The Self-Destructive Habits of Good Companies: And How to Break Them

My favorite section of this entire book, and that is high praise indeed given my opinion of the rest, starts on page 200. Sheth mentions how academics are often criticized for existing in an ivory tower and how the accusation is false; the real inhabitants of an ivory tower are corporate CEOs and their immediate minions. It is the job of academics to interact with raw beginners and to do the best they can to teach their students the breadth and depth of skills needed to survive in their chosen profession. From the first day they step on a college campus, students are interacting with their professors; there are very few barriers between the student and the head of a department. However, the executives at the highest levels of a corporation are much more sheltered, which is a significant part of the problem. Many fly on private jets, have their private elevator, washroom and cafeteria. So many of them interact with only a few of their employees and almost never with their customers. The information they receive is carefully filtered and in the most rigid of organizations, it is unthinkable that a line worker would ever exchange meaningful words with an executive. Sheth also describes many of the other problems that good companies face, although I don't believe he is complete in his analysis of why companies fail. He is quite correct that many of the companies initially succeed largely due to luck and being in the right place at the right time. However, the eventual failure of so many companies is due to the creative destruction that is an inherent feature of capitalism. The advance of technology and social mores cannot be predicted or stopped; so many companies simply outlive their economically effective life. In my opinion, that point is not stressed enough. Sheth is quite correct in pointing out that the greatest point of failure is when companies become "fat cats", content to bask in their success and believe that the good times will continue indefinitely. Or at least as long as the current executive team remains in their positions. He also commends companies who have the policy of term limits in executive positions. By rotating executives from position to position on a regular basis, no person has an opportunity to build a "protective silo", where it becomes more important to protect their executive turf than it is to advance the company. Another very amusing point that I agree with; is when he points out that there is less of a cultural divide between Christians and Moslems than there is between engineers and marketing people in the same company. As a former software developer, I remember some of the very hostile barbs that went back and forth between the marketing people and the programmers. We spoke a different language, not only in how the product should be built, but we strongly, vehemently disagreed about what should be said to potential customers. In conclusion, Sheth does an excellent job in describing the history of some of w

In terms of business books, I've always found it interesting how today's hot model corporation can become tomorrow's disgraced icon. You wonder what went wrong at what point to lead them down the wrong path. This pattern is covered in the book The Self-Destructive Habits of Good Companies: ...And How to Break Them by Jagdish N. Sheth. I think a number of the leading companies in today's headlines could take some lessons from these pages. Contents: Why Do Good Companies Go Bad?; Denial - The Cocoon of Myth, Ritual, and Orthodoxy; Arrogance - Pride Before the Fall; Complacency - Success Breeds Failure; Competency Dependence - The Curse of Incumbency; Competitive Myopia - A Nearsighted View of Competition; Volume Obsession - Rising Costs and Falling Margins; The Territorial Impulse - Culture Conflicts and Turf Wars; The Best Cure is No Cure At All; Endnotes Each chapter in this book goes into a particular trait that can doom a company's long-term survival. For instance, denial often manifests itself with a company believing that its success is due to some inherent greatness that will always be there. In reality, success is often something determined by chance interacting with a good idea. Once the rest of the world catches up, that idea advantage disappears regardless of how much the company may deny that the environment has changed. Sheth does an excellent job in providing examples of companies who have fallen prey to each problem. For denial, it's Xerox ignoring emerging technologies, A & P ignoring the changing tastes of the American shopper, and GM ignoring the growing excellence of foreign autos. Granted, it's easy to apply hindsight to see how these situations unfolded, while at the time the decision to pursue a particular direction does not come with a guarantee of any particular results. But still, knowing these different problems beforehand can help to guard against making the same mistakes. Being in the technology industry, I could relate to many of these situations. A certain large software company in the Pacific Northwest could easily qualify for a number of them. Armed with this material, it becomes a bit easier to imagine how endgames might play out. And if you're a stock investor, this book could easily save you lots of money by allowing you to examine company stock in the light of past industry failures. Either way, it's an interesting read, one that's sure to have you looking at your own organization and wondering if you're next...

