Reinventing your business
Try to rebuild it from scratch
Some years ago, I conducted a strategic workshop for a DIY retail chain. The company suffered from the competition with the local online stores, some of which were growing frighteningly fast. The DIY chain launched its own online store in an attempt to benefit from the omnichannel.
But I wouldn't call this venture successful. The rivals from the Net were gaining a customer base much faster despite offering fewer options.
Experts have written many articles and even books on the topic. When a company needs to change radically (for instance, to go online), too many internal forces resist shifts. Managers are afraid of losing their jobs or status. Executives and board members are afraid of a temporary decline in revenue.
So, they prefer to "change without changing," making some insignificant alterations.
But that's only a part of the problem.
Endowment effect
A couple of months ago I moved to a new flat. When packing my belongings, I was unpleasantly surprised by how many possessions I threw away. Why did I keep them in my old house? Why didn't I get rid of them earlier?
Because having more things makes us feel safer.
Have you ever felt almost physical pain when discarding some old stuff? We feel vulnerable when we lose something (even if it is useless).
Loss aversion is "the observation that human beings experience losses asymmetrically more severely than equivalent gains." It's cool to buy a fancy car. But if you crash it into a tree, your grief will be twice as intense.
We also tend to value what we already have much more than we could hypothetically get. The scientists called it "the endowment effect."
I've seen many times that team members had difficulties with getting rid of old products, redundant services, and customer segments that created more trouble than profit.
The addition mode
People tend to find a solution through addition rather than subtraction (this notion is known as the addition mode). So, if a company faces a strategic challenge, top managers will rather add new products or services than discard some. Thus, the logic is always the same – let's leave our business as it is but add a couple of new features.
I proposed forming a group of middle managers in that DIY chain and entrusting them with designing a perfect DIY retail company. The group spent a month studying the practices of retailers worldwide and delved deep into customer needs and expectations.
While temporarily relieved of their current responsibilities, they were assured that their jobs would be secure.
We didn't ask them to improve the existing business, we asked them to create a new one from scratch.
Then we had several workshops and got several wonderful insights. We succeeded because the group members were free of any restrictions – it was an act of pure creativity.