What Are Major Reasons for Change in Business?

Companies change for several specific reasons. However, all business change results from internal or external drivers. Internal drivers include innovative leadership, survival instincts or financial goals. External drivers include societal movements, technological evolution, economic reality and customer demands. Whether innovative or reactive, change is inevitable in companies that last.

Tip

Some common causes of change in business include economic factors, societal reasons, innovative leadership, growth in the business and competitors' actions.

Economic factors compel companies to change in many cases. If current business activities, products and services don't generate the revenue necessary to sustain profit, change is required. Often, companies that change early have a better chance of developing new revenue streams.

The economy can also create more universal industry change. Many retailers turn to lower prices and discount promotional strategies during poor economic conditions to attract more budget-conscious buyers. The problem with this sort of brief, reactive change is that it is sometimes difficult to restore a quality image when the economy improves.

Societal pressure and customer demand also prompt company change. Many businesses have become more green-friendly in response to growing public pressure to preserve environmental resources. Government regulations sometimes compel companies to react to public pressure even when they otherwise wouldn't.

Changing customer preferences also compel change. Dunkin' Donuts recognized increased consumer demand for coffee drinks and made that a focal point of product development and promotional campaigns.

Change is inherent in a business that prides itself on innovation. Apple is an example of a company that had to change and innovate to maintain the brand image it had created. Steve Jobs realized that computers weren't going to sustain the success of Apple and seized upon the emerging trend toward mobile devices with the iPod, iPad and iPhone.

New leadership also drives organizational change. Public company boards sometimes oust executives to inspire change in a stagnant environment. A new leader brings a different own leadership style, philosophies and business insights.

Competitor action is another one of the common causes of change in a business. Companies sometimes prefer the status quo until leaders see competitors evolve. If a business doesn't respond to innovative competitors, it could fall behind and lose customers, prestige and revenue.

Blockbuster is a prime example of a company that waited too long to change to mail-order, kiosk and streaming movie technology. Its moves were too late to catch up to the likes of Netflix. Game developers are quickly shifting gears to mobile applications as of publication. Those that fail may get left beyond as traditional game players turn to tablet- and phone-based games.

Extensive growth is another one of the reasons for change and may require a complete restructure of a company. As a small company gains more popularity and demand, a single location and limited staff might no longer meet the needs of its customers. Waits for a small restaurant might become too long, and a storefront may not be big enough to handle the increased crowds. Furthermore, customers in other towns or even states might have a need for its product to service but find the distance limiting.

These changes can drive the business to expand from a single storefront to multiple brick-and-mortar locations that can handle the increased capacity and traffic from customers. A business might also extend its operations to the internet to serve customers regardless of their geographic location and at more convenience than a brick-or-mortar addition.