This chapter is from the book
This chapter is from the book
This chapter is from the book
It's All About Leadership
So what "self-destructive habits" do you find in the interconnected stories of these three companies? Denial? Arrogance? Complacency? Check. Check. Check. How about "competency dependence" and "competitive myopia"? Check, check. Given a slightly different slant, these stories could also illustrate our final two self-destructive habits, "territoriality" (internal turf wars) and "volume obsession" (too-high cost structures). But I have lots more stories to tell. The following chapters spell out, define, and illustrate all seven of the self-destructive habits, examine other companies that have exhibited them, and look at how they corrected them—or failed to. The discussion, I hope, will show you ways to identify such behavior in your own business and ultimately point the way back toward health and longevity.
First, though, let's define our terms a little further. For our purposes, let's consider two aspects, or connotations, of "bad." The first is the more obvious and direct: bad means unhealthy, not good for you, contrary to your self-interest, or destructive. Behavior that makes your customers or suppliers resent you, that makes them seek out other business partners, seems clearly "bad" in this sense. Arrogance or abuse of stakeholders would seem to be good examples. But "bad" in the business arena can also suggest "lost opportunity." Here, perhaps complacency, or underestimation of the competition, causes you to fail to maximize your potential. Your behavior may not be "actively" bad, nor are you reviled by others in your community. But your vision has failed, and you have lost, or are about to lose, your chance.
Finally, a word about leadership. Sometimes CEOs are directly responsible for the self-destructive habits their companies develop. This is most likely to be the case with founding CEOs, or CEOs who refuse to retire, or who "clone" their successor, or whose directors have been handpicked. Family-run businesses, where the "genetic influence" is strong, are similarly likely to fall into self-destructive habits.
However, whether or not the CEO is responsible for the company's self-destructive habits, it is definitely his or her job to break them. When proactive intervention is necessary, it can only come from the top. Sometimes, especially when the crisis is severe, when the habits have become addictions, a new leader must be brought in. We saw this in the case of IBM, and you will see other examples in the chapters to come.
Consider the performance of GE under Jack Welch. When Welch became CEO in the early '80s, analysts regarded the company as a solid but staid performer, growing at the same rate as the gross national product. Welch disagreed, and he soon threw GE into turmoil by declaring it had to radically transform itself. He launched a major restructuring under a strategy called "No. 1, No. 2," which mandated "fixing, closing, or selling" every business that was not first or second in worldwide market share and that did not offer major global growth opportunities. In implementing this strategy, GE eventually sold 400 businesses and product lines—including housewares and mining operations—worth $15 billion and acquired 600 others worth $26 billion. By 1988, GE was organized into 14 major high-tech or service businesses that Welch believed had tremendous global growth potential.
GE is a prime practitioner of anticipatory management, a proactive approach to controlling one's destiny in a changing market. Anticipatory management is most needed and works best when the external environment is undergoing rapid and discontinuous change. Anticipatory management gives organizations a major competitive advantage. Trends that are anticipated can be planned for, and competitive advantage accrues for firms that do so better and earlier than their competitors.
As shown in the following figure, when a company continues to practice "status quo" management and look inside-out rather than outside-in when the environment is changing, it begins a slippery downward spiral. These companies die a slow death, as if inflicted with a chronic disease.
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Figure 1-2 Leadership styles
If the company confronts a sudden threat, it goes into crisis management as a survival necessity. For example, if an investment bank suddenly loses important customers because it has taken them for granted, it can immediately undertake a campaign to assess how its remaining customers view the company and focus more attention on relationship management. Such threat-driven changes can prolong survival, but they don't ensure growth or prosperity in the long run.
Leaders must anticipate environmental changes and proactively position their companies to be even more successful than they were under the status quo. They must intervene and transform the company's culture, processes, structure, and systems internally. They also must alter the regulation externally to safely position the company's future in a changing world of technology, competition, capital markets, regulation, globalization, and market needs.14
Leadership is about shaping expectations; management is about delivering expectations. Management is perfectly capable of sustaining habits, whether good or bad. Real change is likely to come only from an executive with the power to initiate it.
Now, let's look at those self-destructive habits.