Friday, July 28, 2006

Successful companies carry the seed of their own destruction

As The Economist pointed out today, many of the successful high tech companies founded 25 years ago have hit a wall. From 3Com to Silicon Graphics, Novell to Borland, and perhaps even Microsoft or Dell, each faces huge problems. These are not only problems of reduced growth or profitability, but of survival. I find it interesting that of the eight companies I have worked for (not many these days over a long career), only two still exist as independent entities. Three ceased to exist while I was with them. Both of these are boring Consumer Packaged Goods companies, one a soap company founded over 175 years ago. Even among CPG companies, most of the well-regarded ones of a few years ago no longer exist - Quaker Oats, Pillsbury, General Foods, Hunt-Wesson, etc.

So why do so companies go through this cycle? Firstly, they are usually formed around a great idea. They boom and prosper. Management and employees start to think that they are smart, not just lucky. They believe that they have moved through the four stages all the way to "unconscious competence" without passing through "conscious incompetence " and "conscious competence." In fact, in many important respects, they may still be at "unconscious incompetence."

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