I was going down a list of failed and problem companies and it occurred to me that the seven sins in the Canterbury Tales by Chaucer map pretty well to most of the mistakes that I’ve observed companies make over the years, either as a corporate entity or by their executive staff. As we watch Apple’s latest slide, I think it would be good to revisit them.
Lust was highlighted in Mark Hurd’s catastrophic departure from HP. And that is the all-too-common practice of providing top executives with mistresses and the all-too-common problem of an in-office affair. Both corrupt the company from inside and can result in bad publicity and termination, as we saw in the Mark Hurd instance. But the internal affair does even more damage because it creates unofficial power structures around the lower-ranked member of the affair and builds massive resentment due to perceived inequality. Whether it is lust for a partner’s success, or just plain illicit lust, this can do severe damage to the company.
Here in the Silicon Valley, executives appear to believe they are invulnerable to Web searches and cell phone cameras. That belief is leading them to behavior that will likely hurt their families, companies and careers.
This is a sin of excess. You most often see this with executives who are newly minted billionaires. Work can become an annoyance (I recall one executive who decided he only needed to show up about once a quarter), yet they retain their title and responsibility, becoming a barrier to getting stuff done. Worse, these visible representations of excess (hot cars, hot women, hot boats, houses, jets, etc.) become an annoying distraction for subordinates. When they execute austerity measures, much like Carly Fiorina did while updating the HP jet fleet and buying Maybach luxury cars, it can turn the employees against the executive.
Finally, excess can also lead to the belief that rules don’t apply, and this is often when executives start misappropriating funds. At Microsoft, there was an executive that used his intercompany authority to get software for free and then he sold it to support a lavish lifestyle. He was fired when caught, but this showcases how excess can lead to behavior that can damage both the company and the executive’s career.
I’ll translate this into an excessive focus on financial success, something that I think is likely helping kill Apple right now. Back at ROLM Systems, I recall the exact turning point when the company started to nose dive. That was when they set a corporate goal to hit a much higher revenue point. This focus took their eye off the market, staffing, and quality. The end result was this contributing to the company dropping two-thirds of its revenue over a few short years.
At Apple, they are desperately trying to hold on to a stratospheric stock price, which was largely tied to Steve Jobs’ unique combination of marketing and social engineering skills. Those skills are gone, but instead of focusing on replacing them, the firm instead appears ever more desperate to come up with new products and strategies that can increase revenue. These moves are devaluing the brand and lowering margins. It is clear that the company is more focused on recovering revenue to get the stock price back up (which won’t work) than in understanding the real problem and correcting it. Focusing on the customer should be the primary goal. The only firm that has done well focusing on money is Oracle and given its horrid customer loyalty scores, that likely won’t last.
In the corporate world, this comes down to not doing the hard stuff. Often, you’ll see a company, say Microsoft with Zune, that fails spectacularly and at the core of that failure is laziness. It isn’t that the firm doesn’t work hard, it is that it avoids the tasks it doesn’t want to do, but that are critical to the success of a project. This is like a triathlete who doesn’t like to swim so he works out extra hard on biking and running. It isn’t a winning strategy.
Microsoft’s model was to sell through partners, but the partners weren’t successful with PlaysForSure. Microsoft found working through them annoying, so it created its own product, which failed. Had it put the same effort into fixing the relationship issues, it likely would have been more successful. You see Google remaking this mistake with its partners and Android at the moment because keeping the partners happy is just too hard. The worst was Palm Software.
I met with Palm Software while Sony was still building Palm devices and it was clear that Sony was sequentially failing because it was cycling products too quickly. Palm needed to rein Sony in and do whatever it took to keep the effort from failing. It didn’t, Sony abandoned the platform, and Palm Software was eventually shut down. To be successful, you have to do all of the job, not just the parts you like doing. At Facebook, most of the problem is because it’s a company that lives off ad revenue that surrounds human interaction, but it has yet to develop strong ad or interpersonal skills. And that’s because these tasks are hard for engineers.
When we get angry, we tend to act first and think second. This is likely at the core of Sun and Netscape’s failures. Both companies got really pissed at Microsoft for different reasons and altered their strategies to hurt Microsoft. They both did hurt Microsoft, but neither company is around today to enjoy the benefit.
Anything that takes a firm’s focus off of the customer is bad, and anger does that in spades. Steve Jobs was fired from Apple largely because he got upset and failed at a coup against the CEO that, had he not been angry and headstrong, he either would have avoided or executed more successfully. If you remember that decisions made in anger are very likely to help more than hurt the company or executive you are angry at, you’ll likely make more reasoned, and less catastrophically bad, decisions.
In companies, this translates into “I want the business you have,” and it likely speaks to the trouble both Google and Samsung have had with Apple. Both firms lusted after Apple’s business and created litigation exposures as a result - in Samsung’s case into the billions. Google’s founders were branded as traitors and cheats by Apple’s founder, almost on his death bed, and this went a long way toward turning that company into Microsoft’s replacement as the evil empire. This often leads to foolish moves, like hardware companies wanting to be software companies or software companies wanting to become hardware companies.
IBM has spawned an impressive amount of envy in its competitors over the years, and DEC was likely the biggest catastrophe that resulted. Digital Equipment Company, which at one time was stronger in the mid-market than IBM, even changed its name to DEC to match IBM’s three letters. And it isn’t around anymore. You certainly can admire and learn from other companies. But when you try to clone them, it tends to end badly because the firm being cloned has an advantage, and it is already where you want to be. If customers see that, they’ll go to the competitor in droves.
The best example of this was Novell and Super NOS. Here was a company dominant with a unique networked product that looked over at Microsoft’s NT server efforts and decided it wanted that, then announced a product that sounded a lot like NT but was years from completion. Novell’s not around anymore and that one decision is a big part of the reason why.
This is the granddaddy of all of the sins. This is why Netscape’s found Marc Andreessen let himself be put on magazine covers as the next Bill Gates, which is what focused Microsoft on killing Netscape. This is likely why Eric Schmidt appears to be playing unauthorized diplomat to Korea, or why he had Google exit China.
It goes hand-in-hand with the arrogance that has largely transferred from Microsoft to Google over the last decade and keeps companies that have made a big mistake from admitting it in a timely manner. I think it is why Oracle can’t keep a CFO in the job and why eventually that will become a huge problem for the company, where they really only have to admit that buying Sun was incredibly stupid. Pride and status are hardwired into all of us, but often the far simpler and safer path is to swallow our pride and admit we’ve made a mistake and to avoid making decisions based only on preserving or increasing status.
I think this goes to the core of Apple’s slide. The firm doesn’t want to admit what a critical part Steve Jobs played, and when Jobs was there, he didn’t want to have anyone that could replace him. That combined pride is keeping the company from even looking at the problem it has in depth. Until it does that, it won’t be able to craft a fix. Pride can destroy companies. I expect we will watch it destroy Apple.
Wrapping Up: Seven Deadly Corporate Sins
If a firm focuses like a laser on understanding its customers, market, trends, and ecosystem while assuring retention and promotion of qualified talent and investing in things that improve efficiency and quality, it is nearly immortal. But any of these seven deadly corporate sins can eclipse these more critical virtues (suddenly I have an idea for another column) and cripple the firm from within.
Something to think about early in this New Year.