BUSINESS organisations emerge, grow and most of them eventually disappear for good.
The reason organisations fail in the long- run can be attributed to the calibre of leadership that steer them. Every organisation can hire the finest of leaders from the market, thus the individuals who have the right experience and the requisite skills and qualifications.
But what is amazing is that these businesses, despite having some of the best brains on board do eventually fail. Businesses are folding all around us, both locally and globally. We continue to wonder what really goes wrong.
It is important to note that there are organisations that previously made it big at some point in history, yet they ended up folding. Consider that Kodak created the first digital still camera, which weighed in at 8 pound (slightly over 3,6 kilogrammes) which had 0,01 megapixels.
Their business story is quite fascinating; particularly when viewed from the innovation perspective. It is true that they tried to keep abreast with the revolution within their photography industry.
Be that as it may, check out the following facts: Their electrical engineer Steve Sasson is credited with the invention of the said first digital camera in 1975.
It did not matter that Kodak had been a leader in the photography marketplace since its beginnings in 1888. It is also the firm that pioneered consumer photographic techniques and developed consumer products and processes that brought the camera from the exclusive photo studio into our homes. We may also take regard of the fact that Kodak survived two World Wars and the Great Depression.
The systemic strategic planning miscarriage by Kodak’s leadership was their failure to understand why people take photographs in the present day. Kodak continuously thought that consumers take photos that they would print. No other plausible reason would explain why Kodak persisted with this notion of photographic film and printed picture for longer than they should, without thinking beyond that.
One of the key failures of leadership that eventually brings organisations to their knees is what is called the success trap.
The success trap comes from the notion of organisations that set themselves particular goals and then achieve these set desires and become complacent. The phenomenon is similar to someone climbing to the top of a high mountain. After the excruciating effort, the climber will celebrate when they reach the top of the mountain. The logical thing to do would be to rest. In the modern day of technology, the climber could start taking “selfie” pics, posting the images to social media. The climber would be contented for they would have achieved their goal.
In the business world, organisations would be highlighting their success to all and sundry. At this moment organisations spend their time on managing the logistical operations of providing the “same old service” (SOS). Whilst sprucing up the SOS, organisations fail to realise the need to further innovate.
What eludes the minds of business leaders is that as they were trying to reach the envisaged success benchmark, their competition were also trying to come up with better offerings to bring to the market.
In the global economy, the success trap fate befell countless organisations; the events in our local economy are a microcosm of the global stage. Whilst economic woes have a hand in the fall of organisations, the systemic problems of relaxing in the glory of success is a major contributing factor.
This brings us to the issue of leadership mentality. The leadership in organisations easily get into two main mentalities; the first being that they praise their organisations for their success; and secondly they are quick to apportion blame to the market forces when they fail to sustain their businesses. The success mentality brings complacency in the minds of leaders; they have good results to show, and nothing else matters.
Success results are like the displays of dinosaurs in a museum. The moment one basks in the glory of the results that are on the table today, they are just like museums curators, ready to tell all visitors all they know about the extinct dinosaurs. Leaders who focus on celebrating their results are living in the past; they lose sight of the fact that the uncertain future requires more attention.
Back to Kodak, is it not surprising that the records of the United States Patent & Trade Office; record number 4,131,919 under the date 26 December 1978 shows that two inventers Gareth A. Lloyd and Steven J. Sasson of Rochester, from the organisation Eastman Kodak Company (Kodak) filed a patent for an electronic imaging apparatus, otherwise known as an electronic still camera, which employed an inexpensive information-recording medium of audio-grade magnetic tape for “capturing” images. Though this was supposed to be the beginning of the digital camera, the Kodak executive team thought they had made enough success such that they would not worry about any competition.
The then Kodak executive in the 1977-1978 era wanted to control the business within the path of the approved strategic objectives, in a known path.
If a new idea that is brought before a leader does not make sense, it may well be because of the leader’s illiteracy in respect of innovation than the idiocy of the innovative team member.
An astute leader would take a step back and look at the issue from a different perspective; that is what leaders should ideally do. True leaders know they do not know everything, so they ask the inventor to explain the innovation without being judgemental.
The then Kodak executive team did not see any value in the digital photography invention most probably because the inventors’ presentation was titled “Film-less Photography”. For a company that had a 90% market share of all film sold in the USA at that time; “film-less photography” did not make sense…
This was so despite that the technical report for the invention stated that “The camera described in this report represents a first attempt demonstrating a photographic system which may, with improvements in technology, substantially impact the way pictures will be taken in the future.” The project was shelved until 2001, only revived after Fuji unveiled their digital camera, igniting a revolution in digital photography. How would you judge the then Kodak executive team mindset?
Another example is Borders Books which was an international book and music retailer.
The company employed about 19,500 staff in its Borders and Waldenbooks stores.
Borders too failed to respond to a changing environment and increased competition. On July 7, 2010, Borders opened an eBook store to allow books to be directly downloaded to an e-reader, yet it was too late. On February 16, 2011, Borders applied for Chapter 11 bankruptcy protection and began liquidating 226 of its remaining stores in the United States.
These companies did not fail due to a lack of technical know-how. Each of these companies had the necessary leadership skill set. So what happened?
The failure of these companies was due to the lack of an effective leadership mindset. What derailed the leaders of these organisations was the combination of a changing environment and a mindset that was stuck in the past. The shift in their industries toward digital required new mindsets, new ways of seeing, and new ways of being.
They needed new maps to navigate their organisations into the future. These leaders failed to shift their mindset as required to compete in the new business environment.
To understand the innovation that is required to keep an organization afloat, it is important for the organisation to understand the actual innovation that the market needs, not necessarily what it seems to be or what we may want it to be.
Past success and outdated leadership mindsets are the biggest inhibitors of future success. There is no merit in ascribing all business failures to the economy for it is more like a tree blaming the wind for all its fallen leaves, the tree should understand that leaves drop because they would have died.
Organisations that will succeed into the future are those whose leadership does not dwell on past success and realise that dealing with a hostile economy and unfavourable markets is what leadership is all about.
“Unfortunately, top people are often there because they are expert in what was important yesterday… We put more energy into developing skill sets, rather than the right mindsets” – Professor Jonas Ridderstrale, Stockholm School of Economics
Sam Hlabati is a Senior Professional in Human Resources (SPHR®), a Certified Compensation Professional (CCP®) and a Global Remuneration Professional (GRP®). E-mail firstname.lastname@example.org; twitter handle; @samhlabati