During times of thriving commercial expansion, leaders take responsibility for their high achievements and offer cogent explanations to employees, investors and the media. Yet in most cases they are unaware of the actual process by which they achieved so much. When Merck was rated as the most admired corporation in America in 1985, the corporate Vice President of Marketing of its US operating division wrote to me that he never actually understood what made Merck so successful until he read the explanation of the process in my book The Vital Difference: Unleashing the Powers of Sustained Corporate Success. When the whole country, indeed the whole world, looks up to a business as a model of success to emulate, it is difficult for most companies to conceive that there are ways to substantially improve on that performance. That difficulty is one of the reasons why few companies maintain market leadership for long periods of time. So the VP, CEO and the rest of MSD’s top management team were surprised when we presented ten strategies to double the company’s record performance. They had not recognized the enormous growth potential as the top performer, because they compared their strengths with others, rather than with their own untapped potential for improvement.
During times when companies are struggling for their very survival, they attribute declining performance to external forces beyond their control. When I ventured to tell the leader of a prominent Indian business group that he could increase the profitability of his rapidly declining rayon tire-cord business three or even six-fold, he literally laughed at the notion. Convinced that this was simply not possible for a company in a sunset industry selling a product that had become technologically obsolete twenty years earlier, he repeated his conviction that the company could not remain profitable for another year. Eventually he agreed that we could try. In the three years following presentation of our recommendations, the profits of his company did increase six-fold, and 25 years later it is still in business. When an industry is in decline or the whole economy is in recession, it is extremely difficult for most businesses to realize that the general condition need not determine their own performance. They not only come to rationalize poor results as inevitable, but even anticipate and convert them into self-fulfilling prophesy, like the rayon tire-cord company.Download Article 500 Club