I read this hard hitting blog about how Toyota messed up their cars and they had to recall almost every other vehicle they had produced. some interesting facts the authors put here and we ll look into this from an Indian IT perspective.
Author says that a critical weakness by many successful leaders: failure to learn from success. He also mentions the three reasons about doing so well means bad for business..
1. Fundamental attribution errors. We assume that our talent or strategy is responsible for our successes, giving short shrift to environmental factors and luck. “Any number of factors may lead to success, independent of the quality of a product or management’s decisions,” Gino and Pisano note. “Yet it is all too common for executives to attribute the success of their organizations to their own insights and managerial skills and ignore or downplay random events or external factors outside their control.”
We could see number of examples for this issue. Many of our IT companies were successful during the boom era and most of them thought it was their own success factors which lead to the success. But we know that at that time almost every IT company was doing well as clients were not as tech savvy as today and other countries were catching up with India on outsourcing. Now except a few companies all others are facing single digit growth and slowly declining bottom line.
2. Overconfidence bias. Success begets hubris, and we all know where that can lead. “Overconfidence inspired by past successes can infect whole organizations, causing them to dismiss new innovations, dips in customer satisfaction, and increases in quality problems, and to make overly risky moves,” the Harvard profs observe. “Consider all the companies that grew rapidly through acquisitions only to stumble badly after biting off one too many; and the countless banks that made ever-riskier loans in the past decade, sure of their ability to sort good borrowers from bad.”
We see that quite often in our industry isn’t it? Number of companies got folded which were successful due to overconfidence and unnecessary risk taking. Companies like Penta.. comes into my mind. Even Infy’s problems are somehow related to overconfidence I believe. Companies like Yahoo and Microsoft are victims of this problem. Failing to recognize Google as a major threat is Yahoo’s overconfidence I would like to think. Failing to understand how internet is going to affect their core business is Microsoft’s problem isn’t it? Their too much success in the Windows / Office led to this blunder. Even the subprime problems in US could be attributed to this behaviour easily.
3. Failure-to-ask-why syndrome. No one’s asking the tough questions that transform a success into a replicable strategy. “When you’re confronted with failure,” Gino and Pisano explain, “it’s natural to ask why disaster struck. Unfortunately, success does not trigger such soul-searching. Success is commonly interpreted as evidence not only that your existing strategy and practices work but also that you have all the knowledge and information you need.”
This is the most difficult part right, we never care to analyse “how did we do”? when we are successful. We tend to think mostly it is due our own strengths (first problem) we are successful but a deep analysis will bring out the other factors which are not in our control but contributed to our success. There are many examples we could identify here but I would like to talk about Hindustan Motors (makers of Ambassador cars). I guess they never cared to ask “why we are successful”? If they had, they would not have kept the same model with minor changes for 50 years.
As you could see all three issues are interrelated and we could identify every failure(after mega success) into one of these reasons. Companies which realized and corrected these problems were able to rebound like IBM. Even to some extent Apple. But I am afraid our dear old Infy is still not asking the right questions. In fact most of our IT companies are not asking the right questions about how long they are going to believe in T&M models and what if the low end jobs gets replaced by Automation (machine learning etc..) / Robotics etc.