By Kavita Chhibber
Photo Credits Susan Stottlemeyer
Digital, IBM, G.E. Sony, Intel, Macdonald’s Coke, GM, Boeing,
Wal-Mart-they are the crème de la Crème of the business world,
and the common thread that seems to run through them is not
their success story but their fall from grace at some point or
the other in their life cycle. These companies are only the tip
of the iceberg, according to brilliant academician and marketing
Guru Dr Jagdish Sheth. Dr Sheth’s thought provoking presentation
on the 26th June at TiE Atlanta on why nothings fails like
success if top notch companies become addicted to self
destructive behavior, is based on ten years of deep study and
captured in his new, extremely readable book, “ The Self
Destructive Habits of Good Companies”.
A question Duane Ackerman asked Dr. Sheth many years ago about
why good companies failed, triggered off the research and search
for an answer. What Dr. Sheth found was the fact that
most companies destroy themselves by picking up bad habits on
their way to success just as people do. One third of the
companies listed in the 1970 Fortune 500 list vanished by 1983,
through acquisition and mergers. Now the number is more than 50
percent. Corporate life expectancy declined from 45 to 18 years
in Germany, from 13 years to nine in France and from 10 to 4
years in the UK. So what went wrong?
In his usual thought provoking style Dr Sheth outlined seven key
reasons why good companies run into rough weather-denial,
arrogance, complacency, competency dependence, competitive
myopia, volume obsession, territorial impulse.
The first key habit that led companies into trouble was denial.
Denial said Dr Sheth comes from a company making it big and
attributing it all to itself. The truth is that “all too often,
companies succeed by accident.” The story of Daimler Benz was a
good example. There was a race, an Austrian dealer won it in a
Daimler automobile and proceeded to place a substantial order
for Daimler automobiles. Then later there was a car accident, a
Mercedes that was part of Daimler-Benz (result of a merger) was
involved in a head on collision. The car’s owner escaped
unharmed and was greatly impressed. His name-Adolph Hitler. The
result of that lucky accident? Mercedes Benz became the German
government’s official vehicle and Daimler-Benz was recruited to
manufacture all the military and state vehicles. “The problem
arises when the company forgets those lucky accidents and begins
to take credit for its good fortune”, added Dr Sheth. Trouble
also happens when the top brass is in denial about a changing
global environment and changing consumer tastes.
Arrogance is another attribute to be wary of. It usually follows
in the heels of super success and companies start believing in
the hype they see about their achievement. Like denial said Dr
Sheth, arrogance too has a way of blinding corporate eyes from
reality.
Complacency is also a key self destructive habit, and comes from
resting on past laurels, assuming that the future will be
predictably as good and that scale would protect the entity from
any setback. AT&T is an example of that complacency, said Dr
Sheth. AT&T’s monopoly bred complacency and it couldn’t handle
the competition. Core competence is usually the secret of a
company’s success but that can slide into competence dependence,
creating road blocks to success.
Competitive Myopia when you only focus on the competition that
is right there in front of you, and aren’t far sighted enough to
realize there are others lurking around
can also pull the rug from under you. So Coke worries about
Pepsi, GM, Ford and Chrysler, chase each other, RCA worries
about Zenith, Magnavox and GE, and others come in and create the
tougher competition and walk away with a huge chunk of the
market and in some cases totally destroying the leader of the
pack.
Volume obsession, where you are spending too much to make money,
is another self destructive habit. Then there is the issue of
territorial stakes, where as companies grow they create
divisions like regional offices/international operations. “What
had been one, with a kind of organic, intuitive wholeness and
health,” now becomes seemingly splintered. These units may not
be willing to work together and it becomes a case of disunity in
diversity.
All these key self destructive habits have and can wreak havoc
in many a corporate success story.
But being ever the optimist, Dr Sheth reminded the audience, he
strongly feels that just as complacent human beings who become
addicted to bad habits, can with discipline and willingness to
change their lives, become healthy again, there are ways by
which these self destructive habits of successful companies can
be nipped in the bud and even avoided. Prevention is always
better than cure. He went on to highlight several tips that
would help companies avoid trouble.
“In the case of companies, the crisis might take the form of an
emerging competitor, a sudden erosion of market share, or a
technological advance that threatens to leave the company
behind. Such developments can spell doom, or they can serve to
shake companies out of their destructive behavior patterns,”
said Dr Sheth and concluded, “The message is positive: if you’re
willing to examine yourself honestly enough to discover your
weaknesses, you can ultimately transform yourself.”
For those who want to know more, Dr Sheth’s book is Must. So
pick up a copy as soon as you can.
The presentation was jam-packed, and after a lull of many years,
TiE-Atlanta too seems to be reinventing itself with stellar
presentations throughout this year.
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