3. Why Do Good Companies Go Bad?
• In a nutshell: Good companies fail when
they are unable or unwilling to change
when their external environment changes
significantly.
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6. What leads to Denial?
• Denial of emerging technologies.
Denial of changing consumer tastes.
Denial of the new global environment
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7. Signs of Denial
• “Hey, we’re different, so there’s no way
it can happen to us.”
The company is too proud to admit that
someone else has come up with a better
way.
The company ignores, rationalizes, or
blames others for its situation instead of
admitting its fault.
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8. How to break the habit of denial
Look for it
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9. How to break the habit of denial
Assess it
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10. How to break the habit of denial
Change it
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12. What is Arrogance?
• Offensive display of:
Superiority
Self-importance
Pride
Disdain (contempt)
… because of an inflated sense of self
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13. What leads to Arrogance?
• Exceptional achievement in the past
David conquers Goliath
The company pioneers a product or
service
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14. Signs of Arrogance
• The company stops listening
The company becomes extravagantly
eager to show off.
The company begins to act like a bully,
both internally and externally.
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15. Signs of Arrogance
• The company becomes high-handed and
abuses rules
The company favors those who validate its
views and gets rid of those who are
critical.
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16. How to break the habit of
arrogance?
• Rotate management to new challenges.
Implement nontraditional succession
planning.
Diversify the talent.
Change the leadership.
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18. What is Complacency?
• Complacency is the sense of security and
comfort that derives from the belief that
the success that’s taken place in the past
will continue indefinitely.
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19. What leads to Complacency?
• The company’s past success came via a
regulated monopoly.
The company’s success was based on a
distribution monopoly.
The company was “chosen” for success by
the government.
The government owns or controls the
business.
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20. What leads to Complacency?
• The company’s past success came via a
regulated monopoly.
The company’s success was based on a
distribution monopoly.
The company was “chosen” for success by
the government.
The government owns or controls the
business.
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21. Signs of Complacency
• The company is in no hurry to make
decisions.
The company’s processes are overly
bureaucratic.
Everybody has to get on board before a
decision is made.
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22. Signs of Complacency
• The company is completely vertically
integrated.
Enormous cross-subsidies are in place –
by functions, by products, by markets, by
customers. Average costing and average
pricing prevail.
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23. How to break Complacency?
• Reengineer to achieve high quality,
eliminate waste, and reduce inefficiency.
Decentralize profit and loss by creating
and molding business units around
products or geographies.
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24. How to break Complacency?
• Outsource – contract out all non-core
functions.
Reenergize – consider a new leader with a
positive, opportunity-oriented vision
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26. What is Competency
Dependence?
• Somebody else can be doing a better job,
and if a company is unable to figure out
what to do, it has become competency-
dependent
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27. What leads to Competency
Dependence?
• R&D dependence
Design dependence
Sales dependence
Service dependence
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28. Signs of Competency
Dependence
• Reengineering, reorganization, retooling
have been tried and still no good results.
The thrill is gone and the company is in a
funk.
Stakeholders are leaving
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29. How to break Competency
Dependence?
• Find new applications where the same
competency results in new value.
Determine new markets where the same
competency remains an asset.
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30. How to break Competency
Dependence?
• Expand the range of your competencies
by moving up or down the value chain.
Refocus company resources into areas
with more growth and profit potential.
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32. What is Competitive Myopia?
• When they define their competition too
narrowly and acknowledge only direct and
immediate competitors
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33. What leads to Competitive
Myopia?
• The natural evolution of the industry.
.
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34. What leads to Competitive
Myopia?
The clustering phenomenon.
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35. Signs of Competitive Myopia
A company allows small niche players to
coexist with it.
The loyalty of a company’s supplier is won
by a nontraditional competitor.
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36. Signs of Competitive Myopia
New entrants, especially those from
emerging economies, are underestimated.
The company becomes helpless against a
substitute technology.
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37. How to break Competitive
Myopia?
Broaden the scope of the product or
market.
Consolidate to squeeze out excess
capacity.
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38. How to break Competitive
Myopia?
Counterattack the nontraditional
competitors.
Refocus on the core business to
concentrate limited resources in the most
successful area.
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40. What is Volume Obsession?
• Too much money is being spent for the
company to make money.
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41. What leads to Volume
Obsession?
The high-margin pioneer.
The fast-growth phenomenon
The paradox of scale.
The ball and chain of unintended obligations
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42. Signs of Volume Obsession
Guideline-free, ad hoc spending.
Functional-level cost centers.
A culture of cross-subsidies.
Stakeholders say numbers are not good.
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43. How to break Volume
Obsession?
Identify where the company’s costs are.
Convert cost centers into revenue centers
or profit centers.
Move from vertical integration to “virtual
integration”.
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44. How to break Volume
Obsession?
Outsource non-core functions.
Reengineer to automate processes to
improve cost efficiency.
Implement target costing
Become a world-class customer.
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46. What is Territorial Impulse?
• As companies grow they tend to organize
themselves into “functional” and later
“regional silos”. However, the various
units into which companies organize
themselves don’t always get along well
with each other, for various reasons.
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47. What leads to Territorial
Impulse?
The corporate ivory tower.
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48. What leads to Territorial
Impulse?
Growth requires the institution of formal
policies and procedures.
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49. What leads to Territorial
Impulse?
The informal, spontaneous culture is
extinguished.
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50. What leads to Territorial
Impulse?
A company’s culture is dominated by one
functional specialty.
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51. Signs of Territorial Impulse
Dissension - a lot of headstrong
lieutenants instead of one strong general
Indecision – decision-making is an
agonizing or even impossible process
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52. Signs of Territorial Impulse
Confusion – one side doesn’t know what
the other side is up to
Malaise – nobody’s happy
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53. How to break Territorial
Impulse?
The leader must bring all the people
together in a common cause.
Rotate the people in and out of different
functional or geographic silos.
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54. How to break Territorial
Impulse?
Create permanent cross-functional teams.
Reorganize around customers or products
rather than around function or geography.
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