Why big companies lose their way?

December 27, 2016

dead-end

Short answer: Success!

Seriously? Truly successful companies get in their own way. And it all starts at the top. This fact is of course management 101. Haven’t we all heard of countless business cases and probably many more from our own experiences of how big companies fail? All corporate failure is always directly or indirectly attributable to the big kahuna running the show! It’s easy enough to blame the CEO for all failures. But there is more to it than what is apparent. The biology behind this fact is always missing from the discussion. Leaders that enable breakthrough success are driven by a larger purpose but as we know from a biological perspective this purpose is hard to express into words. Simply because the part of our brain that drives this purpose, the “why” is seated in our limbic brain. And this part of our brain is separate from the one processing language and words. It’s a serious human limitation. A point I can’t stress enough. And it’s crucial to overcome this limitation. The problem only gets compounded from here on. Why?  Firstly most leaders are NOT driven by a larger purpose, those who are, are NOT able to translate it well into words that can inspire action. As a result that purpose fades away as they hand over the reigns of leadership to their successor. Those few who are able to create a company with an enduring purpose AND find subsequent successors that can take the founding purpose forward are the only ones who succeed persistently and stand the test of time. That’s the reason why we see only a few Apples and Googles in our lifetime. Getting it all right is easier said than done. Let’s break it down.

In my last post I talked about the importance of a larger purpose and how it can make all the difference. Here I am going to talk about how a company that was once driven by a larger purpose loses it’s way. For a company like Kodak the challenge was discovering the purpose in the first place. Despite achieving breakthrough success Kodak failed to discover their true purpose and fell in love with what they did. Had they realized that their larger purpose was to enable capturing memorable moments regardless of technology and not just to manufacture film they would have been in a much better place. This post is NOT about companies who didn’t find their purpose, but about companies that were driven by a larger purpose, became successful and are now grappling with the challenges of their success as a larger entity.

How success became their biggest enemy?

So what really happens when a company becomes successful? The founder becomes distant from the team. They have to. The team has grown into a large organization and they possibly can’t give everyone the face time they once did. When things were starting out everyone was huddled close together. The core team, or the entire team for that matter, was in close proximity with the founder as they lived by their purpose day in and day out. They were infused with that belief and worked towards making that purpose a reality. But this is no longer possible once the organization has grown. For the CEO to simply live by that purpose is not enough. It needs to be expressed into words, and then communicated. They can no longer afford to be involved in the ‘what’ and the ‘how’ of the company in the same way as they once did when the company was starting out. They have to depend on their direct reports for this. Therefore each of the CXO’s that get on board need to be experts of what they do. Each has to be able to translate the founding purpose into an action plan pertinent to their area and possess the necessary expertise to execute and deliver on that plan. The way an organization is to be structured from this point on gains a whole new level of importance. With scale the need for structure becomes a necessity. From this point on the CEO has to put their maximum energy into infusing the “why” across the organization in every way possible. They have to keep reminding their direct reports of the founding purpose and enable them to deliver on it.

But they can only do that for so long. For all founders there will come a time when they need to plan for succession. This is probably the biggest continuity challenge for a successful organization. It is ultimately the CEO’s vision, passion and belief that enabled the organization to be where it is today. And changing things up at the top can pretty much spell doom going forward. Getting succession right therefore is one of the most pivotal aspects of leadership. It is quite possible that a founder may get the most competent successor possible but if they are not driven by the same purpose they will lose sight and eventually derail the company. A good example is Steve Jobs getting John Sculley to run the show. He was competent as any leader Steve could have wished for but was not driven by the same purpose as him and led Apple off the track. It is very tempting for a new successor to infuse their own beliefs into the organization, to focus on the “what” of the business at hand rather than the “why” behind the initial success. Driven to prove their mettle to the board a successor may redirect their focus on short-term profits, milking revenue in every way possible, ‘optimizing’ the company through cost cutting measures and forget what made the company great in the first place – the belief and culture created around a larger purpose.

