More Brain, Less Surgery (Part 1)

28 Mar 2012

Since 2001 we’ve worked with over 200+ TMT clients globally on a myriad of growth related issues.  You could say we’ve been running in traffic a long time now.  Through our client work we get to see a lot; too much sometimes.  Negative growth, very high growth, and everything in between.  What’s the old saying?  You never want to see a butcher make sausage else you’d never eat it, right?  One of the benefits of running a strategy consultancy is pattern recognition.  We assess strategies.  We critique strategies.   We invalidate strategies.  (We never ‘validate’ strategies BTW).  We create strategies.  Show us 20 strategies and we’re pretty confident we can segment them in four quartiles on probability of success (and more importantly, why).  Show us 200 strategies and we’re pretty sure we’ve seen the DVD before.

Question.  What do Nokia, Sega, Kodak, Nortel, GeoCities, Seagate, AOL, Excite, Ariba, AltaVisa, MySpace, Exodus, Wang, Compaq and Kana all have in common?  All once white hot growth companies that stalled.  So why do once high growth companies ultimately falter?  We believe there are four fundamental reasons.   We’ll look at the first reason – Blinded By Success – in this  post and address the other three reasons in subsequent blog entries.

Blinded By Success – Pretty straightforward.  Successful high growth companies are lulled into a feeling of invincibility that prevents them from proactively changing their strategy from an invariably predictable and pronounced shift they are thus not prepared for.    Successful high growth companies that are blinded by success are most often blind-sided by the extremely rapid decline in their prior success.

There are a couple of underlying causes of being blinded by success.

First, past success often blinds companies from reinventing their future.  Go back to early 2007.  Nokia, RIM and Motorola had a whopping 64% combined share of the mobile handset market.  They all thought they were firing on all cylinders.  ‘Why change anything?’  was evidently the mantra of senior management at these companies.   They were locked in a red ocean strategy with each other – fighting for incremental market share gains against each other, with relatively minor ‘me too’ functionality easily replicated by each other in subsequent quarters..   These three companies had strong relationships with operators worldwide and churned out incrementally new products year after year.  Then along comes two new mobile market entrants from out of nowhere: Apple’s iOS and Google’s Android.  Both entered the mobile market as outsiders to utterly dominate the high end of the mobile handset market – and they did it in very short order.  Apple and Google saw a huge market opportunity where innovation was stale.  It’s fair to say past success is not always a good indicator of future success.  Too often, company Boards and management teams too often believe their own hype.  They think they are innovators when their customers are actually buying on price for instance.  Look, all products can’t be innovative.  Definitionally, half of all products in any category are statistically below the median.  Companies also get lulled into the fallacy of cash cows.  Sadly, a lot of cash cows are missing the ‘cash’ part.

Second, companies are typically built to do one thing and one thing well.   That’s fine when you’re small, when you’re growing fast, and when you’re grabbing market share.  Monolithic companies are much more problematic in mature markets.  Dell pioneered the build-to-order model and enjoyed nearly two decades of high growth.  They literally built the company brick by brick to be a build-to-order company – something we now take for granted in the PC business.  Dell’s core competence is as a manufacturing/assembly company with a thin marketing veneer.  It now wants to get heavily into software?  We agree with the rationale but Dell wasn’t build to be a software company, it was built to be a manufacturing/assembly company.    Can it change?  Maybe.  In time to matter?  Maybe not.

Are you a high growth company?  Your choice is either to be confident in your success, a little complacent, and thus exposed to being blinded by success.  On the other hand, Andy Grove once said only the paranoid survive, and it’s (usually) never to late to proactively get ahead of the curve.  Disrupt or be disrupted.  ‘More brain’ now by you and your team will mean ‘less surgery’ later.  The choice is yours.

We’ll post Part 2 in this series in the next two weeks or so.  Stay tuned.

Up and Right!

1 Comment for this entry

* (denotes required field)

Posting guidelines

We hope the conversations that take place on this blog will be energetic, constructive, free-wheeling, and provocative. To make sure we all stay on-topic, all posts will be reviewed by our editors and may be edited for clarity, length, and relevance. We ask that you adhere to the following guidelines:
  • No selling of products or services. Let's keep this an ad-free zone.
  • No ad hominem attacks. These are conversations in which we debate ideas. Criticize ideas, not the people behind them.
  • No multimedia. If you want us to know about outside sources, please link to them, Don't paste them in.
All postings become the property of Milestone Group, Inc.
The Editors