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Friday, October 28, 2022

The Risks of Genetic Blindness

Companies spend so much time working within the confines of their own operations, they often lose sight of what is going on outside their universe. This becomes a real problem when your customers and competitors take on a global profile, and are spread all over. As far as competition is concerned, no one can say with any certainty where the danger  is lurking, and what is about to happen. When things cease to happen the way corporate chieftains expected or had planned for, they quickly pull back to figure out what can be done in the new environment.  The situation could have changed due to a combination of several factors ? technology, competitors with new strategies, changes in government regulations, or plain customer needs.  

Regardless of the reasons, the outcomes are the same - dwindling profits, eroding market share, low morale, high turnover of good people, the works. Does this happen because companies don't take adequate steps to stem the rot and turn the tide? No, in fact all companies take action. The problem lies with the type of action they take, and how they prepare themselves on a continuous basis.

Companies effortlessly fall back on past experience and try to repeat the steps they may have taken in the past. This happens even if the past simply doesn't resemble the current situation. Listen to Donald Sull of the London Business School describe this phenomenon: "Stuck in the modes of thinking and working that brought success in the past, market leaders simply accelerate all their tried-and-true activities. In trying to dig themselves out of a hole, they just deepen it."

Say you find yourself offering a particular type and quality of product. A competitor comes along and offers a radically improved product - longer life, less maintenance, at the same or marginally higher price.

The common reaction is to try and ramp up one's own production, and try to counter the onslaught. And this is where the problems sometimes set in. Instead of making significant changes, companies often end up making superficial changes. For instance, the new product may require manufacturing processes of much higher quality. There may be a need to close down facilities that cannot be upgraded. Large numbers of people may require significant retraining.

Instead of taking up these things in a wholehearted manner, companies end up launching halfhearted and feeble attempts. Firestone failed to recognize the writing on the wall, and got decimated by the advent of radial tires, thanks to Michelin.

This is what happened to Laura Ashley. Not recognizing the changing attitudes and lifestyles of women, the Welsh apparel maker stuck to styles that were not suited to working women. While competitors were moving production offshore to less expensive locations, Laura Ashley held on to its expensive facilities in Wales.

Several attempts and several CEOs later, the company remains in as much turmoil as it was in the late eighties. Laura Ashley simply stuck to its old ways of doing things. Ideas about apparel were limited to the romantic vision of English ladies making tea at their country manors.

Why do companies behave so self-destructively? There are several reasons. For instance, managers take a view of the business based upon a set of conditions. They then build strategies and structures to exploit these conditions. Things work, success is theirs. The methods that work well first bind them; soon these very methods blind them. They fail to see the changes going on around them. This is managerial myopia at its worst.

Xerox suffered from this managerial myopia in the seventies. They believed that IBM and Kodak were their main competitors. They also believed that their technologies - protected by patents - were their best defense. This myopia prevented Xerox from noticing the threat from two Japanese contenders ? Canon and Ricoh. Canon had the slogan 'Kill Xerox' plastered all over the organization, to remind staff of the single objective the company had decided for itself at that time.

Xerox did get its act together, though somewhat belatedly. But it expended so much of its energy warding off Canon, it paid a very steep price by losing out completely in the battlefield of the personal computer. Everyone knows that Xerox's Palo Alto Research Center  - better known as the PARC - was the birth place for the graphical user interface [GUI] and the mouse. These two inventions were among the key technologies that helped the personal computer revolution. Yet Xerox has had virtually no share of this burgeoning market. Xerox, in effect, has left more money on the table than any single company on the face of this earth.

Sadly, Xerox forgot those lessons in less than thirty years, and the document company is in deeper distress than before.  

All these companies failed to do one thing - bring in new thinking. Entrenched as they were in their own mental models, they were unwilling to look outside their own limited spheres of vision. They failed to understand that whatever happens inside an organization is cost related, while whatever happens outside is opportunity [and revenue] related. When companies get caught up listening to their own people, they stop listening to those from outside. They endanger themselves deeply by doing so. This leads to serious genetic blinding.

