For a troubled company, it is prudent to challenge all “sacred cows” – those old and sacrosanct business assumptions. It is probable that some of these old “sacred cows” which were based on prior erroneous perceptions and assumptions that got the company into trouble.

In times of rapid change, a strategic failure is often caused by an incorrect or false assumption. We console ourselves by telling ourselves that we have gone through the present problem before and hence are able to tide through it again. Often, we also falsely assume that this change is temporary, or that the impact would be limited and hence can be ignored. Success has got into the management’s heads and become their greatest root cause of the disease. The prevailing mindset is that “we have been successful and everything worked in the past and failures will not happen here.” Then the company’s profit erodes and their stock plummets.

In a similar vein, we may dismiss the pain in our body such as a headache or stomach ache and just treat it with simple over-the-counter medication without noting its severity. Sometimes, this could well turn out to be more serious or life-threatening such as stomach cancer or prelude to a heart attack and stroke. The high death toll during the SARS outbreak of 2003 was also partly attributed to the initial dismissal of the symptoms and nonchalant attitudes adopted by some of the infected victims causing it to spread rapidly.

Many of these old and obsolete assumptions happen in large and well-known companies whose traditional cash cow businesses have become sacred cows and end up as sacrificial cows or mad cows when market forces turn against and overwhelm them. Time and again, some wrong business assumptions and perceptions by experts have led many companies astray. For example, Ken Olson, president of Digital Equipment said in 1977: “There is no reason anyone would want a computer in his or her home.” Chairman of IBM, John Akers added in 1983: “The world market for computers is about 275,000.” Because of these erroneous assumptions and perceptions, it is no wonder both Digital Equipment and IBM were late in entering the personal computer market.

Gary Hamel said: “One of the things that I believe is that whatever you need to know to create the future you can know. By definition, whatever Microsoft needed to know, it knew. Whatever CNN needed to know, it knew. Take an example. Why was it CNN rather than BBC that created the global news network? I do not think it was a prediction issue for CNN. It was not somehow they had some wonderful planners who saw what the BBC could not see. All the things that you needed to create CNN were totally visible.

You had cable television eroding the monopoly of the traditional broadcasters. You had satellite technology that made it possible to put a team anywhere in the world and get signal out. Anybody who was willing to challenge their own assumptions could see those things.”

Michael Dell believes that the status quo is never good enough, even if it means painful changes with loss of his reputation. Success is greeted with five seconds of praise followed by five hours of post-mortem on what could have been done better. To Dell, celebration breeds complacency. He once rejected an idea to display Dell artefacts in the company’s lobby because “museums are looking at the past.” Says Michael Dell: “Celebrate for a nanosecond. Then move on.”

Hence, companies sow the seeds of failures and arrogance during good and successful times. Managers get addicted to the old formula of success and refuse to change when the competitive situation changes. To ensure its effective and successful implementation, the troubled company must critically re-examine and re-visit every business assumption.

http://www.corporateturnaroundexpert.com

Dr Mike Teng (DBA, MBA, BEng, FIMechE, FIEE, CEng, PEng, FCMI, FCIM, SMCS) is the author of the best-selling business book “Corporate Turnaround: Nursing a sick company back to health”, in 2002. In 2006, he authored another book entitled, “Corporate Wellness: 101 Principles in Turnaround and Transformation.” Dr Teng is widely recognized as a turnaround CEO in Asia by the news media. He has 27 years of experience in corporate responsibilities in the Asia Pacific region. Of these, he held Chief Executive Officer’s positions for 17 years in multi-national, local and publicly listed companies. He led in the successful turnaround of several troubled companies. He is currently the Managing Director of a business advisory firm, Corporate Turnaround Centre Pte Ltd, which assists companies on a fast track to financial performance. Dr Teng was the President of the Marketing Institute of Singapore (2000 – 2004), the national body representing some 5000 individual and corporate marketing professionals in Singapore