Recently, a customer asked me to develop a seminar for his executive team and board of directors on the topic “Why Good Companies Fail.” A fascinating question which begs to be answered. After all, how could good (and even great) companies like Nortel, Kodak, and others fail? Yet somehow they have. Each the leader in their respective industries; now bankrupt.
My customer represents a solid company, and they have decided to face the fact that if other good companies can fail, so could theirs. Which bring me to my first point – prevention. Stop denying that it couldn’t happen, and start anticipating how to prevent it.
Although bankruptcy is often the ultimate failure, the reasons why a company can fail in regards to profit objectives are likely caused by failure in other areas.
When looking at any corporation, there are seven goals of corporate responsibility (listed below). Failure can occur in one or all of these areas.
To finance organizational growth, create value for shareholders and provide the resources necessary to achieve corporate objectives, a company must create sufficient profit. Unfortunately, companies that fail often classify success as profit and forget that profit is not the game, it is only the scoreboard which indicates if management is or is not doing their job correctly.[i] When a company bankrupts, everyone loses: communities, employees, even governments. Nothing bothers me more than to travel through Southern Ontario and see once thriving towns becoming destitute due to loss of revenue caused by company closure. The overall impact of company bankruptcy on society is poverty.
Any company must earn their customer’s respect and loyalty by consistently providing products, services, and solutions of the highest quality and value which exceed expectations. Evidence that a company is losing customer loyalty can be seen when customers buy less, stop buying altogether, and/or stop telling others via word of mouth that you are an excellent company to deal with – which can lead to consumers telling others not to buy your products and services. In a modern economy, customers have an extraordinary amounts of power as they can submit reviews, rate companies, and even write blogs complaining about a company, product or service.
A company must lead in the marketplace by developing, producing and delivering useful, innovative products, services, and solutions which empower customers and fulfill their needs. Evidence that a company is no longer demonstrating leadership:
As a result of these failures, a company could see the loss of new sales, loss of market reputation, and/or loss of stock value.
A company must recognize and seize opportunities for marketplace growth which builds on the strength of their core competencies. What does this mean? Simply put – they must always be chasing the next great innovation. Evidence showing that failure is occurring in this goal can be seen when a company becomes complacent and does not consider new ways to create wealth or exploit new technologies or methods. They demonstrate a lack of boldness and courage in relation to risk.
A company must demonstrate a commitment to employees by promoting and rewarding based on performance and by creating a work environment that is stimulating and reflects the values of the company and the diversity of the global community. The very heart of a company is compromised when a company begins to fail in this area. Evidence of failure:
Without employee commitment, there can be no improvement in any area of business activity. It does not take many uncommitted employees to prevent a business from prospering and thereby ceding a significant advantage to its competitors.
A company must develop leaders at all levels who consistently lead them to win, grow and thrive as a company. Exemplifying the company’s values in their behaviour, actions, and business practices day-to-day is also necessary. Evidence of failure in this goal can be seen when employees have no goals and no integrated plan to meet goals; the company becomes indecisive, management is self-serving and not serving the company, employees or shareholders. The impacts of failure at the leadership level are:
When leadership fails, the company will fail.
A company must fulfill their responsibility to society by being an economic, intellectual and social asset to each country and community in which they do business. Evidence that a company is failing in this area:
The impact of not being a good global citizen is a loss of investments in education, and therefore undermining the development of the next generations of inventors and employees.
In Dr. Jagdish N. Sheth’s book, The Self-Destructive Habits of Good Companies, he takes a hard look at the causes for company failure. He identifies seven self-destructive behaviours or belief systems which companies that have failed have exhibited. These behaviours/beliefs systems are:
I think Jag’s book is an excellent document to help detect that failure has happened or is in process, but it falls short of addressing the root cause for these behaviours/belief systems. Two questions must be asked:
From my extensive background, I know that to solve a process problem, you must uncover the actual root cause and not try to fix the symptom.
I have also been involved in several start-up initiatives. In each, I’ve noticed a key ingredient to their success was the commitment of all that are involved. The managers and employees were committed to the firm or idea that the firm was attempting to accomplish.
The key ingredient is a committed heart and solid stewardship. Stewardship requires a person to invest their heart, not just their time. A successful entrepreneur will put their whole heart into their endeavour. It consumes them. They always think of ways to improve their products, methods and market penetration, and they invest everything to make sure the venture succeeds.
As a company succeeds, it takes less heart and commitment to continue to run. Leaders often do not commit their hearts to the firm, and I suggest that this is where the problems begin. These manifest as a lack of passionate commitment, indifference to real issues, and poorly thought out approaches to the work of management. Indifference becomes a cancer that can eat through a company and can affect most people. They don’t care – which eventually will lead to the downfall of the firm.
Leadership must serve with their whole hearts and cannot be guns for hire. When I was at HPE, I looked to Bill Hewlett, Dave Packard, John Young, and Malcolm Gissing as examples of this kind of stewardship. All of these leaders were committed to the firm. They poured their hearts into the firm, and we all drew strength from their examples.
Leadership is the key in all initiatives. Leaders serve. They serve by investing their whole heart – not just their time.
A steward heart is one that is committed to their shareholders and demonstrates these characteristics:
It is hard to lead any organization in these difficult times. Shareholders and employees alike need to be fully committed. Perhaps in the above discussion, you felt a few moments of discomfort and are beginning to wonder what you should do…? There is a solution, and the issues can be resolved if action is taken to change. Here are a few steps to put you on the road to recovery.
A good servant is a good steward; a good steward will always do what is best for their shareholders and employees. Today, as never before, we need all of us who are called to lead businesses to become good stewards to prevent more business failures.
At FoxNet, we understand the need for organizations to have good advice. To help our customers identify where IoT and Hybrid IT solutions may be of assistance in their municipality or businesses, FoxNet provides multiple IoT Education Sessions, Workshops and Hybrid IT Strategic Planning services.
During the IoT Workshops, FoxNet presents detailed case studies of cities and corporations that have implemented IoT solutions to address common city and business issues. FoxNet facilitates a discussion on each of these areas and collects real IoT business scenarios and functional use cases from the workshop attendees. The result of the workshop is a report containing a list of potential IoT pilot projects and a roadmap on what steps need to be taken to address each defined issue successfully.
For additional information on our IoT Workshop, reach out directly to John Chiappetta, Head of IoT, North America at firstname.lastname@example.org.
About the Author
Bill Dupley is a Digital Strategist at FoxNet. He has led IT transformation and strategic planning teams for over 50 companies and governments worldwide and bring extensive experience in IT & Business Strategic Planning, IT process design, and enterprise architecture. Bill has held several positions over his career including the Cloud Chief Technologist for Hewlett-Packard Enterprise Canada and Director of Strategy and Business Development for HPE Canada Consulting. He is a graduate of Ryerson University, a former member of the HPE IT Global SWAT Team, and a member of the Open Data Center Alliance Cloud Maturity Model authorship team. He is dedicated to helping customers equip themselves rapidly for our ever-changing world.