MONDAY, JUNE 8TH, 2009
One of my clients consistently questions his ability to lead and achieve the success he desires for himself and for his business. While one might question his confidence, and at times his determination, the reality is that no one ever lives in a place of complete confidence. You only need to read the biographies of the great achievers in all areas of life to appreciate they had moments of despair, and fearfulness about their abilities to succeed in their chosen endeavor.
Jim Collins new book How the Mighty Fall: And Why Some Companies Never Give In
provides powerful examples of companies that succeeded due to their continuing fearfulness of their competitors catching up to them. Collins mentions that they expected to discover that complacency was the reason most businesses who had previously succeeded fail, but in fact in only one situation did they find anything close to resembling this The Great Atlantic and Pacific Tea Company
[A&P], and in that specific case it had more to do with the Ralph Burger misunderstanding George Hartford’s dying wish, “take care of the organization” which he took to mean preserving its specific practices and methods. [So much so that two decades after Mr. John’s death his office remained exactly as it had, right down to the coat hangers hanging in the same place in the closet.]
Collins offers 5 stages that company’s go through on their way to failure. Stage 1 and 2 are related. Stage 1 – Hubris born of success. Stage 2 – Undisciplined pursuit of more.
In fact you’d expect companies that were complacent to fail to innovate and yet nearly every one of the companies that went through Stage two innovated more than they had previously. From the book, The point here is not as simple as “they failed because they didn’t change.” As we’ll see in the later stages of decline, companies that change constantly but without any consistent rationale will collapse just as surely as those that change not at all. There’s nothing inherently wrong with adhering to specific practices and strategies (indeed, we see tremendous consistency over time in great companies), but only if you comprehend the underlying why behind those practices, and thereby see when to keep them and when to change them.
Overreaching is a far better explanation for how these once seemingly invincible companies fail. An excellent example of this is Ames Department Store
. Ames started in the Northeast
about the same time as Wal-Mart in 1958 [actually 4 years ahead of Sam Walton’s first Wal-Mart] with the same idea, and performed roughly at the same rate of return [nine times the market]. Where is Ames now? Gone - Dead! While Wal-Mart is alive as #1 on Fortune 500.
Collins describes an incident that points to Sam Walton’s deep humility and learning orientation. In the late 1980’s when a Brazilian group bought a discount retail chain in South America and sought help to learn how to run their company better, only one discount retailer responded to their requests for help – Sam Walton. Yet when they arrived Walton didn’t immediately show off his organization. Instead he asked them questions about their country, their market, seeking first to learn from them.
How do you really know if you’re right about the underlying causes of your success? The best leaders never presume they do. They retain an irrational fear that perhaps their success has more to do with luck or fortuitous circumstances.
The downside of this thinking if you’re wrong Collins points out is minimal. You end up being stronger by your disciplined approach to success – incessantly working at making yourself stronger and better positioned for the day your luck runs out. On the other hand if you suppose your success to be due to your superior qualities you might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late.
Large companies as well as small often see opportunity despite the brutal facts. The Space Shuttle Challenger offers very real evidence of Stage 3 Denial of Risk and Peril. We’ll explore this as well as a helpful concept for decision making and risk taking called the “waterline principle” in the next blog.
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