One of the my earliest and most impressive experiences as a journalist was a visit to the Imperial Tobacco headquarters in Bristol, shortly after it had become part of the Hanson group. The place was the size of a university campus but it was largely deserted. The DP manager, Ian Yamanaka, took me on a tour of the computer facilities: where once giant mainframes had ruled over a private network connecting Imperial’s sites around the country there was now only a vast empty space the size of a football pitch with wires sticking up from the floor. All over the site the story was the same: the publicity department, reduced from 20 people to two; the four staff restaurants – closed. What could have gone wrong?
This is an extreme example off the results of what author Eileen Shapiro calls “doom-loop thinking”: the very things that gave the directors of the old Imperial Tobacco that warm glow of security – the vast offices, the restaurants, the giant computers – were perceived very differently by the circling sharks.
How do companies get so out of touch? How do they fail to notice that the world has changed, that the competitors they think are so far behind they are not even worth worrying about are already many yards ahead?
In her latest book, The Seven Deadly Sins of Business, Shapiro outlines seven ways in which companies can succumb to dangerous, if not fatal (and that sometimes literally), self-delusion.
In a way it outlines the dark side of her previous work, Fad-Surfing in the Boardroom (probably the most useful take on early ’90s management thought): here, instead of looking at the insecurity of hypochondriac managers who cycle through the nostrums churned out by the guru industry, we have corporations who are complacent to the point of immobility. It’s a darker picture, because instead of hypochondriacs here we have organisations that ignore the suspicious lumps in the corporate body because everything they know tells them that they are too rich, successful and good-looking ever to be touched by the hand of death.
In Seven Sins, success appears as a dangerous and seductive drug: unfortunately you can’t just say no. Shapiro “sins” have names like “Outstanding products”, “Turbo-charged employees”, “Workplace sizzle” – all good stuff, surely – unless it blinds you to what’s really going on underneath.
“You have to believe those things,” says Shapiro. “You cannot run a business in confidence without believing those things. But managers have to divide themselves in half: one half steeped in self belief, the other half saying ‘this may not be right’.”
One of the joys of Seven Sins for schadenfreude addicts is that unlike most business books it’s not full of smug success stories. In any case, Shapiro is sceptical about endlessly repeated business myths such as “how Honda took over the motorcycle industry by focusing on core competencies”.
“I haven’t seen the core competency model work elsewhere, and I don’t believe Honda worked like that,” she says. (Check out Fad-surfing for a highly convincing account of how Honda’s market entry strategy in the States was doomed to fail, did fail, and how eventual success came fortuitously and against the best efforts of the company to sabotage it).
Instead Seven Sins offers some hugely satisfying disasters and the comforting experience of learning from someone else’s mistakes. An early example contrasts two launches by Polaroid: the unveiling of the first instant camera in 1948, and the 1986 launch of the Spectra, a model that at last could compete with the 35mm world in image quality.
The first launch succeeded beyond the inventors’ wildest dreams: the public fought over the new technology, and production plans had to be uprated by many orders of magnitude. The Spectra made barely a ripple.
What had happened? The world of photography had changed: 35mm enthusiasts could get their prints back within an hour, rather than in weeks, and the legions of amateur photographers with their gadget bags and expensive 35mm cameras were seeking eternal images rather than instant feedback anyway. Meanwhile instant photography had found its own niche, for party snapshots and candid photos that you’d prefer not to send to the chemist.
Despite this, Polaroid confidently poured R&D dollars into a gap in the market that no-one was interested in. The other thing that had changed is that the nervous boffins of the 1948 launch had changed into infallible giants of the photo industry: “If you launch it, they will come”.
Shapiro believes the US suffers particularly from this syndrome because of the “bubble” of US managers that grew up in the post-war boom, a period the States began with most of the world’s money, productive capacity and geopolitical clout at its disposal.
“In the US our managers felt good,” she says. “And feeling good becomes like a drug.”
No-one wants to feel bad, and if the facts about your business are going to make you feel bad, the tendency is to ignore or deny them. When the first cracks appeared in this scenario, they were dismissed as “anomalies”.
Japanese imports? “Yes it’s happening, but what really counts are our domestic competitors, because we know that deep down people want to buy American”.
Shapiro hopes her book will be used as a diagnostic tool, encouraging people to seek out the anomalies, rather than automatically treat them as mere irritants.
“There’s this phrase: The exception that proves the rule,” she says.
“What does that mean? What could it possibly mean? It can’t mean anything.”
Using phrases like “the exception that proves the rule” is simply another way of saying “I don’t want to think about it”, “make the pain go away”.
Shapiro doesn’t offer methodologies or pat solutions, but rather ways of making covert beliefs explicit, and encouraging people to look at and understand the anomalies that are confusing them.
This is not a task for vast numbers of consultants:
“If the numbers are perplexing, and you can’t understand the dissonance, it’s not difficult to sort out,” she says. “You can do it in a day.”
Shapiro is highly sceptical about the economics of the modern large consulting firm, which she likens to pyramid selling schemes:
“You have one extremely senior person with 14 bright young things beneath them,” she says. “These are the very bright young people who are our economic engine: bright, but insecure enough to work insane hours. With a ratio of 14:1 – and in some companies it’s getting bigger – that’s a recipe for huge wealth creation.”
Despite the high levels of intellect, and the constant exposure to a variety of clients, most consultancies have “an extraordinarily inward focus” says Shapiro. This can lead to extraordinary scenes, such as the revisionist reengineering ideology that BPR gurus Michael Hammer and James Champy began to develop after the first wave had torn the guts out of corporate America.
“Two very smart people both write books saying: ‘We forgot about the people’,” says Shapiro. “How could they not have known that people were involved in reengineering? There’s no excuse for a PhD to forget about people! It’s something that’s patently obvious – you know that people are important.”
Reengineering unleashed a wave of corporate machismo and masochism, the effects of which are felt to this day: “It wasn’t that companies were fat and needed cutting,” comments Shapiro.
“It was like giving managers surrogate muscles.
“People say: ‘We have to work with consultants because we have no managers’ – but we did this to ourselves,” she says. “I’d like to see consultants used in a different way.”
Shapiro describes a “neo-Cartesian” cogito of the modern change project: “I am busy, therefore I am effective. And even if I’m not effective at least I’m working 20-hour days.”
Change projects give organisations the opportunity for huge amounts of hyperactivity, generating the corporate endorphins that once again make everyone feel good enough to ignore what’s really going on.
“What is the job of the manager?” asks Shapiro. “It is to take the rules as given and take and shake them or make and remake them.”
For Shapiro, the key characteristic of a CEO like GE’s Jack Welsh is “restlessness”, the constant awareness that things aren’t always going to be the way they are today.
“Consultants have become almost the opposite of what they ought to be,” Shapiro says, “they should be making the diagnosis, being a pain in the butt, helping you find the data that’s in your organisation, being partners and sounding boards. Instead we go directly to the answer, don’t even say what the question is. Where does the accountability end up? It ends up no-place. It gets sucked up by the giant accountability magnet.”
Shapiro worries that an entire generation of managers is being sidelined, humiliated and ultimately emasculated.
“Why be a manager when you can earn four times as much as a consultant?” she asks. “Instead of giving money to consultants, give it to your managers.
The wealth creditors of the future will be those companies that give some dignity to the job of the manager, coming down on failures but not killing them. Learn to live with success and failure.”
Or as Samuel Beckett put it: “Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better.” Worstward Ho (1984).
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