All of us are attempting to fight one of the key laws of nature in both our business and personal lives: its life cycle. This process of birthing, growing, maturing, and dying applies to everything in the universe-including our own sun. So when our leaders, in both business and government, refer to "sustainability," they are to be applauded for attempting to lengthen the life cycle. However, they still can't repeal this essential law of nature. This note explores the reasons why these life cycles occur as well as some brief thoughts about how to extend them.1
1. Inability to Persevere in Doing Things That We Don't Want to Do
We all talk about staying in shape and watching our weight to enjoy and to extend a healthy lifespan. However, obesity is epidemic in America. As a Hall of Fame tennis player explained to me: "I've trained hard for 20 years. I'm done and going to enjoy life." This world-class athlete had become obese and completely out of shape.
Similarly, as corporations grow and become successful, complacency sets in. The culture changes from the quick, lean culture of the initial employees to a much larger group who are attracted because the firm is a successful enterprise that offers potential for wealth and security and an "easy" job with an "entitlement" to all of the associated benefits.
So the "tough stuff" of watching costs, changing the business model to preserve market leadership, and being "paranoid", in the words of Andy Grove, are no longer done—or acceptable.
Potential solutions: The CEO and his/her team need to concentrate on maintaining the culture of the company through A) hiring only those people who will adapt to the culture and embrace it, and B) structuring the proper incentives to motivate employees to maintain that culture. They must recognize that employees who excelled at a particular position may not have the skills to operate optimally in that same position as the company grows and matures.
2. Inability to Recognize That the Game Has Changed
Andy Grove also observed that he was the last to know things as the CEO. Because senior management and government leaders are typically far removed from the "front lines," it's difficult for them to identify critical changes as early as possible. Similarly, many employees aren't creative thinkers. They merely carry out orders. Those who sound the early warning alarm are frequently "shot" as messengers of bad news.
Potential Solutions: Structure a fairly flat organization where information can flow to the top quickly. Establish a separate email address for each member of the senior management team that is different from his/her primary email address, so that rank-and-file employees can send emails directly and allow the sender to screen his/her email address, if desired. In this way, the sender will know that no reprisals will occur. An intranet employee chat room, once again allowing for anonymity, will let employees interact quickly on line so that new ideas can be exchanged and issues can come to the surface quickly. It will also allow the senior management team to learn how the company and themselves are viewed by employees.
3. Inability to Change Strategy Tactics Even Though the Change Has Been Recognized
Professor Clayton Christiansen of Harvard Business School has done exhaustive research in this area and in the area described above.2 Organizations are typically a prisoner of their own business models. To effect the necessary change is painful, requiring the adoption of an entirely new paradigm, which may entail reengineering, retraining, and restructuring (including layoffs). Most firms don't have the will to do this.
Potential Solutions: Accept the fact that "you need to do it to yourself-or it will be done to you." A company can either be a victim (as in the Big Three automakers) or a survivor (as IBM has expanded its business into the services area instead of continuing to concentrate primarily on hardware manufacturing). This not only demands a tough "look in the mirror" on a periodic basis and the will to do what has to be done; it also requires significantly different management talents and styles to maximize the profits of declining businesses. (These can remain high for a long period, if appropriately operated). These talents and styles are different than those operating in growth businesses or mature businesses. A company needs to have all three types of managers on its "pitching staff" (e.g., starter, middle relief, and closer) and to establish the appropriate incentives for each group.
4. Loss of Flexibility and Nimbleness as the Bureaucracy Grows
As a firm achieves ever greater success, it grows larger, less nimble, and more bureaucratic. Rules and procedures tend to be inflexible rather than adaptive. The behemoth can't move as quickly as the fox. When Intel switched from DRAM (dynamic random access memory) as its principal product to microprocessors, it took a year for Gordon Moore and Andy Grove to gain managerial acceptance of the new strategy.
Possible solutions: Organize the company to operate in smaller units, allowing it to be more nimble in its responses to challenges and change, as well as to attract and retain entrepreneurial managers. Delegate decision making downward, so that the decision chain is shortened and response time is improved. An interesting example is Johnson and Johnson, which permits its key managers to run their businesses on their own, except that they must get all significant capital expenditures approved by the CFO.
This note is brief of necessity. It can't possibly address all of the issues and potential solutions. I also don't have a monopoly on knowledge. Therefore, I would encourage comments, suggestions, and criticisms by the reader, which is how I learn and adapt to the changing environment as well.
1 For a very thoughtful discussion of how our human "health span" can be maximized, please consider: Younger Next Year: Live Strong, Fit, and Sexy Until You're 80 and Beyond by Chris Crowley and Henry S. Lodge and the successor book: Younger Next Year for Women: Live Strong, Fit, and Sexy - Until You're 80 and Beyond by Chris Crowley, Henry S. Lodge, and Gail Sheehy (both, Workman, 2007). The strategies and tactics articulated in these books can frequently be mapped into business situations.
2 Christensen, Clayton M. The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business. Collins Business Essentials: 2003 (1997).