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Why Good Companies Go Bad

Why Good Companies Go Bad

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Published by Misti Walker

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Published by: Misti Walker on Oct 16, 2009
Copyright:Attribution Non-commercial

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05/11/2014

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Why Good Companies Go Bad 
 Article ReviewMisti Walker 1
 
Why Good Companies Go Bad By Donald Sull 
In the article,
Why Good Companies Go Bad,
Donald Sull explains thephenomenon that occurs when successful companies encounter change and are unableto transition the company effectively; Sull posits that active inertia is to blame. Activeinertia is what occurs when a company resists change, unable to let go of the ways of the past. Successful companies are more prone to this because past policies andpractices have contributed to their success. When these companies fail to adapt tomarket changes, it is not due to paralysis as widely believed. Rather, these companiesare often aware of shifts in the marketplace well ahead of time. What then, causesgood companies to go bad?Four things happen to companies experiencing active inertia. First, strategicframes become blinders. That is, managers in successful firms have proven strategiesand consequently view all information through their proven strategic frames. Thisundoubtedly allows managers to work more efficiently by allowing them to quicklydetermine what needs attention. However, by relying on the strategic frames of thepast, managers are unable to see developing trends or opportunities. In essence, theframes become blinders.Second, companies experiencing active inertia have processes that havehardened into routines. When employees are first presented with a task or goal, theywill try several different ways of doing that task until they determine which is the mostefficient. Upon determining the most efficient method, employees will adopt thatmethodology for the future. However, as the marketplace, workforce, or the company2
 
goes through changes, old processes may no longer work. If these processes havebecome routines, it will be nearly impossible for the employee to recognize more viablealternatives.Third, relationships become shackles to companies with active inertia.Management must maintain relationships with buyers, suppliers, resellers, employeesand the like. However, to avoid active inertia, management must be aware of theconflicting needs of these groups, yet always put the company’s interests first. Anexample of this occurrence is when a company is not interested in selling its productdirectly to consumers, for fear of upsetting the relationship with its resellers. This isexactly what happened at IBM even though consumers were demanding to buy PCsfrom the manufacturer, as evidenced by Dell’s success. Coincidentally, IBM no longer competes in the PC market. Once again, what worked yesterday may or may not worktomorrow. It is management’s responsibility to periodically review old relationships andprocesses to determine if they are still working for the company.Fourth, companies with active inertia have values that have slowly hardened intodogmas. A company’s values are a set of deeply held views that unify and inspireemployees. Strategy is where the company is going and its values are the path used toget there. Values can be a great asset to a firm, if they are still pertinent and effective. As companies grow, values that have the ability to inspire are replaced with rigid rulesand procedures that are only in effect because that is the way things have always beendone.In short, in an ever-changing environment, businesses must constantly examinetheir values, strategy, relationships and processes to ensure that all are still pertinent3

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