Once upon a time, IBM was America”™s favorite company and set the world standard for innovation in the computer industry. In the 1980s, the company fell hard. IBM assumed that it could keep winning by doing business as usual.
“We should continue to invest in mainframe computers where there is still room for productivity improvement,” was the IBM mantra.
It is impossible to underestimate the power and the danger of mental models. The administrator of a prominent Chinese hospital said, “We know we don”™t have AIDS in China, so we don”™t test for it.”
The ability to dismiss information that contradicts a mental model is called issue avoidance and, like untreated AIDS, is fatal.
Mental models prevent acceptance of obvious valid information, cause mental lockdowns and have a destructive power that has put many out of business. Although the IBM mantra may have been true, it prevented the potential for even greater productivity improvements by not investing in PCs. IBM believed in continuity and assumed that changes would happen gradually, if at all. While the industry was experiencing one of the greatest changes in its relatively short history, IBM couldn”™t see it.
Like IBM, avoid the example given by a past McDonald”™s chairman, Mike Quinlan. After years of building a reputation as one of the cleanest food chains in the world, many of its restaurants had become dirty and neglected creating a public perception that, once established, is hard to overcome.
In a BusinessWeek interview, Quinlan was asked about the neglect and cleanliness of properties and if changes were in order. He responded, “Do we have to change? No, we don”™t have to change. We have the most successful brand in the world.” As soon as the interview was published the board fired him.
As the story of the Chinese hospital points out, the mental model of any management or leadership group determines what type of information the business elects to capture. Kodak was totally aware that digital photography was emerging but, like IBM kept making incremental improvements in film.
In 1990, the prestigious Encyclopedia Britannica hit its all-time sales peak of $650 million. Five years later, sales had plummeted by more than 80 percent. The destruction of this outstanding brand was not a set of thicker, more scholarly editions. No, the demise of Britannica came from a thin CD-ROM called Encarta and since has been replaced by the free online encyclopedia Wikipedia.
Why bad things happen
IBM, Kodak and Britannica aren”™t isolated cases. The same things have happened in the automotive, music and movie industries, just to name a few. The evolution of a businesses culture seems to be the primary determinant of competitiveness in any organization.
In his latest book titled “What Matters Now, How to Win in a World of Relentless Change, Ferocious Competition and Unstoppable Innovation,” Gary Hamel who was ranked by The Wall Street Journal as the world”™s leading business thinker and called the world”™s leading expert on business strategy, by Fortune said, “Today the most important question is: Are we changing as fast as the world around us?”
He points out that “in industry after industry it”™s the insurgents not the incumbents who are surfing the waves of change. It”™s Google not Microsoft, Hyundai not Chrysler, Apple not Nokia and Amazon not Barnes & Noble.” Yet Microsoft, Chrysler, Nokia and Barnes & Noble once “owned” their industries. What were they thinking?
Questions for discussion:
Ӣ Are we still focused on serving the rapidly changing needs of our customers?
Ӣ If we are thinking like an incumbent rather than an insurgent, what is our next step?
Joe Murtagh is The DreamSpeaker, an international keynote speaker, meeting facilitator and business trainer. For questions or comments, contact Joe@TheDreamSpeaker.com, www.TheDreamSpeaker.com or call (800) 239-0058.
