How Arrogance Can Blind Your Transformation Efforts

An acquaintance of mine (let's call him George) is an acknowledged thought leader on a topic that the senior-most executives at a particular company had placed high on their agenda. But the middle managers who contacted George to give a talk balked at his regular speaking fee, instead treating him like "a silicon chip supplier." This unnamed company had been the gorilla of its market for the past two decades and had gotten used to throwing its weight around, particularly with suppliers that wanted both the positive reputation effects and the volume that came from serving a market leader.

The net result was the company didn't get access to George's knowledge, and he was left with a bad taste in his mouth about the organization.

This exchange highlights one of the biggest barriers to incumbents dealing with market transitions: arrogance. There's nothing wrong with a company being proud of its accomplishments. After all, only about 40 percent of companies last long enough to celebrate their sixth birthday. While becoming a leader in an industry or geography might involve a dose of luck, it also involves significant skill, determination, and hard work.

When confidence turns into arrogance, however, it can blind a company to the fact that the things that made it a great company will not make it a great company. Being a giant in today's industry doesn't guarantee even short-term success as industries collide and hungry startups from around the globe keep developing innovative ways to siphon profits from even the most seemingly staid of industries.

The pace of change in today's world means that job one for every leadership team is to determine how they will manage the dual challenge of maximizing the cash flow from today's business while investing to create tomorrow's businesses. Only a handful of companies have demonstrated the ability to do this once; the set of companies that have done this several times is even smaller.

If you cut through Clayton Christensen's management classic The Innovator's Dilemma, the root cause of failure in the face of disruptive change is the resource-allocation process. A steady stream of incremental decisions, each of which makes sense to the individual making it, leads to companies systematically underinvesting in and mismanaging disruptive change.

Grabbing hold of that resource-allocation process starts with a dose of humility. When confidence turns into arrogance it leads to a hidden complacency that makes change impossible. Wait too long and the punishment comes in a swift and brutal form. Just ask Kodak, the U.S. newspaper industry, Research in Motion, and on and on.

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