The Self-Destructive Habits of Good CompaniesThe Self-Destructive Habits of Good Companies… … And How to Break ThemAnd How to Break Them

Group 6:

Why good companies fail.

Three conflicting theories as, Why Companies Die:• Population ecology or “survival at the

fittest”

• Inevitability or “birth & death”

• By Author’s View

Although it is believed that, institutions are immortal & humans are mortal

But It is found that average life-span of companies are declining

Head of Shell Co. Arie de Geus :“Average life expectancy of Fortune 500 Company is 40-50 years” “1/3 of Fortune 500 companies in 1970 had vanished by 1983. (13 years!)”

In 1957 Kenneth Olsen, a 31 year Engineer at MIT, asked for $70,000 from American Research & development to start a new firm

Y-1958$94,000

Y-1977$ 1 BillionY-1963

$6,500,000

Years

Sales

In 1989, Digital announced to introduce range of PC

Stock was trading at $98, down from $199 just a year & half earlier.

Olsen scrawled his own message “The personal computers will fall flat on its face in business.”

But companies hemorrhaging continued through 1991, as stock was now at $59/share

Olsen Autocratic style was drawing criticism

Olsen’s support for ill-fated VAX mainframe, which cost $1billion was partly responsible failure

After retirement of Olsen in 1992, Successor Robert palmer for seven years prove up to the challenge

Finally in Jan 1998, crippled giant was acquired by Compaq

The “ I am different” syndrome

The “ Not Invented here” syndrome

The Looking for answers in all the wrong places” syndrome

Look for it

Admit it

Assess it

Change it

Exceptional achievement in the past wraps your perception of present reality

David Conquers Goliath

You pioneer a product or service that nobody can duplicate

You’re smarter that the other guys

THE WARNING SIGNS OF ARROGANCE:

You stop listening: You believe you’ve seen it all before, and you no longer listen to customers, employees, investors, consumer advocates or the government.

You flaunt it: You are extravagantly eager to show off your success. You browbeat others: Your company acts like a bully-internally and externally.

You are high-handed: You abuse rules and procedures in the belief that no one can regulate or even question your business.

You curry approval: You favour those who validate your views and get rid of those who are critical.

HOW TO BREAK THE ARROGANCE HABIT:

Rotate management to new challenges: Challenges your management but allow them to fail. Failure is a good teacher of modesty.

Implement non-traditional succession planning: Consider fast tracking candidates across functions, divisions, and markets.

Diversify the talent pool by recruiting from a variety of educational institutions, countries, and demographics: Make your corporation strong by diversifying your talent genes.

Change your leadership: Consider bringing in an outsider.

  Summary:

Neither people nor companies are likely to become arrogant overnight. It’s a habit formed over the years and its roots can reach deep into the corporate soul. No one of these five suggestions – not even a change of leadership – can guarantee that the culture of arrogance will be broken. In all likelihood, real change will come only after arrogance has begun to cause visible damage – in lost business, lost customers, lost profits. At that point, the remedies suggested here may help transform the corporate identity – inside and out.