We Say We Want Change, But The Status Quo Almost Always Wins Out. Here’s Why:
In 1984, Michael Dell launched his eponymous company in a college dorm room with a simple idea: Bypass the dealer channel and sell customized computers directly to customers. It not only gave Dell a cost advantage by eliminating reseller’s markups, but also allowed him to receive payment before paying suppliers, achieving negative working capital.
This direct model was a simple idea and a clear competitive advantage, but none of the incumbent industry giants, such as Compaq and HP, were able to adopt it. It wasn’t for lack of trying. The advantages of Dell’s model were highly publicized, well known and understood and there were a number of initiatives to copy it.
Yet change is never just about selling an idea. It is always a strategic conflict between that vision and the status quo, which has sources of power keeping it in place. That’s why efforts that rely primarily on communication and persuasion usually fail. To bring genuine transformation about, you need to understand the forces that are supporting the status quo.
Internal Sources Of Power
Theoretically, switching to a direct model shouldn’t be that difficult. You set up a website, make deals with logistics companies and design a marketing program. If a college kid like Michael Dell could set it up in a dorm room, surely multibillion dollar corporations like Compaq and HP could manage it. Yet change doesn’t fail because people don’t understand it, it fails because they actively resist it.
Consider all of the salespeople servicing big retail and reseller accounts. They’d spent years earning status within the organization by building those relationships. You could adjust the commissions so they were incentivised to favor direct accounts, but that would undermine the identity and status conferred by the connections they’d worked so hard to build.
It’s not just salespeople either. Logistics would have to be completely redesigned. Longtime employees would have to sever relationships and build others, learn new skills and do their jobs differently. Jobs are more than just transactions, they are very much tied up with our identity and sense of selves.
Incidentally, I heard something similar in a conversation with a Ukrainian politician about former president Petro Poroshenko. Poroshenko is, by almost all accounts, a patriot and did important work putting the country back together after the Revolution of Dignity and the Russian invasion, but just couldn’t bring himself to do the work needed to clean up corruption. It’s hard to discredit a system in which you’ve been successful.
So one reason that the status quo rarely changes is that there are internal stakeholders keeping it in place.
External Sources Of Power
In 1937, a young economist named Ronald Coase sought to make sense of the transition from artisanal to industrial production in his famous essay, The Nature of the Firm. He argued that the function of a firm was to reduce transaction costs, especially information costs, and that firms would grow until the increase in organizational costs canceled out efficiency gains. The theory became extremely influential and Coase would win a Nobel Prize in 1991.
Yet today, technology itself has greatly reduced those transaction and informational costs, organizations today access ecosystems of talent, technology and information through a network of partners and platforms. Much like internal stakeholders—and in many cases to a much larger degree—these become sources of power that affect the status quo.
Going back to the computer industry example above, those retailers and resellers did more than just sell computers. Many were also important sources of market information, helping computer manufacturers understand the marketplace. External supply chain partners designed their services (and pricing) over the years to support the reseller model.
To execute a genuine transformation to the direct model, computer manufacturers would either need to persuade their partners to redesign their services to support the new model, degrade those relationships or even sever them completely. Understandably, those partners exerted whatever influence they could muster to support the status quo.
Relationship Complexity
In Why Information Grows, MIT’s Cesar Hidalgo explains that it is through emergent complexity that we create value. To understand what he means, consider an iPhone. Its simple design belies incredible complexity, not only in the technology it contains, but in what it connects to, a complex ecosystem of apps, servers and data.
Mathematician Sam Arbesman explains how complexity evolves in terms of two processes. The first is accretion. The first iPhone was much simpler, but we wanted it to do more so Apple added components, such as gyroscopes, GPUs and other specialized chips. The second process, interaction, happens because we need these components to not only work with each other, but with other applications and services external to the iPhone.
The business models of the computer manufacturers evolved according to a similar pattern. They began fairly simply as startup companies in a nascent industry. Yet as their businesses grew and their customers demanded more, they needed to add the number of stakeholders internally and externally, creating a complex network of relationships.
So what may seem like a relatively simple shift in how a firm would sell computers—from resellers to the direct model—actually involves a complex ecosystem of co-dependent relationships, all of which affect and influence each other. It is that ecosystem that you need to address if you expect to have any hope of displacing the status quo.
It’s Not The Nodes, It’s The Networks
We tend to see change as an engineering problem. There is a desired end state, so we design a logical strategy to achieve it, build a timeline and execute the plan. We expect some obstacles along the way, work to identify sticking points and maybe even devise some plans to address them. It seems that, with some will and determination, we should be able to push through.
Yet that’s not how the world really works. The status quo always has inertia on its side and never yields its power gracefully. It has had years—and sometimes decades or longer—to build connections and form networks. If we are to achieve genuine transformation, it’s that underlying ecosystem we need to address.
That’s why we need to think less like engineers and more like gardeners. Engineers believe in laws that can be understood and put to specific use, so they build machines to perform specific tasks. Gardeners believe in complexity and emergence. They don’t design their garden as much as tend to it, nurture it and support its surrounding ecosystem. They don’t expect the same result every time, but understand’ they’ll need to adjust as they go.
That’s why we need to think less about individual nodes and focus on networks. It is small groups, loosely connected, but united by a shared purpose that bring about transformational change. That can’t be mandated and it’s never top-down or bottom-up, but travels from side-to-side, propagating through social bonds.
Or, as General Stanley McChrystal put it, “It takes a network to defeat a network.” We can’t simply think of strategy as a game of chess, but must weave networks by widening and deepening connections in order to influence the sources of power that support the status quo.
Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, host of the Changemaker Mindset podcast, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com, follow him on Twitter @DigitalTonto, his YouTube Channel and connect on LinkedIn.
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