The news that the once ubiquitous Blackberry – the makers of the ‘phone that everyone just had to have – has put itself up for sale, is another stark reminder that success can bring its very real and unwelcome problems. Blackberry, formerly Research In Motion, is the latest in a line up of once successful brands that have fallen from dizzy heights. Kodak, Polaroid, HMV, Comet, Woolworth and many others spring to mind. Indeed, if we bear in mind that during the period 1955 to 2006, 86% of US Fortune 100 organisations suffered a crisis (and around half of those did not fully recover), then the perils of success might be a critical issue to explore.
So is there something about success that we should know about?
Research tells us very clearly that organizations tend to follow a life cycle with distinct stages (just like us humans) of birth, successful growth, maturity, decline and death and that periods of successful, rapid growth can be, paradoxically, the worst thing that ever happened to the organization – if you don’t see those problems coming. In my view, the organizational life cycle is both a critical and under-utilised management tool. If as many organizations used the organizational life cycle approach to predict their problems as used the Balanced Scorecard, then we could well see a dramatic reduction in corporate failures. True, I’ve written about the organizational life cycle before, but here I’d like to go further and offer up a number of ‘rules’ that business leaders can follow if they want to avoid the unpleasant downside of success.
So why is success such a problem?
In short, there seem to be four real problems at work when organisations experience periods of success and hyper-growth.
The first is, unsurprisingly, simple corporate exhaustion. Periods of rapid organic growth, especially if coupled with a series of growth-boosting acquisitions, produce a tired, exhausted organisation. Tired organizations exhibit coordination problems, failing control systems, loss of identity (understanding what the business really is about) and of course stressed, exhausted employees. A potent recipe for collapse. Indeed, research tells us that this type of exhaustion is the most common cause of organizational failure.
The second real problem is extremes of behaviour. When I talk about ‘extremes of behaviour’ I mean attitudes to innovation and particularly risk-taking. Either organizations become over-cautious and don’t do anything radically new (a recipe for death of course in changing marketplaces), or they become over-confident and throw caution to the wind.
The third is inertia. The absence of any motivation to consider radically new strategies. The desire to ‘stick to what worked before’. This is a really common state of affairs that follows a period of success .
The fourth, closely related to the last, is an inward focus. Rapid growth leaves managers and leaders with typically two big crises to deal with – one being maintaining control and the other dealing with waves of increasing complexity. Both tempt leaders just to focus on fixing internal problems rather than exploring the outside world.
So we can see that these unexpected outcomes of success can, either individually, or as a toxic cocktail, produce the climate for maturity, decline and even corporate death. So just what can be done about all of this? What should leaders of successful organizations look out for? What can leaders do to inhibit the perils of success?
Well, based on my own research and those of others , I’d like to offer up these ‘Rules’ or guidance points for you to think about:
Rule #1 Create dual focus in the top management team. When I talk about ‘creating a dual focus’, I’m not talking about physically dividing the team into two, but I’m suggesting that there are two groups with different focal points. One has the focal point of managing the current business and the other has an exploration focus, looking for new trends, carrying out experiments. The objective of the first group – especially in today’s volatile markets – is to make the existing core business ‘bomb proof’. The objective of the second exploration group is to create new competences and to discover future strategies. If we draw upon the research of Johnson et al (see note 4 below) then its this latter group’s activities that will produce both tomorrow’s competences and tomorrow’s leaders so it’s a critical component of a future focused top management team.
Rule #2 You can’t plan it all. Traditional business planning and strategy-making is very much a formal top-down affair. The top management team controls the process and makes the big decisions. Lower levels implement. Those days are going. In today’s emerging post-recession world it’s impossible to plan everything in advance. Plans now should have a strong ’emergent’ focus, in other words, setting out a framework that defines where learning and experimentation are required.
Rule #3 Create constructive conflict. We frequently hear that organisations should have a strongly defined set of values and that everyone in the organization should adhere to these values. That’s fine up to a point, but only up to a point. Leaders need to encourage a climate of ‘constructive conflict’. Constructive conflict aims to challenge accepted views of how markets work, what the future looks like and ‘how we do things around here’. One leader that was part of one of my research programmes made it clear that he wouldn’t be happy until staff asked him questions that he couldn’t answer. There are really two sources of constructive conflict. One comes from staff where there is an atmosphere in the organization that allows staff to present their own views of what the organisation should do and the other is within the top management team itself. Creating the above dual focus in the management team will help, but remember that within the top management team there has to be challenging debate followed by genuine agreement – two of the hallmarks of a successful top team.
Rule #4 Don’t just think in terms of your industry Industry boundaries are shifting quickly. Mobile ‘phones are attacking camera manufacturers. The retail sector is reeling from out of industry attackers. So don’t frame your view of the world around industry views. Do worry if your strategy looks just like the ‘industry formulaic’ strategy that your competitors are using.
Rule #5 Grow your own competences, grow your own next generation leaders Don’t just think about today’s’ core competences, think about tomorrow’s. Also, aim to build tomorrow’s leaders internally – that’s a big finding from the research  cited below. These are key tasks for the exploration part of the top management team.
Rule #6 Get involved, gently Too many leaders get stuck at head office. The great change agents that I’ve worked with spend a considerable amount of time inter-acting with business level staff providing gentle guidance and encouragement. As Bloomberg’s Peter Grauer says ” a leader must establish a sense of intimacy with employees and customers”. Successful change agents inter-act a lot with employees and customers. One critical reason for such inter-action is to gauge the energy in the organization. Remember that corporate exhaustion is one of the most common reasons for failure. Organizations can’t be led by scorecards alone.
Rule #7 Create an innovation story Every organisation needs some form of innovation. Create a story that paints a view of the future and identifies the types of innovation effort that your organization needs. For more on innovation and the role of the top management team see my briefing Creative Destruction: The innovation imperative.
Rule #8 Get different functions working together As organizations grow, silos seem to appear and all those functions that are, together, responsible for meeting the needs of the customer never seem to talk to each other. cross-functional teams working on innovation and problem solving are a great way to quickly break through silo walls.
Rule #9 Try to predict the next crisis Research  clearly tells us that growing organizations go through a series of crises from autonomy, through to control and then the management of complexity. Think carefully about what your next crisis could be.
Rule #10 Look for over-confidence Remember that research tells us that successful organisations might not be as good as they think at managing and assessing risk.
 Probst, G & Raisch, S (2005) Organizational crisis: The logic of failure Academy of Management Executive 19, 1: 91-105
 Miller, D (1994) What happens After Success: The perils of excellence. Journal of Management Studies 31,3: 325-358
 Greiner, L. (1972) Evolution and revolution as organisations grow Harvard Business Review July-August: 37-45
 A notable example of which is Johnson, G, Yip, G and Hensmans, M (2012) Achieving Successful Strategic Transformation. MIT Sloan Management Review, Spring: 25-32