How to avoid the success trap


Did you know that the chances of your company still being successful in 50 years is probably just 10 to 15%?

Just over 12% of companies that made up the Fortune 500 list of America’s largest corporatations in 1955 were still around in 2014.

A staggering 88% had failed, merged or fallen from fortune, without enough revenue to be listed.

This is the impact of the “success trap” that lies in wait for strong and profitable companies that dominate their markets, like dinosaurs lumbering towards a tar pit.

Bill Gates once said that “Success is a lousy teacher. It seduces smart people into thinking they can’t lose”.

And from Robert Kiyosaki, “The biggest trap, the biggest dungeon in life is isn’t laziness or bad luck, it’s comfort.”

Great companies got there by doing something different. Ford Motors is named after a man who changed the entire structure of transportation using new techniques of mass production and creating a practical affordable car for the masses.

He didn’t get there by listening to his customers. If you had asked them what they wanted, they would probably have said “a faster horse”.

By creating something completely different in the mass-produced car and making it possible for many people to afford it, Ford sounded the death knell for horse-drawn carriages, stagecoaches and buggies.

Yet now, a hundred years later (the Model T came out in 1908), an upstart electric car manufacturer that should not need naming is valued at more than the venerable automaker.

The main problem is that successful companies got there by being good at doing something new. So, they focus and improve those aspects of their business until it becomes business as usual.

They are also under pressure to deliver results, so they focus on the decisions that will produce immediate and visible returns.

In doing so, they forget that what made them successful were the innovative things they did in the past. If they stop innovating, then someone else will come along and do that instead.

When that happens, the market changes around the company, even though it still looks like it’s doing just fine. But eventually, things have changed so much that the company just becomes irrelevant.

So, how do you deal with the success trap?

First, if you are already in it and want to get out, you have a job ahead of you. You need to transform your company, cutting costs and pruning back heavily to the core of your capability. Then you need to invest in the future, innovating and exploring.

It’s not easy, but you can do it. Lego went from being a moribund toy producer in 2003 to taking significant portions of parents’ disposable incomes with its product launches such as Ninjago and tie ups with film franchises such as the Avengers.

To avoid the trap altogether, you may want to reflect on the title of a book written by Andy Grove, a former CEO of Intel, called Only The Paranoid Survive.

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