Interview
Inertia is trapping some companies
After years of doing well, a successful company can go bad by being locked into commitments that made them successful at an earlier time.
They find themselves "trapped by their own commitment."
Professor Donald Sull, an Associate Professor of Management Practice in Strategic and International Management at the London Business School was speaking to business leaders and IOB students at the Distinguished Leadership Series on Why Good Companies Go Bad at the Hilton yesterday.
"Just because things worked in the past, (they) won't work in this brave new world of unpredictability," he said.
"There have been a lot of successful companies, recognised by their industry, that have collapsed."
He said that the companies that failed, whether it was because of changes in technology or entering the global market, saw the changes coming but failed to respond effectively or not at all.
"Of all the companies I've studied over the last decade," he said, "I have yet to find a company that didn't see the change coming. They may not understand what to do, but they all say the changes coming."
He said that some managers actually worked more hours, doing the same old thing. It was like stepping on the gas while the wheel of their car was stuck and spinning in the mud, he explained.
"The explanation that I have found why good companies go bad is that managers get trapped by their own commitments," he said.
"Managers make commitments, of resources, systems, that lead to their success, that tends to harden over time, and when the environment changes, these commitments lock them into a pattern of response that makes it difficult for them to respond."
Sull said that making a commitment to a "global view of the world" was one way of getting out of the inertia.
And this meant "looking at ourselves the way the rest of the world saw us, and not the way we saw ourselves", he said.
"Committing to a global mind-set," he explained, "was getting people within the organisation to see your country and company as the rest of the world sees you. That's what it's about. This is critical: How you look to the rest of the world. I have never seen a company go global without doing an exercise like this. Never once. You have to understand where you stand relative to the rest of the world."
Interview by Ian Gooding. Source: http://www.guardian.co.tt/archives/2005-01-25/business2.html