The blindness of success

Companies can survive forever, claims author Jagdish N. Sheth, provided they recognise some of the factors that can lead them to self-destruct and deal with them before it's too late.

by Knowledge@Wharton
Last Updated: 23 Jul 2013

Arrogance and myopia are some of the most self-destructive traits that can cause serious damage sometimes over a long period. For example, GM grew so big in the US it began to believe its own press clippings.

This is the danger with all hugely successful firms. They win great market dominance, deal successfully with legislators and get their corporate ego further boosted by the media and others such as their suppliers and customers. It is at this point that they can become too arrogant for their own good.

In the 1970s and 1980s GM saw the rise of Asian competitors such as Toyota and Honda as an unimportant development of low-quality small car manufacturers. They failed to see the potential growth of such firms from low quality to high quality once they had established a foothold in the US market. They also did not recognise the market demand for smaller cars. As a consequence, GM had no qualms about allowing Honda, Nissan and Toyota to sell their cars at GM's own dealerships. In this way, they gave away the most critical advantage they had to their competitors: access to the domestic market.

Boeing also experienced similar myopia when Airbus, the European upstart, came on the scene in the 1970s. The US company, well used to being the world's number one aircraft manufacturer by this point, took no notice of the European competitor until the latter started making inroads into its own market some 20 years later. It then discovered that Airbus had introduced some significant innovations such as wider fuselages, cockpits designed for use in more than one aircraft, and electrical rather than mechanical flight controls. After going through severe crises, Boeing started to make a comeback with its 787 Dreamliner series.

Source:
Avoiding the traps that can cause your company to self-destruct
Excerpt from The Self-Destructive Habits of Good Companies…And How to Break Them (Wharton School Publishing) by Jagdish N. Sheth
Knowledge@Wharton, 11 July 2007
Review by Morice Mendoza

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