"That's not how we do things around here." How often have you heard that? And what does it really mean? It is said to stop someone from doing something new. It is no way to promote innovation, is it?
Organizations lock in on the things that helped them succeed early on. They perpetuate what worked last year. The Status Quo police make sure that happens.
Hierarchies make sure nobody runs off the reservation spending money on crazy, new ideas. "That's not your problem," you hear, or "The bosses won't go for it," or "That doesn't seem practical or necessary." AT&T's hierarchy was able to make sure the company didn't overspend on computer services, network services or cellphones as it carefully maintained its dedication to the sale and delivery of land-line long-distance service. AT&T was acquired by Southwestern Bell when it approached bankruptcy as its revenue growth and profits disappeared.
Commitment to the company's existing technology, product line, distribution system or customer base becomes a sacred cow. Microsoft's commitment to PC technology has kept it investing in operating system and office automation software for the last decade while losing more than two-thirds of its market share in smartphone operating systems and delaying its entry into the fast-growing tablet business--places where Apple has had astoundingly profitable revenue growth. Dell likewise missed both markets as it kept its focus on its supply-chain strength. Both Microsoft and Dell have stagnated in market capitalization as customers shifted to newer technologies.
The status quo police institutionalize initial metrics. They insist that innovations achieve the proper margin, order size or net price or be abandoned--regardless of shifting market demand and potential future growth. Motorola avoided smartphones, seeing them as a small business even if one with higher than traditional margins. Instead the company focused on maintaining its market share targets with its lower-margin sales of ordinary cellphones. Its profits disappeared while Apple soared with an iPhone that had less than 5% market share but a business designed to reap much higher margins. Likewise Digital Equipment focused on its profit margin in computer-aided design and manufacturing software only to be destroyed by its lower margin but higher volume competitor AutoCad.
Such destructive norms couldn't be sustained if there weren't people anointed to enforce rigid adherence to them. Those are the Status Quo police. Their job, first and foremost, is to make sure that historical ways of doing business are not altered. It is not to focus on positive business results. To the contrary, it is to make sure the organization stays with the tried and true regardless of results. The police simply assume that results will be good if the status quo continues.
Does your human resources department seek to hire "the right kind of person for our company"? Does its employee review process focus as much on getting along with peers and supporting cultural norms and supporting the company purpose as on meeting business objectives and getting measurable results? Such HR practices keep a company from hiring, promoting and rewarding people who don't maintain the status quo.
Does your finance department review all proposals concerning new products, distributors, manufacturing processes or market entries and comment on whether they meet internal hurdles for gross margin? For net margin? For risk-adjusted return on investment? Does it require detailed financial models for anything new, challenging the numbers for anything outside the most common historical practice? If so, your finance managers are the Status Quo police, keeping the business from doing what may be competitively necessary though frighteningly new.
Does your marketing department tightly control what products can carry the company's brand name? Or resist selling through new distribution channels for fear of upsetting old distribution lines? Marketing department managers enforce status quo adherence by making sure they protect old norms first, and they avoid venturing into new products or new ways of distribution regardless of what is happening in the marketplace.
At Virgin and Nike the brand means--what? While other record distributors and running shoe companies are now forgotten, Virgin and Nike have grown dramatically by expanding into new businesses far beyond their original arenas of success.
Amazon's rapid entry into entirely new businesses, including the Kindle and mass merchandising far removed from book sales, has helped it grow and grow. Meanwhile Procter & Gamble has paid the price of focusing on minor brand extensions, seeking approval from the Status Quo police for products like Tide Basic, Charmin Basic and Bounty Basic. Does anybody really consider a less good, cheaper product any way to generate double-digit growth? Sears has lost all growth with its inability to deal with the emergence of traditional retail competitors that have different margin needs and merchandising plans, such as Kohl's , Lowe's and Target , and its inability to embrace Internet retailing as well.
Early in their lives, when growth is good, companies form Status Quo police to make sure they keep doing what works well--always the same thing, albeit better, faster and cheaper when possible. They have ultimate faith that this strategy will forever produce profits. They make sure that all resources--people, money, management attention, supplier enhancements--serve that end. No matter how market needs change.
In fact, when markets shift, the Status Quo police become an internal gestapo. They make doubly sure change doesn't happen. Deteriorating results are beside the point. Realignment with markets, re-establishing growth and improving profitability cannot begin until somebody removes those Status Quo police from power. Only then can innovation and organizational creativity re-emerge to successfully focus on results and take the company forward.
Adam Hartung lives in Chicago and is a partner in Vector Growth Partners, a growth strategy consulting firm in suburban Washington, D.C. He is the author of Create Marketplace Disruption: How to Stay Ahead of the Competition. Learn more at AdamHartung.com.