PUTTIN' COLOGNE ON THE RICKSHAW

Of the top 25 industrial corporations in the United States in 1900, only two remained on that list at the start of the 1960s. And more profound is the fact that of the top 25 companies on the Fortune 500 in 1961, only six remain there today.

This proves the old adage that nothing lasts forever. It should give pause to all in management in today’s business world. It also sort of proves that the chaos theory, detailed a couple weeks ago in a blog post, is truly at work.

Some of those companies fell from existence because they miscalculated the competition or didn’t correctly forecast the future−a good example being any of the many companies in the typewriter business back when personal computers were making their debut. Still others disappeared because they were absorbed by other companies and still others ceased to exist undoubtedly because they were mismanaged into extinction.

Blockbuster is a perfect timely example. Blockbuster stuck to a business model that no longer offered benefit to the consumer because they discounted Netflix’s completely new business model and continued to believe they could compete and win. Undoubtedly Blockbuster’s management didn’t take Netflix serious because they felt they “knew better.” What else could explain their disregard? They were thoroughly convinced that their business model was the best one and would survive a rising upstart like Netflix. We all know how that turned out.

The sad irony is that after Blockbuster saw its lunch being eaten it woke up and tried to emulate the Netflix model, albeit too late. It’s sad because in many respects what Blockbuster countered with was in fact superior to what Netflix was doing. The problem is that once you’ve lost the customer base it’s tough to regain.

Companies like Blockbuster are an excellent example of what’s called a “self-licking ice cream cone.” A self-licking ice cream cone is anything that offers few benefits and exists primarily to justify or perpetuate its own existence. And just like an ice cream cone it eventually melts from existence.

The phrase “self-licking ice cream cone” was first used in 1992, in the paper “On Self-Licking Ice Cream Cones,” by Dr. Pete Worden, Director of NASA’s Ames Research Center. His article targeted NASA’s bureaucracy. It’s a perfect metaphor for why many companies are still in business despite their miserable performance or blindness to the future.

That said I’ll admit that in many ways all companies need to be self-perpetuating (self-licking) if they are to remain in business. However there are companies that are clinging to life when in fact they should be allowed to die an ignominious death if for no other reason than to put the employees out of their misery.

Having a viable business model aside and assuming that an organization’s management doesn’t make the same mistakes as Blockbuster, what I’m talking about are the organizations that self-perpetualize a dysfunctional culture and management style. An example would be obsession with process and procedure and the command and control management style that will make any organizational dysfunctional over time. What need to change are corporate cultures, which can become self-perpetuating models of power and authority, that support an unhealthy notion of what success is and how to obtain it. These attitudes spill over into how the management views the outside world and thus how they perceive the risks coming from the competition.

In an organization that isn’t a “self-licking ice cream cone” there is a mechanism (leadership) at play that transcends policies, procedures and practices and the need for command and control. It becomes more of how the organization’s management “leads” versus commands and controls, i.e., dictates.

Yes, procedures and policies are essential to a healthy organizational culture as they are the tools that “leaders” use to help align workers with the organization’s business model, and for the workers to effectively perform their day to day activities. However it is how these procedures and policies are implemented and the importance they are afforded that makes the difference in whether an organization’s culture will be functional or “self-licking.” Dysfunctional management creates a workplace culture that is blind to what’s going on around it, promotes stagnation and blindly sticks to process and procedure or a business model that has become antiquated.

The flip side is an organizational culture that helps the business model grow, i.e., promotes innovation (e.g., Netflix’s new approach to video rental).

Inertia is a powerful force in all organizations just as it is in nature−recall the chaos theory. Things at rest have a tendency to remain at rest–things in motion tend to stay in motion. There’s another way to look at this. We’ve all heard the cliché “rest on your laurels.” It means to rely on a past success instead of trying to improve oneself further or to stop trying because one is satisfied with one’s past achievements. Resting on your laurels is the same as remaining at rest. It suggests a decline into laziness and lack of application. Anyone who’s regularly read this blog knows that I love clichés. That’s because the fact is clichés become clichés because they best describe reality.

In business the expression “resting on one’s laurels” refers to an organization that is relying entirely on past successes for continued fame, recognition or its very existence. An organization resting on its laurels believes its past will ensure its future. Even the biggest, most successful companies eventually grow complacent and find themselves being beaten by some upstart with a new and novel business model or one that’s simply being “led” not “managed.” There are new business models, new ideas and new technologies being created every day that many management teams simply cannot see because their dysfunctional egos won’t let them. These are the companies that will snooze and lose.

So if you find yourself in one of these “self-licking ice cream cone” dysfunctional organizations that are “resting on their laurels” instead of trying to improve remember that’s because in business it’s easier to stop things from happening than it is to make them happen.