Musings from the CU Suite

Written by Anthony Demangone

When can success be a problem?  When it leads to hubris so powerful, that it blinds you to risks.

That's one of the lessons from a study that looked at the failure of Nortel. 

In 2000, Nortel was the 9th most valuable company on the planet. A decade later? Poof, it was gone.

The study, highlighted in the article I linked to, found three main reasons for the failure.

1. Nortel's focus on growth in the 90's hurt its ability to innovate.
2. After the tech bubble burst, it cut costs to the point where it alienated its customers.
3. Perhaps the biggest problem? Its early success led to arrogance.

This comes from the article:

Many of Nortel’s problems came from a culture that got baked into the company long before it was in trouble. In the ’70s, it could essentially tell customers what technology they needed, and charge what it wanted. The company had extraordinary success doing exactly that.

It assumed this would last forever and there would always be a majority shareholder who could bail the company out. This resulted in a culture where responding to the customer and having financial discipline weren’t emphasized. Nortel’s pride was a strength at first, but ended up costing the firm.

“It escalated into hubris to the extent of making it especially difficult to absorb acquisitions, to quickly respond to market needs, and to accept and understand what customers wanted (largely as result of the delusion of ‘we know better’),” the authors write.

The timing of this article was perfect, as I'm still in the middle of Good to Great to Gone: The 60 Rise and Fall of Circuit City.  The article reminded me of a section I had read recently, and there it was on page 92. Former Circuit City CEO Alan Wurtzel had the following advice.

Be humble, run scared. Continuously doubt your understanding of things. Business success contains the seeds of its own destruction. Worry about what the competition knows that you do not. Andy Grove, the legendary cofounder of Intel, got it largely right in his book, Only the Paranoid Survive.

All of this is good advice. If you see complexities and hurdles, you probably have good business vision. Once you think you have everything figured out, it may be time to take a second look. 

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This week, I'll be in Charleston, South Carolina for NAFCU's CEOs and Senior Executives Conference. I hope you can join us next year!