Why very smart organizations do very dumb things

I wrote this a while ago for Fast Company magazine, but it occurs on me that a few readers might not has seen it…

Given that the average lifespan of a top 500 company in the U.S. is 40 years (12.5 years in Europe) there appears to be a serious problem with corporate longevity. But why?

One reason could be that nothing recedes quite like success – or, as Bill Gates once said, “success is a lousy teacher, it seduces smart people into thinking they can’t lose.” All companies start off as an idea. Start-ups are usually small and poor, which tends to create focus and urgency. If they develop a great product or service with an easily communicable point of difference, they usually grow. And therein lies a problem.

One of the first issues to arise in a growing company is that management gets separated from innovation. Peter Drucker made this point many years ago, although he used the term entrepreneurship. Although managing and innovating are different dimensions of the same thing, most companies regard them as separate. Moreover, as the urgency to stay alive evaporates, the focus shifts to internal management issues. But without continuing to innovate, companies die.

There are other challenges too. As companies grow, senior managers become physically separated from their customers. The entire board of one of the major banks in Australia takes calls from customers every week, but this is a rare exception. A recent survey by Bain & Company found that 80% of companies believed that their firm delivered superior service. Only 8% of their customers agreed. Perhaps senior managers are confusing profitable customers with happy ones. Departments like sales and customer service are usually close to the needs of customers. Hence they are close to one of the primary sources of innovation. Managers generally aren’t — they are close to the needs of management.

The culture of an organization can also contribute to failure. The dominant culture of most successful companies is conservative — to avoid risk and to proceed in an orderly fashion. This is fine in the short term, but longer-term, what made your company successful in the past may not do so in the future. Eventually a kind of corporate immune system develops that resists innovation and tries to free itself from any form of obligation to adapt, even when change is clearly on the horizon. IBM failing to see the rise of desktop computing is a good example of such Group Think. One suspects that Sony’s loss of the portable music and entertainment market or the failure of Kodak to adapt might be others. I’d say that most banks are similarly in denial.

You can spot such organizations a mile off because they tend to distrust people from the outside (including their own customers). They also think that they have absolutely nothing to learn from anyone or anywhere else. A classic mistake is only recruiting from the inside. I once worked with a retailer that strongly favoured home-grown talent over external hires. Nothing wrong with that, except in this case it reinforced the arrogant and complacent attitude that there was anything to learn from the outside.

There is also the issue of creating the reality you want, rather than seeing what is really happening. It is not uncommon for senior managers to “edit” news before it reaches the board level — so things appear much better than they really are. There’s even a story about a supermarket chain in the U.S. that repainted its stores, and hired extra staff, just before the CEO was due to make a visit. I don’t think the company ever went as far as hiring customers for the day, but once you start editing reality where do you stop? In addition to corporate culture, corporate structure often gives rise to another problem. As Clayton Christensen points out, large organizations are generally structured on departmental levels. As a result most innovation is incremental. For example, most innovation inside fast-moving consumer goods companies takes the form of endless line extensions to existing products. Unfortunately, young start-ups have no respect for these boundaries, so it is generally they who invent new categories and business models in response to changing conditions or new customer attitudes and behavior. In other words, unless you can look at innovation from a whole business perspective and make innovation truly cross-functional (twinning designers with R&D staff as Procter & Gamble now does, for instance) innovation will never get beyond the component or existing category/product level.

But perhaps none of this is a bad thing. After all, survival is not compulsory. Perhaps everything (individuals, organizations, markets, countries) need to die – or at least be threatened with extinction – so that the cycle of innovation can begin again.

Here are a few quick tips to prevent your organization from doing dumb stuff and dying too young.

•Water your roots. Re-discover the entrepreneurial zeal and focus that founded your company in the first place.

• Think about how a start-up would operate in your market. How could you apply this thinking to make your own organization more resilient?

• Don’t just look at what the big guys are doing. Study what the start-ups are doing, especially those on the fringes of your market.

• History repeats itself. Companies and markets tend to operate in cycles, so know where you are and act accordingly.

Something waiting to happen

Two things I’ve been thinking about. First, how a virtual roller coaster at Universal Studios was far more thrilling than any of the real roller coaster rides. Second, how these theme parks, especially Disneyland, are so vulnerable to attack. There are bag searches and finger print scans, but the bag searches are cursory and there is no attempt to search the person.

In wet or cold weather, when people wear coats, you could get almost anything through security at these theme parks. I’m not talking about terrorists here. More internal elements, especially a repeat of the Sandy Hook elementary school shooting. It’s not just the ease of smuggling things in though. It’s the concentration of people, especially children, in relatively small spaces. I hope someone out there is thinking about this and ways to prevent such an outrage.

