In the wake of disruption and turmoil, many senior leaders turn to the traditional cost-cutting playbook. In Forbes, Dev Patnaik discusses how leaders can identify the right projects to discontinue while investing in growth initiatives.
In some alternate universe, we all spent the 2000s walking around with Sony digital music players in our pockets.
The reason we ended up with iPods instead is a powerful example of why companies need to be ruthless in killing off the old to make way for the new.
It’s a lesson that’s even more critical today. In the wake of pandemic-era excess and industry-wide disruption, senior leaders understand that they need to cut costs now and transform their companies over the long term. This isn’t business as usual.
The Wrong Approach
The traditional cost-cutting playbook (favored by big management consulting firms) goes like this: Either spread the pain evenly across the business or cull anything that isn’t making money right now.
Both approaches contain a fatal flaw. They sacrifice future growth while failing to target the present drains on energy, attention and performance.
These are the zombies—the walking dead of past projects, technologies, processes, or relationships that don’t help you compete but are somehow still hanging around. Nearly every company has them. They’re the pet projects from previous leaders that keep on going for no good reason; the partnerships you keep investing in that will never grow; the big, fancy office for impressing clients who no longer visit in the era of remote work.
In Sony’s case, it was the compact disc. The Japanese firm had everything it needed to dominate the shift to digital music. It even came up with a portable digital music player two years before Apple. But it starved the project because it was reluctant to cannibalize the market for CDs. For Sony, compact disks were both a big driver of earnings and a zombie in disguise.
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Companies with a vested interest in the status quo are particularly vulnerable to zombies because they see innovation as a threat rather than an opportunity. That sort of thinking only feeds the zombies and smothers your babies—those fresh ideas and experimental new projects that are key to future growth.
That’s why one of the biggest impediments to electric car adoption has actually been car dealerships. Nearly half of dealerships’ profits come from after-sale parts and services—a market that EVs will destroy. It turns out that electric cars just don’t break down as much as gasoline-powered vehicles. That doesn’t mean that car dealers themselves are zombies; it’s their current business model that’s walking dead. And that dealer system is in turn protected by zombie state laws that forbid consumers from buying cars directly from the factory. There are many valuable roles for dealers to play in the new model: most of them are still waiting to be invented.
Read full article on Forbes.
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