The mighty who fell: too big to succeed
Levi Strauss, Eastman Kodak, Caterpillar, Heinz, American Express, Procter & Gamble, Compaq, Blackberry.
Just a sample of companies, all legendary, that at some point, saw their growth stall, their market caps decline and their very existence questioned. Megatrends in technology and demographic shifts made some of their troubles inevitable. But, I can’t help but think there’s more to that.
In my previous career as a management consultant, I had the opportunity to work with organisations across industries and geographies on a variety of business priorities. Every large organisation of pedigree is around because they’ve done certain things really well. However, their very size and complexity brought with it a certain inexorable slowness in the way things happened. At the sub-system level (design, engineering, marketing, supply chain…) you see frenetic activity; demanding leadership, conference calls, review meetings, workshops, burnt out teams. Yet, the purely incremental, par-for-the-course product release keeps getting pushed back, from it’s timeline of 18 months (which was 12 months behind nimble competition to begin with), to finally limping into market, 24 months after it was kicked off, laden with long-outdated features.
In each case, the prime suspects, to me, have looked like size, and centralisation. The more an organisation looks to run things out of functional mega-structures, the less accountability for outcome, rests at the front-line. Not that they have it easy. Far from it. Measured against derived metrics (number of sales meetings conducted, tickets resolved, Turn-around-time for customer queries…?!), they’re forever scampering to show progress to the myriad national, sub-regional, regional and global designations who needed those updates to justify their not-insignificant payroll.
The perceived benefits of centralisation; shared know-how, cost curves, scale economies etc. look utopian and usually only marginally realised, if at all. So much so that I consider the phrase “synergy benefits” in a corporate press release or earnings announcement as a SELL indicator!
The exception to the rule
And then there’s Amazon. Conventional wisdom says a publicly listed organisation making $136Bn in annual revenue and market cap $422Bn should have those same problems of bloat and inertia. Of struggling to innovate, launch and successfully scale new multi-billion dollar businesses. Then you read the CEO’s letter to shareholders and it makes sense why.
Learning from Jeff Bezos 2017 letter to shareholders
On being asked when will Amazon move from the “just begun” (Day 1) phase to that of a mature, evolved company (Day 2)
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.
So how does a company avoid becoming irrelevant?
Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.