A De-Materialized Christmas

 

 

 

 

 

 

 

 

 

 

 

It’s Christmas time. You know, mistletoe and wine. Children singing Christian rhyme. We’ve got logs on the fire and gifts on the tree.

But no. Wait. It’s gone all virtual. Seriously, things are a little weird this year. My eldest wants things that don’t have any physical presence – digital music, digital games, e-books. So the tree is there, but there’s not much underneath it. How long, I wonder, until they tree itself is simply a digital projection (available for instant download in millions of colours and designs) and the relatives show up a holograms.

2013: Hello. Goodbye.

I’ve been collaborating with Ross Dawson to create a quick visual summary of some of the things that will be appearing and disappearing in our lives in 2013. The graphic is above and a text list is below.

Here is the full list in text form (in no particular order):

APPEARING

Augmented reality glasses

Thought control

3D printing in the home

Personal DNA testing

Digital butlers

Voice control TV

Customized medicine

Pay by fingerprint

Electric sports cars

Robot sex

Conversational computing

Empathic robots

Gesture interfaces

Flexible, foldable mobile phones

Robo-nannies

Infinite color at home

Personalized billboards

Networked professional services

Bio-Hacking

Pollution absorbing clothes

Biodegradable electronics

Automated instant translation

Memory implants

Video wallpaper

Retail delivery boxes

DISAPPEARING

Intimacy

Computer mouse

Spelling

Landline telephones

Coins

Privacy

Video rental stores

Public phones

Vacuuming

Retirement

Weekday newspapers

CDs/DVDs

Chain bookstores

e-Cards

Space tourism

8 hours sleep

Switching off

9-5 workdays

Dining rooms

Handwriting

Shop assistants

Biodiversity

Non-internet businesses

Printing photographs

Welfare state

Learning foreign languages

Paper medical records

Watches for under 25s

Focused attention

Maps

Shame

The other great Dylan

I’m in Wales today, so it’s probably time for a bit of Dylan Thomas…

“A good poem is a contribution to reality. The world is never the same once a good poem has been added to it. A good poem helps to change the shape of the universe, helps to extend everyone’s knowledge of himself and the world around him.”

Just one more bit?

“I know we’re not saints or virgins or lunatics; we know all the lust and lavatory jokes, and most of the dirty people; we can catch buses and count our change and cross the roads and talk real sentences. But our innocence goes awfully deep, and our discreditable secret is that we don’t know anything at all, and our horrid inner secret is that we don’t care that we don’t.”

Is Kindness Viral?

 

 

 

 

 

 

 

 

It’s almost Christmas, so perhaps acts of random kindness attract attention at this time of year. Maybe that’s too cynical. One of the most viewed images on the web last month was of a policeman helping a homeless man in New York. The man, a war veteran, was shoeless, so the policeman went to a local store and bought the man some boots – one assumes with his own money. He then helped the man to put them on.

So why is this image so heart warming? According to an experiment published in something called the Journal of Experimental Social Psychology, someone that witnesses someone comforting someone in distress is more likely to be compassionate to another person themselves. I imagine the same is true too in the negative too. If you are the recipient of anger or rage you often pass the rage and anger on to someone else. This story has a twist because the man has been spotted shoeless once again. When asked “Where are your shoes?” the man said that they were too valuable to wear and would be taken from him. Turns out he isn’t homeless either. Nevertheless, it really is the thought that counts.

So be nice to someone you don’t know today, perhaps just smile at someone you don’t know, and make the world a nicer place for a few seconds.

Shades of Grey

I’m starting to miss Sydney. It’s probably the time of year. Blue sky, the ocean, warm air, and a quick swim before work. Or maybe it was the delayed and overcrowded 6.14 train to London Bridge a few days ago. Talk about a load of wet, grey and rather depressed looking people. And what’s with the frantic typing at 6.14am? What’s that important?

The ferry commute across Sydney Harbour was much nicer, especially the day that the ferry was late because we stopped to look at a whale. On the other hand it was snowing this morning and the nearby hills looked a bit like the Alps, albeit in a rather squashed form.

I was in Paris recently for the day (one upside of living in Europe!). Been thinking about privacy in a networked age. Malcolm Rifkind, a former British Government minister, was on the train (last week it was Sophie Ellis Baxter on the plane). It occurs to me that real time reporting of where well-known people are via Twitter and Facebook must reprint something of a security risk. If someone doesn’t like you…!

Anyway, I am no longer on the train and neither is Mr Rifkind. Almost out of the woods work-wise too, so I’ll be posting the second part of my scenario planning tips shortly. I’m also working on what might be a quite nice post on the death of quiet humility at the hand of exhibitionist individualism.

