BusinessNewsDaily.
Jennings is quick to point out that he's not attacking the profit motive, per se; profit is necessary to sustain the long-term viability of a business. What he's attacking, he says, is the relentless focus on profit as the driving reason for the existence of a business.
Without constant reinvention, he maintains, profit is a moot point.
The main reason for constant reinvention is the need to find, keep and grow the right people to ensure a business's ability to survive, thrive and grow, he said.
"When you find, grow and keep the right people, those right people are able to stay ahead of your customers," Jennings said. "And by staying ahead of your customers, that's how shareholders are best served."
Reinvention is essential to finding and growing the right people, he said. Reinvention in action is the topic of Jennings' new book, "The Reinventors: How Extraordinary Companies Pursue Radical Continuous Change" (Portfolio/Penguin, 2012). Jennings presents a study of companies bridging the business spectrum, from big businesses like Apple to small businesses like funeral homes, that have achieved continuous growth by mastering the art of embracing constant change.
Mike Long, Arrow Electronics' CEO, built the business from its roots as tiny electronics parts supplier to a global $23 billion business, Jennings said. And he was a serial reinventor.
"I'm surrounded by the most talented bunch of workers on the planet," he told Jennings. "Unless I keep growing this company and unless I keep inventing new businesses, eventually they won't be challenged. Eventually they'll run out of opportunities to make more money. And when that happens, they'll leave. And when they leave, where will they go? They'll either become my competitors or they'll join my competitors. I have to consistently reinvent the business to keep everyone who is here sufficiently challenged so they will stay."
Reinvention, Jennings said, is not necessarily about redefining your comfort zone to accommodate ambiguity.
"It's about letting go," he said. "You have to let go."
Let go of breadwinners
The first thing that businesses need to let go of are legacy brands, products and processes, he said.
"You have to be able to quickly pivot and then let go of yesterday's breadwinners or legacy brands," Jennings said. "Unfortunately, most companies will not let go of their breadwinners."
A painful case in point, he said, is RIM and the BlackBerry, once the inseparable tool of every road warrior worth his or her salt.
"Two years ago, BlackBerry owned the world," Jennings said. "They couldn't let go of the operating system."
The company today stands in tatters, clinging to life and market share on the promises of a new operating system rumored for this fall. It may be too late, Jennings said.
There's a big difference between a reinvention and a turnaround, Jennings said. A turnaround is about being in a "saving" mode, willing to make bold "bet-the-ranch" moves. Turnaround is for troubled companies, he said; reinvention is for healthy companies.
"It's not about getting from A to B," Jennings said. "It's about getting from A to B and falling in love with it so much that you say, 'I can't wait to get to C and then D,E, F and G.' You have to be a serial reinventor."
Legacy, Jennings said, is just another way of describing yesterday's news.
"Legacy is the big killer," he said. "People use the term in hushed tones of reverence. It should have a tag on its toe."
The second thing that most organizations can't let go of is ego, Jennings said.
Let go of ego
"This is hard for most executives and leaders, because they need to be the smartest person in the room," he said.
It's often a case of their being too smart for their own good.
The Montgomery Ward debacle is a good illustration of the point, Jennings said. General Electric Capital made a series of increasingly large investments to save the foundering company that had once been a national mail order and retail giant. GE Capital, then under the stewardship of legendary then-CEO Jack Welch, invested $1.5 billion in the now-defunct company over a 10-year period.
In the end, $1.5 billion of funding from GE Capital "went down the drain trying to bail out their initial investment," Jennings said.
When Welch was later asked about the biggest mistake he had made in his career, he cited Montgomery Ward.
"My ego got in the way and I couldn't let go," he said.
Let go of conventional wisdom
The third thing that companies need to let go if they want to reinvent themselves is slavish adherence to conventional wisdom, Jennings said.
"I've never talked to a business owner who wanted to achieve conventional results," he said. "They want to achieve unconventional results and then they go out and embrace conventional wisdom. Conventional wisdom, at its best, will get you conventional results."
Conventional wisdom says that the longer you serve, the better you get and the more you get promoted, he said. And the more you get promoted, the more isolated you become from your customer. The best way to become deaf to the siren call of conventional wisdom is to get your hands dirty. You need to get down in the trenches with your customers and frontline workers.
Get your hands dirty
"The best reinventors are people who consistently get their hands dirty," Jennings said. Business leaders need to spend about 50 percent of time keeping their hands dirty — 50 percent of their time hanging with their customers."