Market dominance and scale can easily turn into corporate arrogance and lack of urgency. The pressures brought by demands for ever greater scale and efficiency are a catalyst for internal politics, bureaucracy, managing upwards, and internal focus. Hubris can cause poor listening and analysis, missed opportunities and kill the ability to reinvent.
The opposite, in other words, of the qualities of organisational longevity listed by Arie de Geus in his renowned book on The Living Company. Qualities like the ability to learn and adapt from being sensitive to your environment, showing tolerance for experimentation and different thinking, retaining a strong, cohesive sense of identity, to be adept at managing resources to enable flexibility.
A comprehensive study by the Telfer School of Management at the University of Ottawa into the implosion of Canadian Telecoms giant Nortel gives us some stark lessons. The researchers interviewed 48% of all the Nortel executives who were in charge of the company from 1997 through to 2009 when it filed for bankruptcy, and spoke to executives at 53 different companies that were customers of Nortel in that time.
In spite of the rapidity of Nortel’s decline, they found that corporate failure is a long and complicated process dependent on multiple accumulating factors. When asked about Nortel’s biggest management failure however, the study’s lead author, Jonathan Calof, said:
“There were three major factors that caused the failure. When Nortel was a market leader in the ’70s, it developed an arrogant culture, which led to poor financial discipline. Then in the ’90s, it focused so intensely on growth that it broke its ability to innovate and read the market. And after the tech bubble popped, it turned inward and cut costs to the point where it alienated customers.” (Calof, 2014)
Arrogance, pursuing growth at all costs, efficiency at the expense of innovation. Many of these problems were seemingly originating from a culture that became baked into the company long before it was in trouble, and served to reinforce the kind of toxic assumptions that can become powerful barriers to change. Assumptions which damaged the business and brought focus away from where it needed to be and created an internally facing company:
“It escalated into hubris to the extent of making it especially difficult to absorb acquisitions, to quickly respond to market needs, and to accept and understand what customers wanted (largely as result of the delusion of ‘we know better’).”
As businesses become leaders in their market it’s very easy for them to become blinded by conceit. For the language of leadership to slip into the language of arrogance. As they become overly focused on growth it’s very easy for them to become parochial and lose sight of what really matters. As they pursue efficiency gain over forward thinking it’s very easy for them to become internally focused. For informal reward systems (such senior management attention and recognition) to subtly put a premium on inward-looking management. The potential for rapid disruption that digital has brought to so many markets serves only to amplify the impact of such misaligned corporate culture.
Be bold, be proud, be ambitious, but never be too arrogant.