//When Past Success Leads to Future Failure: Corporate Inertia

When Past Success Leads to Future Failure: Corporate Inertia

Sometimes an adverse market change has caused an erosion of the company’s business.  Employees are performing actions that previously resulted in market success, but changing conditions are such that these same actions either do not produce results or, in the worst situation, actively produce negative results or cause harm.  Corporate inertia is when past success leads to future failure, and in these situations, prompt corrective action is needed to provide continuous reinforcement of the new direction until previous behavior is extinguished.

Past Value: Highly Customizable

For example, suppose a company has built its products to be highly customizable in order to enable deep integration with a customer’s operational systems.  The company has built a reputation around the flexibility of its systems – but that flexibility comes at a price in terms of requiring highly skilled programmers to perform the integrations.

Fueled by the success of its business, the culture evolved to be highly responsive to any new integration feature customers asked for. That, in turn, was rewarded by increased revenue from customers paying for those complex features.

Today’s Market Demand: Quick-to-deploy Cloud

Time has passed, and new competitors have emerged which offer quick-to-deploy cloud-based solutions with little customization possible or allowed.  However, now the company’s core business is threatened because the cost of deploying the competitor’s solution is an order of magnitude less, and solves 70% of the customer’s problems – so customers are beginning to abandon the company’s products in favor of the newcomers.

In addition to product, process, and other transformations, it will be necessary to instill a culture that values simplicity over flexibility.  Because the company’s past success was based on flexibility, the natural tendency of employees who have been with the company a long time will be to add more features and complexity (to provide flexibility) rather than remove features (to provide simplicity).  This type of corporate inertia absolutely mandates a cultural transformation in addition to a business process change.

Impact on Company Culture and Employees

Even with the best of intentions and the best of management, employees who have been with the company many years will have an extremely difficult time not lapsing into the behaviors that were previously encouraged and rewarded.

If you can mobilize and motivate the employee population to fully support a revised strategy – and reinforce it with cultural transformation activities to overcome the corporate inertia – your likelihood of success will improve significantly.

This is an extremely difficult kind of cultural transformation, but with concerted programs to change employee behavior in addition to products, processes, compensation, and diligent management focus it will be possible to create an accelerating spiral of positive change once the cultural transformations take hold.

Want to read more about cultural transformation?

For the next blog post in this series read here.

2018-07-20T18:46:27+00:00 Corporate Transformation|