Just look around and it’s hard to argue with him. General Motors. Enron. Washington Mutual. Lehman Brothers. PanAm. The landscape is littered with once-dominant companies that have lost their position of market leadership or gone completely out of business.
These companies withered away due to internal rather than external factors. Convinced of their own immortality, they grew fat, bloated, and lazy, and refused to keep up with changing market conditions. They grew overconfident in their ability to stay ahead of competitors. They ignored or misjudged evolving customer wants and needs. Or, as they say in Texas, they simply got too darn big for their britches and lost touch with their customer base.
How can this happen to such highly successful companies? They had access to resources that most firms can only dream about. They had capable, experienced leadership. They had well-established brands that people knew and trusted. They had long track records of success to continue building upon. What went wrong?
The answer lies, at least partly, in our brains.
The human brain excels at taking in large amounts of data, sifting, and analyzing that data, and then forming patterns. Most of this activity takes place just below the level of conscious awareness, so that we’re not even aware when we’re doing it. Way back in our caveman days, this kind of pattern recognition coupled with instant and consistent response was a good thing. It allowed us to quickly identify predators, remember the location of food and water sources, and engage in other activities that supported our survival. We responded to these inputs of data the same way each time and it worked because the pace of change was pretty darn slow. In today’s modern world, not so much.
The problem is that once these unconscious patterns and responses get established, they can be very difficult to break, especially when they get reinforced by all the trappings of success. That’s why the more success we achieve, the more we tend to do things the same way. After all, it has worked for us up to that point. We are constantly screening in the data that proves us right and screening out anything contradictory. Unfortunately, the world is changing all around us, but our deeply ingrained patterns of seeing the world a certain way cause us to filter, distort, or ignore the information coming in, so that we only see what we want to see. As a result, we continue doing the same things the same way, without ever stopping to question whether the time has come to start doing things differently.
How else to explain GM’s behavior over the past few decades?
I hate to kick GM while they’re down, but they’ve become the poster child for ignoring the obvious. Soaring gas prices. Global sales of smaller, more fuel-efficient cars. The increasing popularity of hybrids and alternative fuels. Despite the evidence surrounding them, all GM could see was a world that wanted large, powerful automobiles. So they continued to churn out over-sized gas guzzlers while watching their market share erode year after year and they continued trying to negotiate in the same way with the same unions years after the data suggested that relationship needed to change dramatically on both sides.
Here’s the kicker: don’t think you have to attain FORTUNE 100 status to become a victim of this “success syndrome.” Simply combine success at your level with a large dose of complacency and the brain’s natural tendency to see what you want to see and you, too, can enjoy a rapid fall from grace.
How can you avoid such a fate? I ran across a good article the other day (http://www.deniseleeyohn.com/assets/files/pdf/resources/DLYohn%20Success%20Syndrome%20Article.pdf) in which the author, Denise Yohn, offered three strategies for avoiding the dreaded success syndrome:
1. Instill a culture of truth telling. In many organizations, data gets collected and presented in a way that people think the leaders want to hear. Instead, leaders must insist that people tell the truth and then reward them for doing so, even when the truth hurts.
2. Celebrate failure. Successful companies often stop failing because they stop taking risks. Leaders need to ensure that failure continues to happen even after success is attained.
3. Be a little paranoid. Like a sentry patrolling the front lines, constantly scan the horizon for emerging threats, and be vigilant about preparing for change.
To this I would add, never take your success or your customers for granted. Constantly ask, “How has our customer’s world changed in the past six to 12 months? Are the ideas, assumptions, processes, and systems that made us successful still valid in today’s world? If not, what do we need to change and how do we need to change it?”
The brain is a marvelous instrument. But sometimes it just gets in our way or we don’t even visit it. Don’t assume that what you think know about your customers, your markets, and your business is still true. Don’t assume that loyal customers will stay if you fail to keep up with their changing demands. And never let yourself believe that you are too big, too successful, or too important to fail.