The UK EU referendum is nearly upon us. A week or so ago the polls indicated a shift to ‘Leave’ winning the vote, although this weekend’s polls suggest a change back in favour of the ‘Remain’ campaign is underway. What’s more, the pollsters tell us that there is likely to be a bias, on voting day, towards the status quo and, as a result, ‘Remain’ is still the most likely outcome according to the bookmakers.
Personally, I’ve no idea how the vote will go, but I do see the ‘status quo’ bias in action in many business decisions. Managers prefer to stick to what they know rather than doing something new if given the choice. The problem is that today’s business model is unlikely to be the model that will win tomorrow.
As companies grow there are three stages at which they can invest in the next stage of growth. The first stage is during periods of rapid growth. Unfortunately, most executive teams fail to invest at this time, focusing all their efforts on driving their current success rather than thinking about the next phase of growth. The second investment point is when growth rates start to decline. Even at this position, however, as growth starts to plateau, it is tempting to simply try to make the current model work harder instead of developing a new model of success.
In fact, it is only usually at position #3, when low growth turns to sales and profit decline, that most management teams recognise the need to change the status quo. Unfortunately, it can be too late at this stage to turn things around quickly enough. Tesco, for example, is currently in this position and is rapidly disposing of non-core assets to focus on reviving growth in their UK business. But will be enough and will it be quick enough? The cost base of Tesco in the UK is far in excess of its low-cost rivals, such as Aldi and Lidl, and their current actions may not be radical enough to deliver a sustainable revival.
As a leader of your business you must recognise that there are no risk-free options to your growth strategy, even if you’re currently successful, and that you need to overcome your inherent status quo bias. Here are three questions you can ask yourself and your team to achieve this:
- What business models are the most successful today in our market? In any strategy discussion you are likely to first look at improving the performance of your existing business model and operations, but the models of your most successful rivals could be a more appropriate starting point.
- What would we do if we were a new competitor in this market? The status quo bias is not relevant to new start-ups. So, put yourself in the position of these entrepreneurial innovators to help you break out from incremental, today-forward thinking.
- If we bought our business today, what would we do? Alternatively, management teams tend to be more radical with new acquisitions than they are with their existing businesses. By adopting the mindset of the acquisition team you can take a fresh view of the opportunities and weaknesses of your business and create a more radical – and potentially more realistic – perspective of the route to future growth.
On Friday we will see how far the ‘status quo’ bias shifts votes in favour of ‘Remain’ in the UK’s EU referendum, but the development of your strategy can’t afford to have this bias in play. How will you use these three questions to ensure that your strategic thinking is firmly focused on the future drivers of success rather than the inertia of today’s realities?
© Stuart Cross 2016. All rights reserved.