What ‘Structural Breaks’ Mean To Your Business

During volatile times in a company or economy, a company’s crisis may be the signal that their business model is no longer relevant to their industry.  As an industry continues to change, companies must change with it or go disappear altogether.Richard P. Rumelt writes in an article from the McKinsey Quarterly that now is the time for companies to be strategic, and adjustments are crucial for survival. 

Structural breaks render obsolete many existing patterns of behavior, yet they point the way forward for some companies and at times even for whole economies… Difficult and volatile conditions wipe out some organizations—yet others prosper because they understand how to exploit the fact that old patterns vanish and new ones emerge. The first order of the day is to survive any downturns in the real economy (see sidebar, “Hard times survival guide”), but the second is to benefit from these new patterns. A structural break is the very best time to be a strategist, for at the moment of change old sources of competitive advantage weaken and new sources appear. Afterward, upstarts can leap ahead of seemingly entrenched players.        

 Continuing with a company’s current strategic plan may not be the best option in order to weather this economy. Companies that hope to succeed will have to analyze their business strategy and ask if it is still relevant to their industry.