Fastest way to kill a company?

I don’t know, but an effective way is to move your Schwerpunkt off of cheng / chi. When this happens, your ability to generate chi will atrophy (it’s hard enough to keep it going, anyway), and eventually cheng will follow. Here’s an example.

From an article in Monday’s Wall St. J. (subscription required) on recent problems at Target:

Creative leeway—once the DNA of the chain affectionately dubbed ‘Tar-zhay’—took a back seat to rigid performance metrics.

Auftragstaktik (as we might describe it) was replaced with control:

Initiatives once left to divisional leaders to execute on their own became subject to consensus and extensive testing, say former executives. Even small projects, like a mobile app, became bogged under the weight of giant teams.

What happened out in the marketplace, what customers experienced, was predictable:

The chain “lost a lot of what used to make it unique,” says Barclays analyst Matthew McClintock. “There haven’t been exciting reasons to shop at Target in recent years.” (emphasis added)

Kill creativity and you kill agility and then …

What’s odd is that the person held most responsible for this debacle, only five years in the making, was a 30-year Target insider hand-picked by the outgoing CEO, the person who had guided the evolution of the previous culture.

I don’t know what to say. Fortunately a palace coup back in May ousted the new CEO and began to fix Target’s culture:

Since Mr. Steinhafel’s departure, top executives have been given more freedom to plot strategy and enact projects—like putting mannequins in stores. … The retailer has pledged to add new products more often and hasten decision making—in part by eliminating layers of management.

“Our ability to speed things up has gotten exponentially faster,” says Mr. Jones, the marketing chief. “We aren’t waiting for a new CEO to arrive.”

I wonder, and perhaps a reader can tell us, whether the events described in the WSJ article were accompanied by an internal focus. One indication is that shortly after he took office, Steinhafel cut off  any interaction with the former CEO (who built the system). If the focus did shift internally, then the events described in the article fit Boyd’s prediction that many non-cooperative centers of gravity would emerge and, as they turn their attention to competing with each other, the company as a whole loses its ability to shape and react to the external environment. Boyd called this effect, “pumping up organizational entropy.” It’s a great idea — for your competitors.

One cannot determine the character or nature of a system within itself. Moreover, attempts to do so lead to confusion and disorder. (Strategic Game, chart 23)

Interaction permits vitality and growth while isolation leads to decay and disintegration. (SG, 29)

Why do people screw up a good thing? This is something that’s puzzled me for years, and it’s particularly weird when it’s done by people who know the system and culture and who even helped create them.

6 thoughts on “Fastest way to kill a company?

  1. Chet,

    I believe that it is a mentality of “stay in your lane” and “don’t fix it if it isn’t broken” that seems to affect all organizations, many small to medium sized too. Stability it would seem breeds a certain arrogance and indifference perhaps.

    That and some may see preserving the status quo as rational, if because they have staked their careers on such systems or have built up their reputations on the status quo. They will also fiercely resist changes often.

    I think that this is a collective action failure. People do things that seem rational for themselves in the short term, but are collectively terrible. In the long run, all those things add up and bring about the collapse. People do not so much deliberately try to “screw up” a good thing as much as they maximize their perceived short-term gains while remaining willfully ignorant of longer term ones.

    On that note, Target expanded to where I live (Canada). It was a total disappointment and traffic to Target stores here in Canada has apparently dropped sharply. I think that they made no effort to satisfy the Canadian demographic’s needs, which they assumed (rather stupidly in retrospect) were the same as American consumers needs.

    Do you think that this may be happening on a national level in the US?

    Regards,

    Chris

  2. Chris,

    Thanks.

    “Do you think that this may be happening on a national level in the US?” And not just the US — Mike Vlahos has a nice piece on that subject over on The National Interest: http://nationalinterest.org/feature/historys-warning-us-china-war-terrifyingly-possible-10754

    Hence, US naval officers do not fear the Chinese super-duper carrier-killing ballistic missile—they welcome it. They see every PLAN move as a mission-gift.

    A similar process is taking place in China. Symbiotic, mutually licking ice cream cones, which would be funny if it were not costing so much and had such potentially disastrous consequences.

    As for companies, and maybe for countries, too, the processes you mentioned are insidious, difficult to spot from the inside, where they seem, as you noted, “rational.”

    O wad some Power the giftie gie us
    To see oursels as ithers see us!
    It wad frae mony a blunder free us,
    An’ foolish notion:
    What airs in dress an’ gait wad lea’e us,
    An’ ev’n devotion!