We have all seen it happen. A company is on top of the world and its future success not only seems assured, but inevitable. Yet, before anyone sees it coming, the wheels come off and the company is fighting for its survival, gets bought out, or broken up. How does that happen? And why does it happen with such seeming regularity? It is the rare company that can stay on top of its game for extended periods of time. The companies profiled in the business classic "In Search of Excellence" would not be selected for such a book today. Nor could the same lessons be drawn from their current position and behavior in the marketplace. This book talks about what happens to successful companies that leads to their getting into serious trouble. When I was in business school and heard stories of this method or process or success story that led to success, I was always wondering about the limits of such methods and where the limits of applicability were. Sometimes my questions and doubting annoyed my professors and classmates, but subsequent events have, I believe, proven the benefits of good hearted doubt. Jagdish Sheth uses a good number of real life business stories from well known companies to illustrate his points. I also like the way he summarizes his points about how things go wrong and some suggestions on how to get things right at the end of each chapter. He begins the book talking about Digital, IBM, and Intel. Bigger names representing blue chip success would have been harder to find in the 1980s. Digitial is gone, IBM had to bring in an outsider (unthinkable before the crisis), and Intel fumbled its way into letting AMD become a major competitor in its core marketspace. The seven mistakes Sheth points to are: Denial (the cocoon of myth, ritual, and orthodoxy), Arrogance (pride before the fall), Complacency (success breeds failure), Competency Dependence (the curse of incumbency), Competitive Myopia (a nearsighted view of competition), Volume Obsession (rising costs and falling margins), and the Territorial Impulse (culture conflicts and turf wars). The discussion of each of these is quite interesting and I am sure you will recognize them from your own work experiences over the years. It is too bad how we are prone to such errors, but humans are quite fallible. We tend to stick to something we think is working until we are forced to change. Unfortunately, things are changing around us, and the very habit of "sticking with" actually deadens the abilities to see why our approach is no longer working. The last chapter discusses why it is better to never need the "cures" he describes in each of the chapters. It is much better to wake up before the crisis and keep your company alive and thriving by preemptive action. I agree with him. However, I expect that the culture of business will require that too many companies have to go through these wrenching trials in the future as they have in the past. Recommended.

In "The Self-Destructive Habits of Good Companies...And How To Break Them", a respected authority on global competition, strategic thinking, and customer relationship management expert Jagdish N. Sheth (who holds the Charles H. Kellstadt Chair of Marketing Strategy in the Goizueta Business School at Emory University) identifies seven dangerous habits even the most well-run company can fall victim to, as well as how to diagnose and counter these corporate habits before they can cause irremediable harm. These basic faults include the 'cocoon' of denial with respect to problems or issues confronting a company; the stigma of perceived (or genuine) arrogance on the part of management; the 'virus' of complacency; the risk factors of incumbency for a company's present and future needs; the threat of corporate myopia with respect to the competition; an obsession toward volume without proper attention to profit margins; and the 'territorial impulse' as reflected in the creation of factions, fiefdoms, and ivory towers within the corporate ranks and structures. Simply put, Professor Sheth's "The Self-Destructive Habits of Good Companies" should be considered mandatory reading for all company executives, and all business school students aspiring to one day become corporate managers.

In Firms of Endearment, Jagdish N. Sheth and co-authors Rajendra S. Sisodia and David B. Wolfe explain how world-class companies profit from passion and purpose. The focus is on sustainable good habits. In this volume, Sheth takes a different approach in response to the question "Why do good companies go bad?" The focus is on habits that are counter-productive, in some instances self-destructive. Because habits (both good and bad) are learned behaviors, not inevitabilities, it is possible to acquire them or eliminate them. Sheth correctly stresses the importance to any organization of having leadership at all levels and in all areas. Without it, it is impossible to avoid, recognize, or overcome one or more of the seven "destructive habits" that Sheth identifies and then discusses. Readers will appreciate the format Sheth has selected which includes two sections within each chapter: "The Warning Signs of [X]" and "How to Break the Habit of [X]."He devotes a separate chapter to each of the seven. Then at the end of each chapter, he summarizes key points in greater detail than do most other authors of business books. These three devices facilitate, indeed expedite review of key points later. Throughout the narrative, Sheth examines a number of exemplary companies such as Digital, IBM, Intel, Xerox, A & P, General Motors, Merck, Motorola, and Singer Sewing Machines. In the final chapter, "The Best Cure Is No Cure at all," Sheth correctly notes that breaking bad habits begins with an awareness of them. He advocates what he characterizes as "anticipatory management" (as opposed to "status-quo management") that, if effective, avoids the need for a "cure," hence the relevance of the chapter's title. Sheth invokes an extended analogy to make several important points. "As in human health, corporate health is better served if self-destructive habits never have a chance to get a foothold. Just as with humans, if the self-destructive habit forms, it may be too addictive to stop. Or it may be allowed to go on until irreversible damage occurs. Or the cure may be so invasive that the company suffers additional negative consequences or never recovers. And the cure may be expensive and require lifelong maintenance. It would be much better, as we know from human health care, to encourage wellness instead of treating illness." In reality, of course, most organizations suffer from "organizational illness" in one form or another at one time or another. (Consider developments -- both positive and negative -- at General Motors, Ford, and Chrysler since the end of World War Two.) For various reasons, some companies survive while others do not. Those who read this book probably have ideas of their own as to how to avoid or break each of the seven self-destructive habits. More to the point, each reader has a clearer understanding than Sheth possibly could how her or his own organization can -- and should -- avoid or break a habit such as denial, "The cocoon of myth, ri