Friday, August 28, 2009

The Success Trap

From the latest BNET -- Stanford professor Jeffrey Pfeffer warns against the dangers of making it big:

Recently, my wife and I went to one of our favorite restaurants in Half Moon Bay, California. The experience wasn’t what we remembered; we waited 30 minutes past our reservation before we were seated, and another 15 minutes for bread and water to appear. I started to reflect on how common such experiences are - and not just in restaurants.

Few businesses are able to avoid the “success ruins everything” syndrome. Some firms overexpand and fail to maintain consistent standards, a fate that has befallen numerous restaurants and celebrity chefs that have spread themselves too thin. Others lose sight of their quality and performance standards in the push to grow quickly. Toyota, which built its reputation and economic success on its quality and design processes, recently admitted that it had let those standards slip in its quest to become bigger than GM. Toyota’s newly appointed CEO promised to return the company to its roots, fixing its quality problems and reinvigorating its technical innovation.

Some companies respond to success by resting on their laurels and ceasing to innovate. Microsoft, with its dominant position in many software markets, failed to improve security and other features on its browser after it crippled Netscape. This lacuna in product development permitted Mozilla to rise from Netscape’s ashes, build a more user-friendly browser, and in the process, gain almost a quarter of the browser market.

The complacency that often comes with success provides a window of opportunity for underdogs and upstarts. Witness Apple’s recent dominance over former cell-phone kingpin Motorola and Ryanair’s profits in a European airline market where its larger competitors are losing money in the face of declining revenues.

And it’s not just companies that suffer from success. So, too, do personal relationships. When a group achieves great success, it can split apart with jealousy as individuals each seek credit and a disproportionate share of the resources from their collective accomplishments. Individuals in firms often come to feel that they could make it on their own and really don’t need their colleagues. Such is the story behind the numerous splits in law firms, investment banks, and management consulting companies. As Tommy Chong, part of the counterculture comedy duo Cheech and Chong, remarked in an interview in the Toronto Star, show business, and maybe all business, is like mountain climbing: “When you’re climbing up the mountain, that’s when you really need each other. Then, when you get near the top, it’s over.”

But it doesn’t have to be this way. The key is to understand the basis of your success, whatever that happens to be, and retain a laserlike focus. Michael O’Leary, CEO of Ryanair, has not let the airline’s success change its emphasis on cost-cutting, even at the expense of customer service. Ryanair’s value proposition is cheap fares - and if you want something else, fly another carrier. Southwest Airlines has resisted the temptation to fly planes other than Boeing 737’s and to expand internationally. I understand how important great colleagues have been to my work over the years, so I try to be as generous with credit as possible, work on maintaining these important relationships, and to always be on the lookout for those who can complement my skills.

Yes, maintaining focus and discipline in the face of success is difficult. But the companies that maintain their performance over time do what it takes to maintain what made them successful to begin with. The night before our debacle in Half Moon Bay, we ate at Gary Danko’s, one of the toughest reservations to get in San Francisco. It was our anniversary, and when I expressed some dismay that our table wasn’t as private as I had hoped, a complimentary appetizer arrived almost immediately. Maybe that’s why Danko’s restaurant has maintained its position in the ratings stratosphere while so many other enterprises - restaurants and businesses - fall by the wayside, lured by success into forgetting what made them great in the first place.

I’m sure you have examples of businesses that were able to maintain the bases of their success as they grew and over time, and some that have fallen by the wayside. Let us know those examples and the lessons you draw from them.

Jeffrey Pfeffer is a professor of organizational behavior at Stanford’s Graduate School of Business and is the author or co-author of 12 books including “What Were They Thinking? Unconventional Wisdom About Management.

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