    Point is, though “some Power” isn’t just going to gie it to us.

    Chet

    • Chet, that is the danger though. That article you linked, noted the potential for war. Looking at Vlahos’ other articles, he describes how to “win” a war against China. Well apart from the fact that it is increasingly looking like if there is a war, Russia is far more likely to side with China than against (or at least stay neutral), war with China would represent a strategic miscalculation that would likely be far more costly that initially anticipated.

      Heck, a case could be made that Iraq was far more costly than anticipated. The true cost could be on the order of $5-7 trillion USD – this article was in 2011:

      http://news.brown.edu/pressreleases/2011/06/warcosts

      Anyways, it did not interest (estimated elsewhere to be another trillion) and other costs, such as the impact on global stability, resources, etc. Judging by the political current in the US, it appears that a substantial proportion of the Washington establishment want to go back to Iraq, due to the recent events over the past few weeks.

      On a national level, I am forced to conclude that Washington has managed to isolate itself from the needs of the rest of the US, in a manner not dissimilar to how the management does so in a corporation. The self-inflicted problems over the past few decades lead to no other viable conclusion.

      There are huge domestic problems that need to be addressed, such as the weak economy (which for all the talk of “recovery” has remained poor for a very large part of the population), the declining infrastructure, the wisdom of being dependent on others for energy, the cost of medical care, and various other local problems.

      Target I think recognizes the scope of its problems and is attempting (it may or may not be successful) in making reforms. Washington it seems has yet to recognize the scope of the problems, much less try to fix them.

      – Chris

      • Chris,

        Heck, a case could be made that Iraq was far more costly than anticipated.

        Rumsfeld: … something under $50 billion for the cost. How much of that would be the U.S. burden, and how much would be other countries, is an open question.

        Wolfowitz: It is hard to conceive that it would take more forces to provide stability in post-Saddam Iraq than it would take to conduct the war itself and to secure the surrender of Saddam’s security forces and his army — hard to imagine.

        Wolfowitz: There’s a lot of money to pay for this … the oil revenues of that country could bring between $50 and $100 billion over the course of the next two or three years…We’re dealing with a country that can really finance its own reconstruction, and relatively soon.

        Sources: http://zfacts.com/iraq-war-quotes; en.wikiquote.org/wiki/Paul_Wolfowitz

  3. “Why do people screw up a good thing? This is something that’s puzzled me for years, and it’s particularly weird when it’s done by people who know the system and culture and who even helped create them.”

    It is a wonder, but also it seems like a little internal isolation was going on at the time when the new guy was adding his creativity to the corporation. Isn’t that what the new guy was taughted, to be creative?

    So I am thinking that either the guy at the top isolated himself in his effort to change the corporation, or was isolated by the uncooperative centers of gravity left behind after the old guy left. If he wasn’t isolated then a whole culture would have been created and there would have been a wholesale firing when the palace coup happened.

    I also wonder how much this says about the person who left? After all, the person who screwed up the “good thing” was just one of the many that were, presumably, left in place at the top, after the top guy left. What was so corrosive about the environment of those in the “palace” that the absence of his commanding presence brought about this kind of change? If his replacement acted in such a destructive manner, what about those other uncooperative centers of gravity, or at least those at the head of those centers?

    Maybe a better metric might be: how many shares were those of the “palace coup” able to buy up at a reduced price, before they were able to “rescue” the company from the person in command? I am not saying there is anything wrong in buying up shares of a company you believe in, I am just wondering how much did the “palace coup” believe in the structure of the company?

    If a corporation’s structure has a great strength that someone can believe in, then much friction can go on, without any permanent failure of the culture inside. In other words, when did the palace coup know to act, if how was not a question?

    Could it also then be asked if that “person” (groomed by the man at the top?) was someone whose ideas or personality was so destructive to all the other uncooperative centers of gravities that they may have just not liked him?

    Just saying, in trying to figure out all that weirdness. After all there is no right or wrong in strategy, only winning and losing. The replacement seemed to have lost strategically.

    • Larry,

      What was so corrosive about the environment of those in the “palace” that the absence of his commanding presence brought about this kind of change? If his replacement acted in such a destructive manner, what about those other uncooperative centers of gravity, or at least those at the head of those centers?

      Excellent point! Thanks.

      Chet

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