How Success Causes Failure

user Andrew Blum

In the past month, there were two developments in the business world that struck me as more connected than initially might have appeared. First, Microsoft announced that moving forward it would be removing the Nokia brand name from its Windows phones. Later that week came news that Sony was posting a net loss of 230 billion yen ($2.1 billion) this fiscal year because it was writing down the value of its faltering Smartphone business. As I contemplated how these two former behemoths of the tech industry could have suffered such precipitous tumbles, it occurred to me that their failures were directly related to the staggering success each of these companies had enjoyed. As Microsoft’s CEO Satya Nadella said recently, “You need new concepts with new innovation, and you have to have new capability and culture to go after those new concepts.” Unfortunately, he added, “Your existing success kind of fights those things.” He might very well have been referring to Sony and Nokia, whose failures were a direct outgrowth of the staggering success they were both so determined to maintain.

Come with me now as we take a quick trip back to 2002… a new century is dawning, George W. Bush is President, and in the wake of 9/11, cellular communication is more important than ever, with Nokia and Sony poised to become the biggest players in this burgeoning business. On the basis of the phones they had already released up to this point, both companies had established a strong consumer brand, and each had the hardware and cellular capabilities to continue their exponential growth. Apple and Samsung weren’t even in the game, at least in terms of mobile devices. (Apple’s first iPod had just been released the previous year.) So how is it that 12 years later, it is in fact Apple and Samsung duking it out for top dog status, while Nokia and Sony have literally fallen off the map, cellularly speaking? Certainly, such a fall was inconceivable to those tracking the ebb and flow of the industry back then. More relevantly, it was inconceivable to Nokia and Sony themselves, which, as I see it, is reason number one for their fall…

1. Success breeds failure… and vice versa. Because Sony and Nokia had up to that point only experienced success with their inroads into the cellular world, it was natural for them to assume that that success would continue. I’m not suggesting that either company grew complacent, only that their vision became limited over time. Business leaders who know only success are often unable to see the plain evidence in front of them that they’re losing their edge, and that their competitors may be gaining on them. Conversely, those companies who’ve experienced setbacks along the way are more willing to take chances and think outside the box, attributes essential for achieving success, and pointing the way to reason number two for Nokia and Sony’s fall…

2. Unwillingness to take risks. Seated comfortably atop your perch of success, it’s an ironic fact of human nature that you become that much less willing to consider taking the very risks – Putting music on your phone? Installing a camera as well? – which will lead to even greater heights. Nokia had kinetic scrolling capabilities long before Apple, but they failed to capitalize on this advantage. Why? Who knows, but my strong hunch is it had a lot to do with their unwillingness to leave their comfort (i.e., “success”) zones and venture into unfamiliar territory. When my clients are considering new hires, I strongly advise them to pay special attention to those prospects who’ve known failure as well as success. Those are the ones who you can bet will never take success for granted, who won’t allow themselves to lapse into ‘risk-aversion’… and who’ll work tirelessly to avoid repeating the same mistakes that led to their previous mis-steps. The almost counterintuitive lesson here is – if you want to hire the successful leaders of tomorrow, look for people who have experienced great failure yesterday. Which brings us, last but not least, to a final reason for the Sony and Nokia cellular disconnect…

3. Over-homogeneity, aka an unwillingness to go to where the action is. Several years ago, Nokia hired Trium and I had the opportunity to spend 18 months in Finland (on and off) to get to know the company and its leaders better. I was very impressed with much of their operation, but I also couldn’t help but notice their… for lack of a better word… Finnish-ness. I remember leading a discussion about Customer Intimacy Strategy in emerging markets and at the end of the meeting asking their leaders to look around the packed room and tell me what was wrong with the picture. No one knew what I was talking about, until I pointed out that everyone in the room was Finnish. Not one person present was from China, India or any other emerging market. This limited range of perspectives at the company meant less fresh ideas or proposals about how to keep them on the cutting edge. I believe this homogeneity led directly to the company’s unwillingness (there’s that word again) to establish a headquarters in Silicon Valley, even after the area had clearly become the nexus of technological innovation. Sony made the same mistake and failed as well to open up an office in the Valley. To resist change, of course, is to resist one of the inevitable truths of life, which in turn is one of the surest ways to court failure.

As you chart your company’s path for the future, you’d do well to ask yourself the following questions:

  • Where are you failing by being too attached to success?
  • Where are you failing to take risks?
  • Where are you failing to go to the action?

If you’re not asking yourself these questions, you could wind up like Nokia or Sony, who lost a battle in cellular communications that they were easily positioned to win. Come with me now as we peek 12 years into the future to the year 2026 and see which companies, if any, have learned from the lessons of the present laid out above.

Oh wait, we can’t look into the future… there’s not an app for that. Yet.

Let’s hope Sony and Nokia are working on one!

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