I’ve also written something (on the train) about innovation, which is a change from the future. Best of all, it was written totally out of my head with no reference back to previous thinking or published material. It’s also just a few words, no images of tricky graphics. I must try doing this again some time.

Anything for you today, dear reader? Not really, although I did hear a great quote last week about 217,000 people sitting down for dinner tonight that weren’t around (i.e. alive) this morning. It was part of what Lester Brown was saying about overpopulation in Milan. Somehow it was so much more real than talking about seven point something billion people – and rising – on the planet. I must admit that I totally disagree though. I’m getting a bit fed up of people saying that 7 billion is a real problem.

This is a very old and very tired argument that dates back to at least the 1700s and roughly says that because population (and economic growth) keeps on growing we are doomed because the planet is finite. Nonsense.

We are still around as a species because we are smart. We usually leave things too late, but history would suggest that we eventually invent our way out of any trouble that comes our way. Also, remember that the more people there are the more brains there are to solve any problems. Also, don’t forget that the reason there are 7 billion people around is not because we selfishly breed like rabbits, rather it is because we no longer drop dead like flies. Overpopulation, if such a thing exists, is due to a revolution in healthcare and this should be celebrated.

That’s far too much name-dropping for one post. I will return tomorrow as a more secretive, self-deprecating introvert hopelessly trying to sell to you yet another new book (today is the UK launch of The Future: 50 Things You Really Need to Know). But you probably knew that.

PS. Digital humiliation. The woman on the train next to me today was listening to an audio version of Fifty Shades of Grey. Only so was the rest of the carriage. She hadn’t pushed her headphone jack in far enough (possibly) and whilst the story was being privately read to hear through her headphones it was also being loudly told to the rest of the carriage via her built-in loudspeaker. We all listened for about 20-seconds and then someone pointed out to her that some passages could prove a little embarrassing.

Extinction timeline – 2013 version

Just got an email from Ross Dawson in Sydney who is thinking of doing an update of our now infamous extinction timeline. The timeline was thought of over lunch in Bondi just before Christmas 2006 and went live in early 2007. Its most famous feature is possibly the extinction of Belgium, which has cost me so much lost business from Belgians over the past 5 years it’s not funny.

Anyway, I’ve got about 20 new additions, for example…

Landline telephones
Door bells
Wrist watches for under-25s
Desktop computers
Printing photographs
Chain bookstores
Record stores
e-cards
Tipex
Typewriters
MySpace
Paper textbooks in schools
Cheap food, especially meat
Single child policy (China)

So I wonder what else might be put on the death list. Any suggestions? Note that by extinction we mean the general disappearance of something, not the absolute and total extinction. It should also be noted that it’s not 100% serious.

European Politics and Premature Senility

What a day. I’ve left my keys and phone in Copenhagen and my main computer has fatally crashed for the second time in ten days – so no email or access to any files until I get things up and running again (I know, I should have seen that one coming).

On this occasion the crash followed an argument with Eurostar’s website which insisted that I add a landline telephone number to a booking form (I, like many others nowadays, don’t have one). When are the designers of online forms going to understand that many people don’t have fixed lines?

Anyway, I eventually found a way around the problem only to crash everything fatally when the form wanted me to download an update of Adobe to print the tickets. Bye bye direct email and internet access and a bunch of stuff that hasn’t been backed-up. Not a big problem, but certainly a pain in the butt.

Oh, and the greenhouse off my new home office is now wetter inside than out due to leaks, we ran out of heating oil (no hot water or central heating) and one of my teeth broke (I mentioned the dead hamster and the sulky dog earlier right?).

On the plus side, I’ve been reading two really interesting pieces in the FT and Economist. The Economist article is about what the boom in Nordic crime writing tells us about globalisation. A key point is that physical location matters more than ever in a globalised and virtualised world. The FT article is about the rising extremism of politics in Europe and the dangers of German isolation. Key points include the fact that in France 1/3 of voters recently voted for extreme far right or left candidate, in the Netherlands (usually a place of liberalism and tolerance) far right and extreme left parties are running 1st and 2nd in opinion polls, while in Austria the far right is supported by around 30% of the population. Add mass unemployment, rising inflation, concerns over a currency (the Euro rather than the gold standard) and it’s feeling like the 1930s all over again. In Germany things remain fairly centrist for the time being, but all the conditions do appear to exist for an extremist revival.

Other news? I’ve started to think that I have been farting around with speaking engagements and consulting work too much and should get back to lowly paid writing.  When I get the home office functioning properly – or get my butt up to London – I will.