Factors that can determine how fast your business changes
Technology helps your business to change fast. FILE PHOTO
Imagine that you awake one day to discover that someone deposited Sh100 million to your bank account. You rub your eyes and stare again at your bank statement. Confused, you call the bank.
The bank confirms that your account does indeed contain Sh100 million and that the deposit was legitimate.
Elated but perplexed, you stagger to a chair and sit down. Did the deposit come from a long lost relative? Did the bank err? Could the deposit originate from questionable sources?
You nervously decide to wait a month and see if the bank reverses the transaction. After 30 days, not only did the Sh100 million remain in your account, but also grew by Sh1 million due to high interest on huge deposits.
Realising that your life will never be the same, you decide to move forward and invest the money. After consulting several friends, you determine that starting a business should yield you the best returns as opposed to passive investment. So, you set out to ascertain which industry you want to launch your business.
Based on your friends’ advice, you break down different sectors into those constantly facing change versus sectors in stable fields with minimal change.
While Sh101 million seems like a lot of money, you decide that you do not want to invest the sum and then constantly pivot and modify your new firm. Desirous of a static industry, you learn that three factors impact how rapidly a business must change.
1. First, information technology impacts the rate of change in organisations. Clearly, technology changes at a rapid pace. However, one must assess the pace of the technological changes that impact your industry.
One might compare Microsoft and Google specifically in the information technology business.
Microsoft’s model locks in customers with the use of its products seen as standard practice with one download or one installation. Google, on the other hand, relies on continual customer engagement multiple times each day.
Which firm do you expect must adapt to changes in information technology faster?
Clearly Google must change more as constant freshness and relevance is required to bring in new customers on a daily basis whereas Microsoft’s core products changed only negligibly in the past 20 years.
If you started a technology firm, would you be able to replicate Microsoft’s complacency in the market or would you likely need to change rapidly like Google just to stay alive? Clearly, the latter seems more plausible for you. Then, you would also utilise more information technology within your workplace so as to keep your creative edge.
Business owners in the information technology space must place more emphasis on knowledge management. The closer your business touches the information technology sector, it requires new competencies and expectations.
Could you keep up with the pace of change? What costs go along with the pace of change for you to lead your industry?
2. Second, globalisation and competition puts significant pressure on organisations to change. Global competition requires strict adherence to industry best practices in order to keep up with or stay ahead of the proverbial curve. Luckily, technology makes it easier to compete quickly. Global competition also results in restructuring, outsourcing, and mergers.
Instead, perhaps, you might invest your Sh101 million into the financial services sector. Banks, specifically, now seem planted on every bustling street corner. Even with intense competition, why did the banking sector experience record profits as reported in the Business Daily on Wednesday this week?
If you enter a non-transparent industry, you stand a higher chance of reaping profit rewards.
As an investor, you may strongly consider investing in or starting a bank. Market forces for change would pressure you less than other industries.
3. Third, many pundits and analysts focus on the demography of client segments as instigators for change. However, a large component of change necessity also derives from internal staff demography.
As Kenya moves towards a more educated workforce, demand changes in firms. An educated workforce desires more involvement in corporate decision making and more interesting work through task variety and task significance.
Younger generations entering Kenya’s labour market often feel less intimidated by status and power. Inasmuch, younger workers often prefer a more balanced work-life. Labour demands may force you to change your business model.
Finally, cultural changes from the forces of westernisation create more individualistic pockets within Kenya, such as urban Nairobi, that impact our traditionally collectivist values.
An individualistic workforce stands less likely to accept the status quo, stays tuned to local and international business news, and moves jobs frequently. In short, who you hire may impact your pressures to pivot and change your business.
Which industry should you start a business in if you want to minimise change costs? Does your business exist amidst intense pressures for change? Did you start a business in an industry that you now regret? Share your experiences at #KenyaEconomics on Twitter.
Prof Scott serves as the director of the New Economy Venture Accelerator at USIU’s Chandaria School of Business and Colorado State University, www.ScottProfessor.com, E-mail: [email protected] or follow on Twitter: @ScottProfessor.
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