Success can hamper a firm in the long run
Seduced by Success: How the Best Companies Survive the 9 Traps of Winning
by Robert J. Herbold, McGraw-Hill, $27.95
In the climb up the ladder of success, the most perilous rung can be the one at the top.
It's just too easy for today's powerhouse company to become tomorrow's bureaucratic laggard, according to retired Microsoft Corp. chief operating officer Bob Herbold, whose new book, "Seduced by Success," focuses on this phenomenon.
"It's really fundamentally human nature that we're talking about here," Herbold said in an interview. "Once individuals and organizations taste success, they tend to imagine that's going to always be the case."
As a result, many successful companies tend to ignore the competition, hire too many people, cling to outmoded procedures, and lose their sense of urgency.
In the 1950s, General Motors Corp. became the first company to make $1 billion in one year. In 2005, it lost more than $10 billion and its market share had shrunk to about 22 percent from nearly 50 percent in the 1970s.
Herbold, who also spent 26 years at Procter & Gamble Co., attributes GM's decades-long decline to a fragmented organizational structure, an inefficient design process, and a failure to keep up with changing trends.
"Union costs have hurt General Motors, pension costs have hurt General Motors, and they've never gotten creative about how to get out of problems," he said. "Now the problems are gigantic."
GM spokesman Tom Wilkinson acknowledged that the company has made mistakes over the years.
"It's certainly fair to say that the things that made GM phenomenally successful for 60 years created problems" when regulation increased and import competitors entered the US market, Wilkinson said.
GM responded by restructuring and is now "truly global," since the growth lies outside the United States, he said.
Herbold also pointed to Eastman Kodak Co. as another icon that has paid the price for resting on its laurels, noting that the company took too long to get into the digital camera business.
"It's embarrassing that the king of photography would miss the digital revolution," he said.
Another recent book, "The Halo Effect . . . and the Eight Other Business Delusions That Deceive Managers," says that success rarely lasts.
Author Phil Rosenzweig, a professor at the International Institute for Management Development in Switzerland, cites studies that show a strong tendency for companies in a free market economy to fall back after a period of extremely high performance.
Still, Herbold's book also lists examples of many companies that have reversed their downward spirals.
Apple Inc., for example, went from the success of its Macintosh computer in the late 1980s to sales declines, executive turnover, and losses in the 1990s, and back to success with the iPod music player and other products.
And some successful companies just don't succumb to temptation. Toyota Motor Corp., which has just displaced GM as the world's largest automaker, has worked hard to improve its manufacturing processes and products while keeping a sharp eye on marketplace trends, Herbold said.
