Many companies struggle to reimagine their businesses in light of today’s competitive realities. Instead of embracing change with agility and adaptability, they continue to cling to outdated business models, processes, technologies, and perspectives on their customers.
There are numerous examples of major companies that have failed to adapt to changes in the market for their products and services and have failed as a result. Consider:
- Kodak was a pioneer in the photography industry, but its failure to adapt to the digital revolution led to its downfall. Despite inventing the digital camera in the 1970s, Kodak remained heavily invested in film and chemicals. As digital photography gained traction, Kodak struggled to transition and ultimately filed for bankruptcy in 2012.
- Blockbuster was a dominant video rental chain with thousands of stores across the US. However, with the rise of online streaming services like Netflix and digital downloads, Blockbuster failed to rethink its business model. The company eventually filed for bankruptcy in 2010 and closed its remaining stores.
- Borders, a well-known bookstore chain, struggled to compete with the growth of online book retailers like Amazon. Focusing on its network of physical stores, Borders failed to establish a strong online platform and digital presence. The company filed for bankruptcy in 2011 and closed all its stores.
- Toys “R” Us was a prominent toy retailer for decades, but it faced challenges in the digital age. It struggled to compete with online retailers like Amazon and Walmart. After unsuccessful efforts to establish its online presence, the company filed for bankruptcy in 2017 and eventually closed its US stores.
Why did these companies with rich histories of success fail to adapt to the changing markets for their services? Perhaps one way to gain insight into these phenomena is to look back at some basic principles of physics that were identified almost 350 years ago.
Newton’s laws of motion are three fundamental laws that describe the relationship between a body and the forces acting on it, and the body’s motion in response to those forces. They were formulated by Sir Isaac Newton in 1687 and remain central to our understanding of classical mechanics.
While Newton’s laws of motion are grounded in physics, their underlying principles can be abstracted and metaphorically applied to business decision-making. Here’s how we might draw parallels:
Newton’s First Law (Law of Inertia)
“An object at rest will remain at rest, and an object in motion will remain in motion with a constant speed and in a straight line unless acted upon by an external unbalanced force.”
Applying that concept to business, if a company remains complacent or unresponsive to changes in its external environment, it will maintain its current trajectory, whether that trajectory is positive, negative, or stagnant.
Businesses must recognize that staying static or maintaining the status quo can be detrimental in a rapidly changing environment. If a business isn’t proactive in responding to changes as they occur, it may require significant external pressures (like market disruption, new competition, or technological innovation) to force a change. For a business leader, this emphasizes the importance of constant vigilance, regular strategy reviews, and adaptability.
Newton’s Second Law (Law of Acceleration)
“The acceleration of an object depends on the mass of the object and the amount of force applied.”
In business terms, the “force” or effort required to change a company’s trajectory is proportional to the company’s “mass” or size. Just like trying to maneuver a cargo ship in port, larger organizations often require more effort and resources to make significant changes than smaller, more agile companies.
Another way of looking at this is to note that the intensity of the change in movement equals the force that is brought to bear times the time interval over which that force is applied. Big changes can occur if a large force is applied over a short period of time (the sudden run on Silicon Valley Bank’s deposits for example), or if a mild force (which may go unnoticed) persists over a much longer time. The latter scenario is what many companies have experienced as smaller changes in technology, competition, or expectations compound over time to ultimately push the organization to the point where a massive catch-up effort is needed and it becomes a scramble for survival.
Newton’s Third Law (Action and Reaction)
“For every action, there is an equal and opposite reaction.”
Every business decision or action will have reactions (or consequences) in the market, among competitors, customers, and also within the organization itself. When making decisions, business leaders should anticipate potential reactions from all stakeholders. For instance, if a company decides to enter new markets or aggressively adjust pricing, it should anticipate potential reactions from competitors (who might adjust their prices) and customers (who might seek alternative products).
Often obstacles to progress come from within a company, as managers and employees react negatively to changes in practices or procedures and may actively work to undermine them.
Anticipating and understanding these reactions can help companies make informed decisions and plan for repercussions.
Conclusion
Using Newton’s laws metaphorically in business emphasizes the principles of inertia (and the dangers of complacency), the challenges tied to the size and speed of change, and the need to anticipate reactions to every action. While these are abstract applications, they highlight the importance of thoughtful and strategic decision-making in the business world.
Many companies have successfully reimagined their businesses to retain their competitive edge. Examples of these success stories include:
- Apple, which started as a computer company but reinvented itself by introducing innovative products like the iPod, iPhone, and iPad. These products transformed the way people interacted with technology and established Apple as a leader in consumer electronics.
- Amazon was originally an online bookstore, but it expanded its offerings to include a wide range of products and services. It pioneered e-commerce, cloud computing with Amazon Web Services (AWS), and introduced the Kindle e-reader and Amazon Prime subscription service.
- Netflix began as a DVD rental-by-mail service but shifted to online streaming as broadband internet became more widespread. This move transformed it into a global entertainment powerhouse, producing its own original content and disrupting traditional media.
- IBM transitioned from primarily selling hardware and software to becoming a leader in enterprise services, consulting, and cloud computing. The company recognized the shift in customer needs and repositioned itself accordingly.
- Microsoft evolved from a software company focused on operating systems and productivity tools to embracing cloud services and enterprise solutions. The introduction of Azure cloud platform was a pivotal shift in its business model.
Newton’s Laws are by no means deterministic when applied to the business world. Company leaders must identify strategies and approaches that they can apply to mitigate the potential hazards associated with each of Newton’s laws and make more informed, strategic decisions that are aligned with the dynamic and ever-changing nature of the business environment.
