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Where is your business’s greatest enemy?

Jul 08, 2013 Business Daily, Strategy

“Companies are rarely brought low by external forces. The majority of corporate crises, sometimes called “stall points”, when revenue growth slackens dramatically or even reverses, are self-inflicted. The two root causes of stall points are myopia and complacency. Myopia is the failure to recognize market discontinuities until it is too late to respond effectively. Complacency is the belief that the company’s strategy is invincible.”

JULES GODDARD & TONY ECCLES ‘Uncommon Sense, Common Nonsense’ (2012)

I have always held a healthy mistrust for business literature. Apart from a brief period when I was young and easily impressed, I have found much of what passes as management wisdom to be shallow charlatanry. A lifetime spent observing and working with businesses of all shapes and sizes confirms an uncomfortable truth: there are no easy answers, no list of generic success factors, no formulae that guarantee results.

Every once in a while, though, a book comes out that makes me rejoice on every page. ‘Uncommon Sense, Common Nonsense’ is one such tome that I came across quite serendipitously. It debunks much of what passes for received wisdom in management and strategy, and I could not put it down.

The excerpt shown is from one page that stayed with me long after I finished reading it. Ask this question to any CEO: where are your greatest enemies to be found?

The most common response will be to finger many culprits out there: uncontrollable external forces. These include the usual suspects: bad regulatory actions; political turmoil; exchange rate volatility; economic downturns; rogue competitors; (and you may add your own favourite bugbear here).

Here’s the real news: research done by the Corporate Strategy Board quoted by Goddard & Eccles has shown that uncontrollable external factors account for just 17% of “stall points” – periods when revenue growth stalls or reverses.

45% of stall points come from strategic factors such as a failure to innovate, premature abandonment of the core of the business, or rash diversification. Another 38% are caused by organizational factors such as dysfunctional teams, organizational design flaws or talent shortages.

In other words, an astonishing 83% of company crises are caused by things that are INTERNAL and CONTROLLABLE. So much for the threat out there. The real enemy is within. As the authors repeat: “companies are rarely killed; they prefer to commit suicide.”

This rings true. My own experience of companies good and bad suggests we should be far more concerned about the dangers that are inside and all around us: failures of vision; refusals to see disruptive change coming; bad boards; squabbling top teams; poor processes, low standards.

Goddard & Eccles call these “internal pathogens.”

So look out for leaders who are always blaming external environments and unforeseeable forces. People who are going to keep on winning have no such delusions. They know very well that it is corporate myopia – a self-inflicted shortness of vision – and complacency – an irrational belief that the company can do no wrong – that are the real enemies.

The best corporate leaders I have ever known shy away from vapid excuses and long lists of scapegoats. They take every reversal personally. When a problem occurs, they walk quietly to the mirror, rather than shout loudly out of the window. They go into meditative mode rather than explosive mode. They admit their own faults before pointing them out in others. They think deeply about the causes of problems, and act decisively once the insights have come.

These are the leaders who fix problems before they happen, rather than act impulsively after the event; they are the leaders who know their own weaknesses only too well, and assemble top teams to compensate for their own blind spots; and these are the leaders who see the internal problem before they look for the external one.

It’s a small group, but I hope you’re in it.

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