When a company is struggling, one of the first reactions is to look at market forces to see whether they are a factor. When they are not, many companies are at a loss to explain the problems and find solutions. Chris Zook is a partner at Bain & Co., a management consultant firm, and served as co-head of its Global Strategy Practice for 20 years. In his new book with James Allen, The Founder’s Mentality: How to Overcome the Predictable Crises of Growth, he draws on his decades of experience to demystify the secrets of companies that push themselves past a slump. Zook spoke about his book.
And over time, senior management, if it’s not careful, can move farther and farther away from the frontlines. We found that what we called the founder’s mentality, which are the three great traits that great founders imbued into their companies, can often begin to wane. Companies can lose a sense of the frontlines. They can lose a sense of their mission, and companies at their worst begin to turn into bureaucracies. In fast-moving markets like today, when you become a bureaucracy, it’s all over. The next wave of insurgents begins to take you over.
In a database that we have of 8,000 companies, we found that right now only about one in nine companies in the world in the last 10 years has achieved more than a modest level of sustained and profitable growth. It is becoming more difficult, and the cycle times of businesses in many industries are becoming like the life cycles of fruit flies — shorter and shorter. Young companies scale ever faster, setting new records for doing that every decade, and older companies
One of the most amazing and powerful statistics from our five-year study, where we visited 40 countries in the course of it, is that for the largest of companies, 94% say that there are barriers to achieving their growth targets. But by my other statistic, 94% of the barriers are now internal. They are not lack of a market, market saturation, technologies they couldn’t possibly have, unbeatable competitors, government regulation, economic slowdown — none of that. They say in 94% of the time it is internal, and we found that many more than two-thirds of these primary reasons were related to complexity and how some companies age prematurely.
… Number one is what we called an insurgent mission. Every founder is either at war against their industry standards because they are frustrated with it or trying to create something new, like Elon Musk is doing with SpaceX — creating a vehicle potentially to put people on Mars or Google is doing to organize information. Yet over time, companies can become just another company. We found that only 13% of people in the world now say they have any emotional commitment to the company that they spend probably half of their waking lives with.
For more and a podcast interview with the author… https://knowledge.wharton.upenn.edu/article/160609b_kwradio_zook/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2016-07-21