GUEST POST from Greg Satell
Go to just about any business conference these days and you’re likely to see some pundit on stage telling a story about a company — often Blockbuster, Kodak or Xerox — that got blindsided by nascent trends. Apparently, the leaders who rose to the top of the corporate ladder were so foolish they just weren’t paying attention.
These stories are good for a laugh, but they usually aren’t true. People who lead successful companies are, for the most part, competent, hardworking and ambitious. That’s how they got their jobs in the first place. There are, of course, exceptions. People who have a talent for self-promotion can get to the top too.
Still it’s much better to assume competence. That’s how we learn. The truth is that we all get disrupted sooner or later. It doesn’t only happen to silly people. Every square-peg business eventually meets its round-hole world. Smart, competent people fail all the time and, if we want to have a chance at avoiding their fate, we need to understand how that happens.
Mismanagement Myths
During Apple’s rise, Microsoft was considered to be big, slow and incompetent. Its CEO, Steve Ballmer, had foolishly dismissed the iPhone and the company never seemed to gain traction in the mobile world. It launched weak products, such as the Zune music player and the Windows phone. Its failed acquisition of Nokia just seemed to add insult to injury.
Yet still even accounting for Ballmer’s mobile missteps, Microsoft’s business continued to perform well, growing its revenues at double digit rates and maintaining high margins. How can that be? Most of Microsoft’s revenues don’t come from the consumer categories that business journalists tend to cover, but in selling B2B products and services to CIOs. While everyone was focused on gadgets, it was building a monster business in the cloud.
When you look more closely, the clever pundits often miss the real story. Blockbuster didn’t ignore Netflix, but executed a viable strategy and still failed. Kodak didn’t ignore the market for digital cameras, in fact its EasyShare line were top sellers. Unfortunately, selling digital cameras couldn’t replace the profits from developing film. Yes, Xerox PARC failed to successfully market the PC, but its invention of the laser printer saved the company.
The reason why pundits tell the caricatures rather than the real stories is that imagining CEOs to be fools makes us feel better about ourselves. After all, if only foolish people get disrupted, then we—assuming we are not fools—should be okay. Unfortunately, that’s not how the world works. Being smart and working hard won’t save you.
Why Do Smart, Competent People Fail?
There are many reasons why smart, competent people fail. A very common one is a category error. For example, Steve Ballmer didn’t think anyone would pay $500 for a phone, but the iPhone wasn’t just a phone, it was an entirely new business model and ecosystem. People would not only pay for it differently (through their mobile plan), they would also use it very differently than earlier phones.
That opens up a very different set of issues. How do we know if we’re making a category error? We put things into categories for a reason, to understand their relations to other things. For example, a plate is something that goes on a table. But sometimes, such as the case with a commemorative plate, they go on a wall. So when does a plate become commemorative?
Other famous failures ran into similarly thorny issues. The CEO at Blockbuster, John Antioco, developed a viable strategy and executed well, but failed to gain alignment among important stakeholders. Kodak marketed digital cameras, but they weren’t nearly profitable enough to replace developing film. Xerox PARC was designed to build the “office of the future,” not to market consumer products like the Macintosh.
What at first might seem like CEOs asleep at the wheel actually exposes some very thorny issues. How much alignment do we need before pushing an important strategy forward? What do you do when your cash cow dies? When you shoot for the moon, how should you hedge your bets?
These are tough problems with no obvious solutions. But notice that when we assume that the leaders were competent, it forces us to think about them much more seriously and, hopefully, learn something useful.
Seeing Competence All Around Us
I was recently talking to my friend Bob Burg, co-author of the Go-Giver series, and something he said reminded me of a short Borges essay I’ve long admired, called Borges and I, in which the acclaimed author writes about the challenges of balancing a public persona with a private one. I brought it up during our conversation and promised to send it to him.
The whole essay is just two short paragraphs of Borges comparing himself, who drinks coffee and walks the streets of Buenos Aires, to the famous author who will live on in posterity. “Little by little, I am giving over everything to him, though I am quite aware of his perverse custom of falsifying and magnifying things,” he wrote.
Unfortunately, in sending Bob the essay, I screwed up. Because it was so short, I didn’t send a link but copy-pasted the text into the body of the email and, carelessly, didn’t include the title or the author’s name, which made the whole thing impossible to understand. Most people would have just written it off as something stupid. Bob did something different.
Instead of imagining me a fool, he humbly wrote me back, apologized for his inability to understand the essay and asked if I could explain it to him, which gave me the opportunity to correct my mistake. In doing so he did both of us a service. He got the small benefit of reading an interesting essay and I got the enormous gift of being able to redeem myself.
When we assume those around us are competent—not stupid or lazy—we do far more than give them the opportunity to be their best selves. People who feel validated actually tend to perform better too.
We Are Always Wrong
We all like to imagine ourselves as heroes in our own story. Unlike others, we are witnesses to our internal process and get to observe our logic develop. So our thoughts makes perfect sense to us and it can be incredibly frustrating when others don’t see it as we do. Our inclination is to imagine them to be fools, simply incapable of grasping basic concepts.
That’s why pundits tend to tell such facile stories. Blockbuster wasn’t paying attention to Netflix. Kodak ignored digital photography. Xerox PARC invented breakthrough products, but neglected to market them. None of these stories are accurate, but it’s far easier to portray a failure as a silly blunder, than admit to ourselves how easily it could happen to us.
The hard truth is that we’re always wrong. Sometimes we’re off by a little and sometimes we’re off by a lot, but we’re always wrong. We succeed not by coming up with the “right” idea from the start, but by taking a Bayesian approach and becoming less wrong over time.
The best way to do that is to assume other people are smart, competent and hardworking. Lazy fools will make themselves obvious soon enough. But by seeking out intelligence and virtue, we are not only much more likely to find it, but also to identify and correct deficiencies in ourselves and our thinking.
— Article courtesy of the Digital Tonto blog
— Image credit: Pexels
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