The Problem with Corporate America and Other Organizations

I have been watching Microsoft implode over the last couple of years. Don't get me wrong. They still make money. IBM still makes money, too. But I don't think anyone will argue that they are the same company they used to be back in the glory days.

Every great company or organization began as the brainchild of some crazy out-of-the-box visionary who decided to do things a different way. This person broke all the rules and did it his way. I am thinking of Steve Jobs who despised IBM or Ray Kroc who started McDonald's. These guys did some fabulous stuff and with Jobs it keeps happening. But why isn't IBM the number one computer firm in the world?

The reality is that any organization becomes the victim of its own success. It becomes big and bloated. It loses nimbleness and innovation. It gets taken over by office politicians who take no risks and avoid all blame. Throw an innovator into this mix, and he has no chance. The bold company becomes the established company and then becomes the extinct company. It is a familiar cycle.

The story of Apple is unique because you can see these forces at work. Apple is a unique experiment because it is the only big company where the genius got fired and brought back. This produced a treasure trove of information that we can see and understand.

Basically, Jobs started this company and turned it over to others to manage. The first thing these people did was move to fire Jobs. This is very important. Nevermind that this man created the company and was its driving force. He had to go. He was seen as a threat not an asset.

Big organizations do not prize innovation, originality, creativity, or what have you. They punish these things. This is because genius produces success which leads to promotion and prominence. The surest way to get fired in a big company is to be bold and to challenge the status quo.

While Jobs was in the wilderness, he founded Pixar which was also very successful and goes to show that his genius is no fluke. Apple languished until they brought Jobs back. Since then, Apple has gone on to greater things. Steve Jobs is Apple.

Innovation is the lifeblood of business. You must always do something new or something better. Nature shows us this. You innovate, or you die. This is how some clever primates went on to leave the trees and build New York City. Then, there are alligators and crocodiles.

Alligators and crocodiles are very successful creatures. While other species have evolved and gone into extinction, alligators and crocodiles have remain unchanged for millions of years. Except for humanity, there has been no pressing need for these creatures to differentiate in order to survive.

In the business world, the aliigators are companies like Coca-Cola or Levi's that change very little from one generation to the next. We can toss in Hershey's chocolate or Wrigley's gum. All these organizations have to do is stick to what already works. Yet, all of these organizations have innovated in terms of distribution, production, marketing, or what have you. I would say that these organizations have a quality I would call "resilience." They can afford to make mistakes or have idiots in charge for awhile.

So, should we innovate? Or should we stick to the tried and true? The answer is that you still stick to innovation. Most ideas fail. But the ones that succeed make up for the failures. The fact is that alligators and crocodiles did have differentiation. It is just that nature did not favor those things much like the public did not favor New Coke. But alligators did not build New York City. Plus, a lot of the changes you can't see. Alligators and crocodiles are resilient to many sorts of germs and viruses. This can only be the result of evolution.

Nature and economics favors innovation. Bad ideas kill themselves in the short run. Good ideas survive for the long term. The key to success is to try a lot of different things and let the economics pick your winners for you. This is the secret behind indexing and venture capital firms. The winners bury the losers.

It takes discipline and courage to take productive capital from something that is already working and put into these experiments. But it was this lack of discipline that is costing GM while Toyota thrives. Both made SUV's, but Toyota was developing the Prius back when gas was cheap. Gas is now cheap again, but Toyota also has SUV's. They diversified. They tolerate the different because they never know when today's idiocy will be tomorrow's genius.

The enemies of innovation are those wedded to the status quo. These are the ones who pursue the policy of "one size fits all." I call these singular strategies. I am not fond of singular strategies. This doesn't mean that I don't think simple answers are not valuable. But I no longer believe in putting all your eggs into one basket.

Change happens no matter what. It is the way of the world. Apple is bigger than IBM. The new overcomes the old. And yes, alligators live, but it is because we choose to let them roam the swamps rather than become boots and handbags. And I can't count how many entrepreneurs who said their big break came when they got fired from some company.