I am fascinated by the multitudes of ways that companies fail. There is such an abundance of source material on this, and yet history keeps repeating itself over and over again with most companies that achieve breakthrough success succumbing some years down the line.
Why does this happen? What can be done to sustain success?
The bad news: your company is probably already in trouble
One insightful research piece on the subject is a decade-old piece from Accenture. While we now know more about various shades and details, the broad lines still remain the same: the world has not changed in a fundamental way since 2007, or even since 1998.
The Accenture report quotes a 1998 Corporate Strategy Board study that found that only 17 percent of Fortune 50 companies that experienced a radical slump in revenue growth managed to return back to high or even moderate growth. The conclusion: it is better to start changing when you are still strong, not when you are already weak.
Of course, this is where it all becomes so difficult. Companies do not achieve their peak results when they are at the top of their game. There is considerable inertia between actions and results, and peak results come at a point when the actual performance is already going down.
But how can you tell? Peak result is not a good indicator, because it is a lagging indicator. You can only tell that you have reached the peak after it is already behind you. Furthermore, the implication of the research is that once you can determine the you are past your peak, your odds of getting back in shape are already coming crashing down.
More bad news: it is the top management’s fault
I have personal experience from working with two market-leading companies that came to experience significant issues. What is encouraging is that in both cases, all the signs were there years before any issues arose. What is discouraging is that in both cases, the issues were caused by incompetent management that lasted for years, even close to a decade before it outweighed the legacy of awesomeness that was at the core of both companies.
This all makes perfect sense, of course. Do you believe that it is the poor performance of assembly workers or engineers that causes a company to fail? Sure, overall poor performance contributes to failure, but that poor performance, in turn, is caused by the strategy, management structures, processes, and culture of the company, and those can be guided only by top management. Top management cannot create them at will, but they are the only ones who can change them, with the help of everyone else.
It is not that all management teams are bad. It might even be the case that you can achieve sustainable success with all the same people. It is just a different thing to achieve success once, and to sustain that success over a long period of time. It is easy to fall into complacency, or maybe just not recognize the importance of constant change and stay put when others are moving forwards. Sustaining success requires continuous improvement and the mental strength to keep pushing on even when you are already at the top.
The good news: you can institutionalize the good practices
The important realization is that you need to keep acting even if you do not feel the pain. If you fully embrace this view, you can make everything fall into place, even if it takes a mental struggle to force yourself to do it.
Are you continuously improving your way of working? Even those processes that are looking good right now? Do you give your employees time to develop their work, and require them to do so?
Do you know what is going on in your industry and in the world? Do you balance between internal promotions and outside hires? Do you look for a variety of backgrounds when hiring to keep new ideas coming in?
Do you coach your leaders to encourage experimentation? Do you give people autonomy and responsibility?
There are lots of terms to describe doing such things. One could talk about strategic Lean, improvement Kata, coaching Kata, red teaming, and building dynamic capabilities. Many improvement methodologies overlap, so I’m not too interested in tagging things by methodology.
In the end, it is all about acting even when you do not feel the pain, and empowering everyone else in the organization to act as well.