Management: Don't just sit there - refocus!

The key to success in business may be a willingness to be flexible - a heightened sensitivity to changes in the market and to the needs of customers. Michael Pitfield assesses the evidence.

Which has been the fastest growing retailer in the UK over the last 10 years?

You would be forgiven for thinking it was one of the "classic" high-street success stories - Marks & Spencer, or Boots, perhaps. In fact, the most dynamic retail force of the Nineties has been a former department of the Civil Service.

The British Airports Authority could perhaps in the past have been accused of seeing its passengers as a "nuisance" in their well-ordered realm of vast open spaces and beautifully designed airport terminals. But given moves to privatisation, and a new management team led by the ex-Jaguar boss Sir John Egan, the BAA has transformed itself into a star performer in the retail trade.

Seeing the amount of unused floor space and the large numbers of well- heeled travellers milling about waiting for flights, the BAA realised that this was a shopping arcade waiting to happen. Its policy has been so successful that nearly every corner of every airport terminal in the UK is now packed with shops, and the model has been exported to other countries - including the US, where the BAA runs Pittsburgh Airport - and attracts more people to shop than it does to fly.

This is a prime example of "business transformation", a process that can be seen in many successful organisations that have undergone radical change.

If you had had pounds 10,000 to invest in 1987, you might well have looked at the market leaders in various areas at that time and thought you were on to a pretty safe bet. Firms such as Commodore, IBM, Rank Xerox, CBS, PanAm, Commercial Union and Asda would have looked like "winners". Indeed, in some of those companies you would have got an excellent return on your investment.

However, if you were looking for spectacular gains you would have been wiser to invest in companies that may not have been too well known then, but which have transformed their business and have challenged head on the companies in that list. Respectively, these are Nintendo, Microsoft, Canon, CNN, Virgin, Direct Line and Marks & Spencer.

To take the last example, who would have thought 10 years ago that M&S would have taken over from Asda as the fastest growing retailer in the UK food sector in terms of profit and sales?

Business transformation goes beyond restructuring, downsizing, business process re-engineering and other topical management ideas. These concepts have enabled organisations to become fitter and leaner - to de-layer and focus on core businesses, certainly - but they have not necessarily led to genuine competitive differentiation. Now that many organisations have reached the position of having little more to squeeze out or speed up, how will the next wave of competitive breakthroughs be achieved?

Transformation means starting with a new perspective on business strategy.

Established economic laws are becoming increasingly irrelevant, barriers to entry are being broken down in industry after industry, and economies of scale seem to be turning into dis-economies.

The fully integrated business which controls everything, once the lodestar of economic efficiency, has turned out to be a symbol of corporate inflexibility in the face of market-responsive newcomers. In short, the characteristics that led us to success in the past may lead to failure in the future.

There are a number of traits shared by organisations undergoing transformation:

l They do not use established economic orthodoxy as the basis for strategy;

l They have stopped wasting time and resources on parts of the business the organisation doesn't need to own;

l they harness aggressive commercial innovation - not just technological innovation - to transform the market and destabilise competition;

l They understand how to use outsourcing and strategic alliances - not to save money, but to improve corporate flexibility and responsiveness;

l They create a flexible, responsive and innovative organisation that is oriented towards customers and markets, rather than traditional functional departments.

It is in response to the clear potential of business transformation that Rick Brown and Martin Burridge, and a group of colleagues at Henley Management College, have created a dedicated programme, enabling senior managers to examine how they can bring about a radical refocusing of their business and markets. The week-long programme runs in March, June and October.

Businesses can become obsessed with being the biggest and best in their own backyard. As with people, there are any number of companies that have yet to make use of talents and abilities which, so far, have been completely hidden.