Jim Collin’s How the Mighty Fall – And Why Some Companies Never Give In can easily degenerate into a depressing read. It was like a reading a catalog of corporate 'list of the dead' with very morbid details on why and how they died. It tells stories of how ‘healthy’ and ‘happy’ these companies were before their sudden death due to diseases of the corporate kind . In fact, he tries to understand why great companies fail, sometimes so suddenly, in the light of his very own personal experiences. His wife was diagnosed with a serious ailment just months after racing him up a mountain and exhibiting all signs of a fit and healthy person. He makes the conclusion, with a tinge of sadness, that while his wife looked hale and healthy, the disease has already taken root in her. It just didn't show until some months later.
That is the parallel he draws to why great companies fail.
The decline of companies begin long before visible signs appear. I would say that if you are a neutral observer, you can detect these subtle signs that shows that all is not well with a company. Here lies the challenge…you need to be neutral .ie. observe without your pride and ego getting into the way which is naturally, a difficult thing for many CEOs and board members to do. In a market system that is dominated by share price movements, it is just so tempting to proclaim that a company is in a position of strength. Why create jitters when you hardly have any tangible reasons to believe that the company is heading downward; save for perhaps you gut feel as the CEO? Just say the good stuff and maintain the share price.
I would also say that if I am a CEO, I would rather prefer my products to fail spectacularly, or for my services being clearly out priced by my competitors, or even for my top talents to leave me. These problems I can see; no doubt big problems but visible problems nevertheless. I can remedy what I can see and measure. It's the hidden and non-visible problems that will keep me awake at night for I will not know where the final blow is going to come from.
I remember conducting a workshop for a company some years ago. Over a period of 2-days I conducted a similar workshop for two groups of employees. On the 1st day, I met the sales personnel while on the 2nd day, it was their managers and regional sales heads turn. At the end of the 2nd day, the CEO of this company dropped by to give out the certificates and say a few words. I walked away from that session thinking “Poor man…he doesn’t know!”. In the 2 days I was with them, I knew there was a huge mis-alignment between what the employees and the leadership of the company thinks the way forward is. Unfortunately, I was an independent trainer at that time and the training company that arranged for the workshop was not interested in doing anything more. If I am in a similar position today (with the kind of support and tool that are available to me), I would have pulled the CEO aside for some teh-tarik and told him what nobody seems to dare tell him or he himself can’t find the courage to admit. Today, this company is struggling to regain its lost ground and the recent liberalization that has occurred in this country will affect its business to a great extent. But, the point here is this – this company is not yet dead and gone. Its just not able to get back to its pinnacle. One day, I am afraid, it will just lie down and die without a whimper and everyone is going to feign surprise.
It is common to find leaders basking in the light of his/her team’s success and nudge them to keep doing what they are doing. It is indeed extremely uncommon to find a leader who continuously admonish his team not to repeat a success the same way twice! Because , this just means that the team has run out of ideas and they are now well into the ‘comfort zone’. Sam Walton, it seems, is one who continuously agonized on ways how to ensure that his managers don’t get complacent with their success and winning strategies.
It dawned upon me one day that most senior managers ( defined as those who report directly to the CEO) whom I have come into contact with can and are quite able to run business profitably. They are well equipped with technical and soft skills to lead and manage. So, why then does a company need a CEO? For me, the answer is that the CEO is supposed to be able to do something that not many will be able to accomplish; even the best among his team. The CEO is supposed to be able to find and live in that fine balance between short term profit and long term profitability. This long term profitability is what gives a company its sustainability edge. Ensuring the success (in whatever way that is defined by the company) is a given as far as a CEO is concerned. What he is paid for and trusted upon is to ensure that the company endures and that what is done today not only produces the desired results today but prepares the company for future growth. This is where the concept and practice of innovation comes in as the one tool a CEO has at his disposal to ensure that he is developing a sustainable company is the innovativeness of the company. In my model of the 4 Dimensions of Leadership & Management Excellence, I have in fact identified ‘innovativeness’ as the inherent characteristics of companies with leaders who have a Knowledge Edge (the 1st of the 4 dimensions). Knowledge here is not only of the current market trend or pricing strategy but also of future trends and market movements. The history of the business world is littered with names of companies who were deemed as impossible to fail but yet fail soon after simply because they did not nurture ‘innovativeness’ for sustainability. They may have had innovativeness to begin with but only towards short term results and profits. The blame for this should fall squarely on the CEOs.
So, Jim Collins was quite right to dig into this subject. He should be praised for his endeavor as some of the big names he researched on are the ones that he used as exemplary case studies in Good to Great. It takes intellectual courage to do that and he has done right with that.
The point is….no matter how great you are, you can fail. Your only salvation : Focus, focus and focus always on long term sustainability. Are you giving life to the doom loop or developing a flywheel of a company?
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