More Brain, Less Surgery: How High Growth Companies Come Off The Rails (Part 2 of 4)

11 Apr 2012

In Part 1 of this 4-part series why once successful high-growth companies come off the rails, we looked at the issue of ‘Blinded By Success’; where companies are literally blinded by their current success to pivot in time to sustain high growth.

There are three more tapes that get replayed again and again.   The narrative and plot is always the same, just the actors are different (well admittedly, we’ve even seen the same actors in a few situations, but we digress).

(1) Strategies Tire – simply put, strategies have a fixed shelf life.  Problem is when designing strategy, the vast majority of execs don’t think this way.  Most often, strategies are presumed to be long-lasting.  Pro tip:  they’re not.  Seems the logic is that since a lot of clever thinking went into it, it must be good for awhile.  When is the last time a strategy was announced with an expiration date on it?  Sure we know a strategy is obsolete when growth stalls, market share shrinks and profits disappear, but then it’s too late – way too late.   Blockbuster stayed way too long with a strategy dependent on a big fat bricks and mortar retail footprint that required me to be inconvenienced in the process.  They had years to respond, but simply didn’t.  Welcome to the deadpool.

(2) Markets Change – the frog in the boiling water analogy notwithstanding, most growth companies that stall are often unable to see the shifting market sentiments that ultimately are their undoing.   The Sony Walkman franchise has been around 30+ years, and guess what?  The Walkman franchise finally died in February 2012.  The Walkman pioneered a space, dominated it, and then finally lost it when they did not sense the strategic market changes underway.  Personal devices merged and morphed as well as software/hardware combinations like iTunes/iPod fundamentally changed our digital audio consumption patterns.  Welcome to the deadpool.

(3) Competitors React  – very few companies have strategies that can’t be (ultimately) copied.  Defensibility is a temporal word when it comes to strategy.  In every industry, the laggards are most often found trying to emulate the leaders.  They seldom catch the true leaders – who are constantly revving their strategies to stay ahead, but the laggards do most often catch some ‘false leaders’.  BMW has remained a leader in the multisport motorcycle segment for over a decade.  Ducati appears to be catching up with them quickly with the Multistrada.  BMW’s successful formula in this bike segment has been renowned.  Needing to diversify, Ducati has gone to school on them, much to BMW’s chagrin.  BMW motorcycles are far from the deadpool, but competition is certainly intensified versus what it was just a few years ago.

The number one cause we see is the incumbents not recognizing strategic or market shifts early enough.  They don’t see soon enough how their strategies are tiring, how markets are fundamentally changing or how competitors are reacting and creeping up on them.  Why?  They often don’t have the market sensing skills, they don’t want to believe the data they see in front of them and they don’t have a replacement strategy ready to be put in place.

Up and Right!

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