Just to illustrate how powerful and challenging it is to make a brand’s purpose a reality and ensuring continuity through succession here are two examples of brands who got it right at first but then as they got successful, lost their way! Sam Walton when he set out to create Walmart was driven by a larger purpose of helping his community. To make Walmart a symbol that represents the interest of the masses, an opportunity for everyone to live a better life by enabling them to keep their cost of living as low as possible. And so it did. Not only to the community in Rogers, Arkansas where the first Walmart opened it’s doors in 1962 but all across America. Now Walmart revenues equate to the 28th largest economy in the world. But something else has also happened. It’s a company that is also associated with poor treatment of it’s employees and reports one of the highest turnovers in the industry. It has the systems to ensure low cost no doubt but that is all it is known for now. After Sam Walton, Walmart lost the essence of it’s purpose. The leadership that followed Sam Walton were not driven by the same purpose. Although very successful, Walmart doesn’t evoke the same visceral connection it once did. Walmart employees neither believe in the founder’s purpose nor feel it anymore. Without the purpose driving it, anyone shopping at a Walmart also don’t feel the same either. This belief to serve the community was such a powerful ideal that even after achieving much success as a billionaire Sam Walton continued to live by it. Driving around in his same old truck with his dogs, wearing his tweed jacket and his truckers cap that he often bought from a Walmart. He lived a life of humility and brought his purpose to life through his own example. But without a successor who believed in what he believed Walmart lost it’s way.

From Walmart to Microsoft…

Microsoft is an example of another brand that started with a larger purpose. A purpose driven by Bill Gates to empower people and enable them achieve their maximum potential. When he started out he believed a personal computer was the tool that can level the playing field for everyone. And despite what most believe about Apple, Microsoft truly changed the world in terms of scale and impact. And they didn’t even make personal computers. When Bill Gates handed operational responsibility of Microsoft he continued with his larger purpose to empower people in any way possible but it just wasn’t through selling computer software anymore. However after he stepped down his successor Steve Ballmer was not driven by the same purpose and Microsoft lost it’s magnetism. Hearing Steve Balmer speak one could wonder why. He is so full of energy. Why someone with so much zeal and enthusiasm failed to build on Microsoft’s success and take it to a whole new level? It’s simply because energy alone is not enough to create a magnetic brand. Energy excites no doubt but it’s charisma that inspires. Bill Gates is not a high energy leader but his belief in a large purpose inspires and draws us to him. That’s what leaders driven by a larger purpose do. They inspire us. They do so because of what drives them and not because of the energy they exude. But once they leave, even if they have created something enduring and very successful without the right successor even the most powerful brands lose their way! That’s how important purpose is! It’s not something that can be easily communicated and handed over. We saw earlier that belief is driven by our limbic brain and it is not something easy to articulate. Only through someone who believes in the same can a purpose be made to endure.

Sustaining a brand driven by a larger purpose is hard but not impossible!

So here we have two examples of brands that are the biggest brands in the world but clearly past their peak. Their revenues could easily match the GDP of a country for all we know. But they are brands that are no longer driven by a larger purpose despite doing so once upon a time and that is probably the reason why they become so big and successful in the first place. So what can we learn from this? A larger purpose is indeed a powerful driver for a business but it is very challenging to make it a reality across an organization more so after the organization has grown and become successful. Changes in leadership through a successor not believing in the founder’s vision can lead an organization to lose sight of it’s purpose and turn to short-terms goals, driven by shareholder interest to increase profitability. While there are other reasons for successful brands to lose their way changes in leadership is indeed the crux of it. A brand that has managed to successfully transfer leadership without losing sight of their purpose is Southwest Airlines. With a goal to democratize flying and make it accessible to the masses Southwest was driven by the belief that everyone had the right to connect to what’s important to them in a way that is enjoyable and affordable at the same time. How did they achieve that? For one it hired people that lived the brand. For example, they wanted their hostesses to wear go-go boots and hot pants to deliver on their fun persona. But go-go boots and hot pants was something not everyone was comfortable wearing. The only people that wore such an attire happened to be cheerleaders. And so that become their hiring policy – always hire cheerleaders since they naturally brought the energy and the right attitude to create the type of brand experience they were aiming to create. But most importantly how their purpose has endured to this day is because they always sought out a successor that believed in the founder’s purpose and lived by it through their own persona. This has been the key. For large organizations that have already achieved success, they don’t need a successor who has his own vision of how to take things forward. They need to be believers of the founder’s purpose and only need to take that purpose forward.

This is my second post inspired by Simon Sinek’s Book “Start with Why”. In the first post I attempted the summarize the importance of purpose. In this one I have tried to summarize the key challenges of continuity for a business driven by purpose. 

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