Warding off nemesis

If nothing succeeds like success, nothing fails quite like it, either. Think Arthur Andersen, Enron and Worldcom. Or, closer home, remember the Modi group of companies, Hindustan Motors or Premier Automobiles? What brought down these giants? Did they start believing they were invincible? Were they overwhelmed by territorial instincts that degenerated into turf wars? Didn't they budget for increased and improved competition? Were they victims of Hubris? Yes, yes, yes and yes. A successful company is often its own worst enemy. It becomes arrogant and complacent, refuses to accept that the environment is changing, gets stuck in a rut of its own making and ultimately, self-destructs. Jagdish Sheth's pronouncements in the strategist on Tuesday painted a grim picture of good companies going bad. According to the marketing guru, even the best-run companies are in danger of picking up "bad habits" that can destroy them in the long run. Dismissing corporate lifecycle theories that suggest that all companies must inevitably die, and that the weaker ones will fall faster, Sheth declared that a company's life is cut short when it acquires any one of seven self-destructive practices: arrogance, complacency, turf wars, denial of new realities, volume obsession (even as margins shrink), being short-sighted about competition, and continuing with a business simply because you're good at it. Suddenly, failure looks like an increasingly attractive option. Now for the good news. The emphasis here is on the word "habit"""the behaviour may be self-destructive, but, it is learned, not an inherent tendency. Which means it is not mandatory for every company to spiral downward from success to survival mode. Ideally, an organisation and its leadership should prevent such habits from creeping into the corporate culture. But that's easier said than done. As with people, organisations too find it increasingly easy to slip off the rails as they become more prosperous. What are needed then are corrective, rather than preventive measures.

Before they can do that, though, most corporate leaders would probably do well to create checklists of warning signs that will alert them if their organisation is in self-destruct mode. Sheth recommends that the top management should swing into action""fast""at the first signs of organisational apathy, high-handedness with stakeholders, casual dismissal of potential rivals or overshooting the budget a little too often. What do they need to do? The prescription for recovery isn't too radical: bring in fresh blood; reorganise the business along new, more profitable lines; develop new products and new markets; rightsize and outsource non-core functions; and squeeze out excess capacity. Nothing that hasn't been said before, and won't be said again. There's something else that won't come as a surprise: in all this repair and restoration, top management had better be prepared to roll up its sleeves and get its hands dirty""company leaders need to demonstrate their commitment to change. There is ample evidence that a good leader can shake up sleeping or dying companies. Azim Premji took over a vegetable oils company and transformed it into an IT powerhouse. Ratan Tata re-energised the Tata Group with new products, new markets and new faces. Those are examples worth emulating.