Looking from the outside in

I came across a thought-provoking article from Lora Cecere on LinkedIn a few weeks ago. She discusses the downfall of Caterpillar’s CEO Doug Oberhelman, as a result of the dogged pursuit of an unsuccessful strategy, and the lack of adaptability of his company to changing market situations.

Sales-driven and marketing-driven processes are internally focused on historic sales. As a result, a company can convince itself for an exceedingly long period that through the execution of a great strategy they can lift a declining market. My warning: it is the exception, not the rule.

The dysfunction she describes isn’t limited to manufacturing, with complex supply chains. It’s just as prevalent in maturing software companies too. I’d venture to suggest that this describes Microsoft in the Ballmer era, amongst others. The pace of innovation slows; the organisation stops noticing what’s going on outside and just obsesses about the self-righteousness of its internal metrics. Cecere continues:

Internally, within a company, the commercial processes of sales and marketing flame good news. As a result, when there appears to be a marketing downturn, there is always a campaign or a promotion, or a new product launch that will reverse the market trend. Bonus programs, egos, and internal processes firewall market data. Commercial engines within the company are good at spreading good news quickly. As a result, good news travels rapidly; but in contrast, bad news moves very slowly within a corporation. Companies have not built the sensing engines to listen and identify market shifts and respond objectively.

This hits the nail on the head.

Once a market reaches a level of equilibrium, it’s very difficult to drive growth. For leaders who have experienced the ride up, this can be perplexing. Being kind, this is because of a natural assumption that the prior playbook continues to be valid. Being unkind, this is because of a lack of self-awareness; an over-belief in their personal contribution to prior growth, rather than a humble acknowledgement that the lion’s share of previous success was down to shifts in the market that they had absolutely no hand in identifying or exploiting, beyond sheer dumb luck.

So it’s easy for a leader facing this situation to be seduced by the promises of a new CRM system, marketing automation or a new manager who’s going to come in and work the team harder. While these things might have a small, incremental impact, they’re almost certainly not worth the investment of time, money and management bandwidth required to implement them – the opportunity cost is huge.

Cecere offers a way forward, which boils down to looking from the outside, in, and adapting to what you see and anticipate. Your company may have a wonderful track record, but if your market is stagnant or in decline, you’re going to need to find new market shifts to exploit, or new business models with which to disrupt yourself. Start by listening to your employees – the ones in particular in your sales renewals, account management and technical support functions – the ones who are talking to your customers, day in, day out, about the realities of your customers’ jobs; how their world is changing – the employees who aren’t being incentivised to tell you good news. You might not like what you hear, but it might just save your company.