Being able to adapt over time is the sign of a successful business. Despite knowing that, the majority of companies don't think they'll be ready to make the changes that will lead to future success when they need to do so.
While executives anticipate increasingly rapid and disruptive change in their markets over the next decade, the majority of them doubt their companies' ability to successfully transform, according to a new study from the strategy and innovation consulting firm Innosight.
Overall, 85 percent of executives agreed that their organization will need to transform its core offering or business model in response to rapidly changing markets. However, only 42 percent said they're confident their company is prepared for such a transformation within the next 5 to 10 years.
A lack of planning was a major factor in businesses' belief that they aren't up to the challenge the next decade will bring. Only 12 percent of executives said their company has a formal growth strategy with a time horizon of 5-plus years. The rest said their company either has no formal growth strategy or a short-term one.
Overall, one-third of the executives surveyed said their company doesn't estimate or analyze the future, either because the market is too unpredictable or because they spend most of their time "fighting fires."
"Transformational innovation takes time to pay off," said Scott Anthony, managing partner at Innosight. "Companies that invest in planning methods that help align senior leaders on long-term growth strategies are probably at a real advantage to develop new business models and open new growth markets."
Anthony said the immense pressure — both perceived and real — to deliver short-term results often holds businesses back from thinking about their long-term future.
"Also, many leaders expect to be in their positions for just a couple of years, so they often don't feel the imperative of thinking about their organization's long-term future," Anthony told Business News Daily.
When they do think about the long term, Anthony said many business leaders are afraid to change something that's been successful.
"Painfully, it is only glaringly obvious that you need to change when it is too late to do anything about it," he said. "Good leaders watch for early warning signs and take action before it is necessary."
To prepare for the future, Anthony advises organizations to first come to grips with the mortality of their core brands, products, strategy and business model. He said they need to recognize that future success will require thinking and acting differently.
Once they have done that, Anthony said companies must ensure that their leadership is aligned with what the firm should look like in the future.
"This isn't coming up with scenarios; rather, it is taking a stand around the desired firm of the future," he said. "Forming the desired future state means developing an understanding of the underlying customer, market, and technological trends with transformation potential."
To really understand these trends, Anthony encourages leaders to spend as much time as possible in what they perceive to be the periphery of their company and industry, since that is where the transformations of the future always start.
The study was based on surveys of 800 executives in 20 different industries.
Originally published on Business News Daily