The problem with Firestone was its genetic blindness. Tucked away in tiny Akron - Ohio, run by generations of people born and brought up in Akron, the genetic coding of the company was incapable of noticing what was happening at Michelin in Europe. Challenging the wisdom of leadership wasn't the right thing to do, if you wanted to protect your career. The tire maker had basked for far too long in the sunshine of past successes, and effectively became oblivious to the realities of the real world outside the walls of its own factories and boardroom. Harvey Firestone was God, and for too long. Finally, unable to bear the onslaught of the competition, it got swallowed by Bridgestone.    

GM, Ford, and Chrysler have been suffering serious genetic blinding since the seventies. At GM, everyone who mattered in its corporate corridors believed that Americans only cared for styling in their automobiles. This blinding was so deep rooted that GM wasn't even aware of it. Net result - the design of every GM automobile was based upon this belief. Of course, GM was hopelessly wrong. Americans had begun to care for quality, thanks to Japan Inc. How did GM discover its genetic blindness? From its falling market share. It has paid a stupendous price for its blindness. Its fall from the most iconic corporation in the world to a dying institution, begging for more and bigger bail outs from Washington, is indeed a stark reminder of what genetic blindness can do.

So what can companies do to avoid becoming genetic blind? Genetic blindness can be avoided and cured. Great companies successfully avoid it by continuously creating opportunities to listen to people from inside the company and outside. They institutionalize the crucial activity of listening. In fact, that is how they keep their ears to the ground.

How can companies listen? Well, here are some ideas.

1. Get different business speakers to address your management team every quarter. You are likely to hear a number of things that can trigger your thinking. These triggers often provide listeners with ideas to solve existing problems, and even identify opportunities that have not been explored. If you don't have the budget for it, steal some money from other expense heads. It will be well worth the expense.

2. At every other management meeting, invite a person from the front-line to present their ideas and perspectives about customers, the accounting system, purchases, hiring, anything at all. This serves several purposes. For instance, it:

  • offers new perspectives to tired old minds
  • helps minimize the effects of managerial group think
  • bonds the rank and file with the head honchos
  • brings to the forefront the real issues that hamper operations
  • boosts the morale of those who really toil
  • uncovers talent hidden deep in the folds of the corporation
  • stimulates management meetings
  • helps to break the deep rift between 'us' and 'them', that exists practically everywhere
  • often teaches management how little they know about key issues

3. Set up a reading session, one afternoon each month. Nominate management team members in turns, to select a topic of his/her choice, research a recent piece from Fortune, Business Week, Forbes, or whatever, and prepare a presentation. Dressed comfortably, with pizza and pop served, get everyone to listen to the findings of your colleague. Next, debate what can be applied at the company. Wind up the reading session with a what, by who, and when action plan along with resources required. Let each management team member be free to allocate up to 15 percent of his or her budget to spend on the projects that arise from these discussions. In short, convert every improvement action into a project - short, low budget, quick action projects. Devote the first fifteen minutes of each session to a rough and ready review of projects in hand. Remember, each session will not give birth to projects. If you identify a number of projects, put them in some priority, tackle two or three of those with top priority, and get nominated management team members to research those topics, until they are finished, you'll make great progress. Reading sessions can have a great impact on corporations. For one thing, they bring a mass of people up to speed very quickly, and decimates those who don't read and stay in touch with the outside world.

4. Get every management team member to visit customer sites regularly. Don't allow any exceptions here. In a variation of this theme, FedEx did just this some time ago. They got 160 people into teams of two, to visit customers and prospects. Depending upon the sex of the person they met at the reception, they gave away flowers or chocolates. If you were a customer, you heard the FedEx team say, 'Thanks for your business'. If you were not a customer, you got a brief introductory spiel. Suddenly, the entire company was galvanized into action, and customers became the focus for everyone. You know what, it will take a long time to lose that focus. If they are smart, they will do it again before that happens.

5. Hire a handful of mavericks who don't fit the image of your company's senior people. Having hired them, give them wide leeway to go about the corporation, seeking out genetic blind spots,  and questioning its wisdom at the boardroom. In short, bring in some deliberate discomfort.      

Genetic blindness is a serious problem with successful companies. The longer you have been around, the more people you have at the top, who dress alike, think alike, and talk alike, the greater the risk to the organization. Ignore it at your peril.

Written by Sam Swaminathan