How to Rapidly Respond to Changing Conditions in Your Industry

Companies don't operate in isolation.

Instead, they operate in fields with three to twenty competitors. And any slight, unexpected occurrence can cause a shuffle in the ranks.

It doesn’t matter if the occurrence is good or bad. Whether it's a technical breakthrough or a tsunami, change destabilizes the entire competitive environment.

When the environment shifts, businesses have to adapt—one way or another.

For example, if interest rates jump from 1% to 17% over a couple of years, borrowing money the same way you used to becomes unsustainable.

Or if foreign imports enter the market priced below your production costs, you either adapt—by entering a specialty market, switching product lines, or finding other solutions—or you go bankrupt.

The companies that respond most rapidly, recognizing where the industry needs to go, will reap the greatest rewards. They move toward new possibilities rather than retreating in fear.

Even in tough times, a company can strengthen its position relative to its competitors.

An Example from the Telecommunications Industry

Years ago, this reality played out in Israel’s telecommunications market.

Until 1997, Israel’s long-distance call market was governed by a single company. When the market opened, two competitors entered, creating a three-way competition. However, the original company had a built-in advantage: any calls dialed using the default "00" code automatically went through their service.

Four years later, regulators introduced a four-month window for companies to sign customers to long-term service. After that period, any unsigned customers would be randomly assigned to one of the three companies based on market share.

One of the two newer companies was already prepared for this period.

They had invested in a variant of the Income|Outcome business simulation and rolled out the workshops with 70 managers from all over the company.The simulated product was a simple, minute-long call to the U.S.

At the start of the simulation, a long-distance call cost $1 per minute—matching real-world pricing at the time. But in one of the three workshops, the price dropped to $0.30, a 70% decrease.

This result wasn’t engineered; it emerged naturally through the dynamics of the simulation.

Later, when the managers gathered to discuss the experience, most dismissed the 70% price drop as unrealistic. They believed such a drastic shift couldn’t happen in the real world.

But the CEO disagreed. He pointed out that if it could happen in the simulation, it could happen in reality.

So they prepared. They developed a strategy to handle that kind of pricing shift. And when the cost of calls did eventually drop by 70%, only one company was ready.

While competitors scrambled and lost money, this company remained profitable. They grew at their competitors’ expense until their market share stood neck-and-neck with the former industry leader.

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This story illustrates that the company that responds fastest to changing conditions will be in the best position to win.

Life wasn’t made easy when those prices fell, but the prepared company used the situation to identify better growth opportunities and develop an enviable marketing position.

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Speaking of preparation...

A rapid response in and of itself isn’t helpful. To truly be beneficial, the response must come from good preparation.Simulations are great for preparation. This is why you have fire and earthquake drills.Even though there isn’t a fire or earthquake, the participants understand what might happen. If disaster strikes, they can respond immediately and appropriately rather than panicking.

A rapid response in and of itself isn’t helpful. To truly be beneficial, the response must come from good preparation.

Simulations are great for preparation. This is why you have fire and earthquake drills.

Even though there isn’t a fire or earthquake, the participants understand what might happen. If disaster strikes, they can respond immediately and appropriately rather than panicking.

It’s exactly the same with financial obstacles.

What will happen if oil rockets back up from $60 to $200 a barrel?

If you’re prepared, you’ll have mental agility to handle it. The rise in price isn’t going to make life more profitable, but prepared companies will lock in future purchases or find ways to switch out from oil to other forms of energy.

Big changes are happening three or four times every decade.

There is a gulf war, a financial collapse, a technological breakthrough... any number of unforeseen game-changers.

There are no stable industries any longer. The closest thing to stability is adequate preparation. If you can simulate changing conditions, you will have the means to respond.

Conclusion

Your company culture should have a rapid flow of information and understand the needs of each department.

In that environment, you’ll have people who are more interested in coming up with plans—and being flexible about re-thinking those plans.

Your greatest competitive advantage is not your existing technology or your existing infrastructure.

The best strategic benefit that you can have as a company is your ability to respond to unexpected change.

For more information on business simulations to prepare your company for change of all kinds, contact us .