Thursday, April 4, 2013

Spinal Tap, Momentum, And Stupidity

“It’s such a fine line between stupid and, uh, clever.”

- David St. Hubbins and Nigel Tufnel

While the legendary poets of Spinal Tap were, of course, referring (very loosely) to art, I see an odd sort of parallel in the development/evolution of so many businesses, particularly those in the technology/Internet arena.

Positive momentum in business is powerful — an indication that a company’s products, services, pricing, marketing, people, etc., are resonating with its target audience.  It typically leads to new customers, faster sales cycles, expansion, profits (or smaller losses), etc., which, in turn, prompts leadership to double down on those momentum-building practices/efforts (after all, if some was good enough to get the ball rolling yesterday, then more of the same has to be better tomorrow).  Perfectly logical and obviously clever.

Over time, these practices/actions — and their expected results — become institutionalized, with financial projections, corporate strategy, organizational charts, job titles, functional responsibilities, hiring needs, product plans, compensation, etc., geared toward maintaining and/or building on that initial burst of positive business momentum.  This is, ultimately, how companies are built; so, again, perfectly logical and, it seems, exceedingly clever.

At this point, companies enter an inertial state of sorts, where the emphasis becomes methodical execution against plan and advancement becomes fairly linear.  Employees are incentivized to largely stay the course; risk management trumps risk taking; “best practices” take precedent over “new practices;” and, optimization tops experimentation, among other dynamics.  This is, in so many ways, the proverbial well-oiled machine that epitomizes “success,” thus moving beyond clever to brilliant, in the eyes of so many.

Unfortunately, though, meaningful change doesn’t usually happen linearly — it is, almost by its very nature, disruptive — especially in the technology/Internet industry.  New technologies burst onto the scene.  Business climates change.  Competition (perhaps from left field) emerges.  Facilitating technologies/platforms reach critical mass.  New laws are enacted.  Etc.  These are hardly once-in-a-generation “black swan” events, even though they may not be entirely foreseeable.

When said change happens, inertial companies are often ill-equipped to respond appropriately because, as stated previously, their financials, strategy, personnel, org structure, product plans, etc., are built for slow-and-steady, not fast-and-adaptable.  As a result, their employees do the only thing they are trained, prepared, structured, and incentivized to do, and the very thing that made the company "successful" in the first place — continue executing on the same game plan, in the same manner, and at essentially the same pace as they had yesterday and the day before that and the day before that and...

In that instant, when exogenous factors demand substantive, long-term endogenous change that fails to materialize, inertia morphs into stagnation, and clever becomes stupid.

It may not yet be apparent to everyone (or even anyone), but make no mistake, it has happened; and, it changes everything.  Sales cycles lengthen, quotas are missed, morale sinks, revenue flattens/declines, margins/profit shrink, development projects are abandoned, rumors swirl, perceptions shift, layoffs loom, etc.  These factors, themselves, then compound the issues at hand and accelerate the negative cycle, as current/prospective customers and employees further weigh the uncertainty.  Needless-to-say, the downside isn’t pretty, and, unfortunately, it usually lasts longer and cuts deeper than most anticipate.

The list of high-profile technology companies to which this clever-stupid transition might apply is extensive (so imagine how long it would be if we considered all those lower-profile companies that dropped by the wayside early-on): Research In Motion, Excite, Nokia, eBay, IBM, Yahoo!, Oracle, eToys, Siebel Systems, AOL, DEC, theGlobe, Microsoft, Netscape, Palm, Gateway, Infoseek, Sun Microsystems, CDNow, Eastman-Kodak, Tivo, RealNetworks...  Some obviously survived their own “stupidity” and eventually even reached new highs; others, however, never recovered and remain shadows of their former selves or have become footnotes in history.

While no company can completely sidestep this risk, I think it is possible to mitigate it by proactively fostering a change-friendly environment throughout the entire organization.  Empower employees.  Appreciate creativity.  Seek divergent views.  Take managed risks.  Frequently revisit long-term perspectives/assumptions.  Guard against complacency.  Incentivize long-term behaviors/thinking/planning.  Put real resources (time, brain-power, money, etc.) behind experimentation.  Actively promote “skunkworks” projects.  Sponsor interdepartmental dialog and collaboration.  Welcome honest feedback from employees and customers.   In short, accept that you (as a management team/organization) do not know everything, are making meaningful mistakes, missing important pieces of the puzzle, and/or have blinded yourself to the possibilities; and, allow that humility to regularly push the entire firm outside of its collective comfort zone.

Mistakes will unquestionably still happen, but hopefully "stupidity" can be avoided.

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