The Underwood Conundrum

The Underwood Conundrum should keep every corporate executive awake at night...

How do I build to last yet constantly adapt?

When guests visit my office they are greeted not by an en vogue iPad but instead an Underwood No. 5 typewriter, a 100+ year machine that is the epitome of nearly-indestructible workmanship, classic design, great historic significance and sadly a corporate culture of strategic complacency.

Underwood Typewriter Company started business in 1895, initially manufacturing consumables for the Remington Company. Following a string of relatively unsuccessful early models, Underwood launched the No. 5 model in 1900, to near instantaneous acclaim. Described as "the first truly modern typewriter", the No. 5 went on to outsell all competitors combined for over twenty years. In short order Underwood became the biggest manufacturer of typewriters in the world (churning out one per minute), marketing their wares with "Jobsian" flair... "OUR MISSION is not to destroy faith in older typewriters, but to create faith in a better one."

By the 1930's the seeds of Underwood's demise had begun to spout. Paradoxically Underwood's downfall was partially routed in its commitment to enduring craftsmanship. Quite simply the Underwood No. 5 was built to last, it was not uncommon for customers to wait 15, 20, or 30 years to replace an ageing or irreparable No. 5. The situation was further complicated by a growing number of generic competitors who took 'inspiration' from the widely acclaimed No. 5. 

The company emerged from WWII in the 40's saddled with technology that was almost 50 years old. Tragically Underwood's executive management team failed to comprehend that the technology and design which made them so successful, was no longer appealing to a customer base presented with an ever expanding number of competitive options.

Underwood limped into the 1950's without another hit product, towards an unceremonious acquisition by Olivetti in 1959. Underwood was at the top of their game for 30-years, they could have and should have seen the writing on the wall, but they didn't. At a foundational level this was a failure of Underwood's management and governance systems.

Fast forward 123 years to 2018 and I continue to see the same failure of management and governance systems in companies facing the same existential threat as did Underwood, only today the strategic stakes are much greater.

We have entered a period where technology and impatient capital markets accelerate market change through the lowering of traditional barriers to entry and emergence of unexpected rivals from previously disparate markets. Dominant incumbents can no longer have the luxury of a 30-year run like Underwood because the margins enjoyed by such a position will quickly invite a swarm of aggressive challengers unafraid of "breaking things." 

In such times, corporate CEOs as stewards of capital need to embrace the Underwood conundrum and adopt hypercompetitive strategies that allow their companies to maintain their competitive advantage by constantly generating a portfolio of new capabilities while simultaneously neutralizing the competitors' advantages. You protect yourself not by digging moats or building walls, but by building a fighting force obsessed with staying one step ahead of the competition. Needless to say, speed is of the essence here, making the CEO's and teams' job even more intense and challenging -- even more so than the past 10-20 years.

You be the disruptor (sometimes of yourself), or you'll be disrupted. This is the brave new world of corporate strategy in the 21st century; it defies reductionist frameworks and shallow engagements, it imposes a great responsibility on executives to create the future rather than respond to it.

Many thanks to friends, instigators and co-authors: Naotake Murayama, Prof. Marc Ventresca, & Jim Greene