Decades of success make organisation’s structure, systems, processes, and culture rigid and bureaucratic, overtaking its dynamism. The leadership loses the fire in the belly
Peter Drucker, the management guru, in his 1980 seminal treatise, ‘Managing in Turbulent Times’, wrote, “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” This somewhat explains why some of yesterday’s blue-chip companies in India are no longer the favourites in the marketplace. Returns on investments in those companies have been well below those delivered even by the bellwether Nifty or Sensex over the past decade. With this realisation, long-term institutional investors such as FIIs are slowly yet steadily abandoning the boat.
The slide is creeping and almost unnoticed in its early stages given that one of the unmapped events in business is the “corporate midlife crisis”. It sets in when the organisation’s dynamism loses direction, grit, and agility, and the business begins to live by its past glory. Like an individual’s life, an organisation transits through the phases of birth, growth, maturity, and stagnation. The syndrome slowly becomes visible but is even more pronounced when leadership refuses to acknowledge that the organisation has lapsed into midlife crisis. Although the situation may not be terminal, it unfolds a powerful inflection point for reinvention.
When an organisation achieves scale, stability, enviable, and sustained success for more than a decade, ‘complacency’ is most likely the outcome. Andry Grove, former CEO of Intel, once observed, “Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” The decades of success make the organisation’s structure, systems, processes, and culture rigid and bureaucratic, overtaking its dynamism. The leadership loses the fire in the belly, lives in the ivory tower, and eventually becomes a maintenance manager. The strategic drift often culminates in a shift in focus from innovation and efficiency to risk minimisation, thereby minimising the input-output ratio.
The current global ethos, characterised by geopolitical turmoil, economic nationalism, technological disruptions, and changing consumer profiles and preferences, is compounding the woes of such corporates and upending leadership frameworks. Unfortunately, quite a few of them did not anticipate or comprehend the impact this setting would have on the organisation’s health, and if they did, they probably chose to ignore it. Apart from the current geopolitical dynamic, technological disruptions are rendering organisational design, business, and revenue models obsolete. It is transforming job profiles, causing redundancies, eliminating hierarchies, yet enhancing productivity and reducing intermediation fees. The availability of multiple options, product customisation, and the synchronisation of production of goods and services with consumption are changing customer behaviour and transforming consumption patterns. The information explosion has heightened customer aspirations.
A corporate midlife crisis is the creation of prolonged success, not failure. Its inevitability can be prevented by timely recognition; where this does not happen, the organisation will need to come to speed with the right strategies and vigorous of implementation schedules.
The journey of overcoming a midlife crisis begins with revisiting the organisational purpose, which leads to the refurbishment of the organisation’s vision, mission, values, culture, and strategy. Questions such as ‘why do we exist’, ‘what problems we solve’, ‘what value we create’, and ‘how’ will help in ‘redefining the future’. The purpose, in consonance with the times, defined by the environment, customer aspirations, and optimal stakeholders’ value creation, has the potential to restore strategic focus and reignite the organisation. This is an area that is vital to reigniting success but is often overlooked.
Change is possible only if the leadership recognises and embraces the change rather than remaining trapped in legacy systems, outdated organisational design, and business and revenue models. Charles Darwin famously said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” Leadership must cultivate a new mindset of decoding and distinguishing between a value eroder and a value creator, learn from failures and stagnation, part with the futile, encourage experimentation, promote agility and flexibility, and embrace calculated risk. Indian companies need recognition of this phenomenon at work more than ever at this juncture.
Many mature organisations turn inward-looking, and customer focus erodes. Meetings, procedures, and internal affairs begin to dominate, and the fruition of customers’ aspirations gets subordinated. The customer focus must get sharper with continuous study of customers’ behaviour, their aspirations, current and future, and improved responsiveness. Offering products and services that do not meet their expectations will lead to the organisation’s decline.
There is quite an underestimation of the extent of technological disruptions. Digital transformation is not about just adopting new software or other tools. It necessitates a comprehensive rethinking of how the organisation operates, communicates, delivers value, and competes. Currently, marshalling technology involves data-driven decision-making, digital customer engagement, the use of artificial intelligence, and, eventually, the architecting of extremely agile operational systems.
Operating with a rancid strategic framework, pursuing conflicting goals, and under-leveraging core strengths is a validation of the organisation’s decline. Building an effective strategy requires revisiting core competencies and sustainable advantages, identifying high-growth opportunities, and eliminating value eroders. This may culminate in exiting declining product lines and markets, restructuring, and even disinvestments. The purpose of strategy transformation is to enhance the efficiency of resource allocation and regain momentum. The most important aspect is revitalising leadership frames. Effective leaders communicate transparently, encourage innovation, empower employees, lead by example, and inspire confidence. During any crisis, human resources look up to leadership for clarity, direction, and confidence-building, not pontification.
Treating a crisis as a catalyst for the transformation comprising rejuvenating the organisation and leadership frames by fostering innovation, strengthening customer connect, accrediting people, and redefining the purpose, in effect challenging the environment ethos, however formidable it may be, is the solution to beating the midlife crisis. In effect, leaders must learn themselves and then train their colleagues in “imagining a new future”.
The Billion Press (GN Bajpai is a former chairman of SEBI and LIC; Praveen Tiwari is a former deputy comptroller and auditor general and member, NFRA.)
