Why Good Companies Go Bad

I stumbled across Gary Hamel’s Wall Street Journal blog today, titled: “Why Good Companies Go Bad,” which was inspired by the news about General Motors today. It’s a great, short read – well worth your effort (although a WSJ.com account may be required). I’m not going to give a synopsis, but I am going to highlight his 3 reasons why businesses go bad:

1. Gravity wins. The bigger a company gets, the harder it is to grow. A $40M company can grow 25% by increasing sales by $10M; a $4B company has to grow business by $1B to get the same target, and that’s simply not the same as $10M.
2. Strategies die. The minute you create a strategy, it starts to die, like a human being. Knowing this and taking action keeps companies ahead of the game; doing nothing brings about the inevitable, kind of like when Polaroid pushed instant cameras in the age of digital photography.
3. Change happens. Few companies handle this well. Apple created the iPod, and then pushed the boundaries again with iPhone. A DC-area company, Erol’s, started off in the TV-repair business. In the 70s and 80s, they moved to videos. In the 90s, they became one of the most popular Internet service providers in the DC region. Instead of insisting on staying in the TV-repair business, they constantly read the tea-leaves and decided instead to remain an on-going business concern.

Staying on top of these things is one of the reasons it makes sense to engage an advisor, or advisors, to ask you tough questions and hold you accountable. Yes, that can mean a strategic business coach like me, but it can also mean a strong board of directors or a strong board of advisors. Enjoy the column!

Grow Strong!

Coach Grev