We have all heard the saying, “The only constant is change.” So, why is change so hard to do? Why is there so much resistance to change? It may have a lot to do with what I refer to as the king principle. Imagine you are king of your domain and everyone must do what they are told. Why would you encourage, promote, instigate or even consider change? Change is the last thing you want. The king principle goes even further to explain why change is so hard. The king is in a position to influence others; he may talk change or a clever king may put people in power that are mere puppets. The result is a lot of talk with no real change. To further illustrate the point, the king became such by doing things a certain way. Why would the people close to him—sharing in the good life—want change? It is very reminiscent of American politics.
Now consider your firm is the one with major market share; competitors envy your success, you’re sitting on top of the world. In this position, you will do almost anything but change. People tell you that change will be good. While it might be that, it can also change who is now king. So, now we understand why change can be hard.
In a recent discussion with a few automotive experts from Europe, they had a hard time understanding why American car manufacturers took so long to accept automotive innovation. Fuel injection was first used in production cars by Mercedes Benz. By the 1960s, most European cars used fuel injection; American cars were stuck on carburetors. Disc brakes were first used on production cars by the French automaker Citroen. It took American car manufacturers years to change from drum to disc brakes. Citroen also invented a powerful new composite aerodynamic headlamp in the 1960s. It was not only rejected but U.S. automakers used an outdated law from 1940 to prevent entry into the U.S. market.
Why did American car manufacturers resist change and innovation during the ’60s? Because the American car manufacturer was the king with 85 percent market share. The wake-up call came in the 1980s, as market share dropped noticeably for the first time as Japanese imports gained respect by building a better car. American car manufacturers were forced to make some changes. The slide in market share just continued. Today, General Motors and Ford make up 22 percent of the car market share for the United States. The decline reached a shocking moment in 2007 when foreign cars overtook U.S. auto market share. This forced American car makers to make changes, as they were no longer the king. What did change do? In 2010, for the first time in decades, American car manufacturers reversed the trend and re-took lost market share.
It is probable that innovators at Ford and General Motors brought new ideas to the boardroom. I am pretty sure the board thought, “Why should we change? We are still the king.” They likely heard about disc brakes and fuel injection and considered re-tooling a factory. Instead they opted to fight the Japanese and Europeans. It was really a fight against change and they lost as the Koreans jumped on board too. I wonder if those retired executives would admit to their short-sightedness or would they state that 85 percent market share was simply unsustainable and loss was inevitable? I would disagree and offer the proof in the current European car market. Even after decades of American attempts to infiltrate, that market remains 70 percent European made cars. I think I can safely say that the foreign car market into the United States has been much more successful.
Change is Inevitable
Innovation and reputation play a big part in market share. The recent Volkswagen scandal has European car makers very nervous. Some Europeans believe the VW emissions problems are similar to what the Citroen head lamps experienced in ’60s and the U.S. car makers are pushing the issue. While I do not believe this to be true, there is a history for them to point to, as our reputation in this arena is not so squeaky clean.
Being king is great—staying king is tough. Some may think they are invincible and they will never lose power, control or market share but they should think again. Change is the only constant and it will occur. It may be good to be the king but having a vision for the future, a well thought out plan and some backing can even topple a king.