Dangerous Success

‘It’s difficult to get to the top, but even harder to stay there.’

This quote from Real Madrid player Alvaro Arbeola highlights a remarkable fact. Since the start of the ‘Uefa Champions League’ in 1992, not a single winning team of the trophy could defend the title the following season.

It’s hard to stay on top – is not only a fact on the pitch, it’s also valid on the playing field of business.

Thinking of companies who were once making it to the top, only to endure an unexpected downfall, my generation -people between 30 and 40- instantly come up with the names of Sony and Nokia.

The purpose to tell the stories of the rise and fall of these two companies, is not to figure out, whose to blame. The idea is to understand, why success can be dangerous and why overconfidence is a very common reason for costly miss judgments. Not only for managers but for each of us.

Sony was founded in 1946, just after the end of World War II in the almost completely destroyed japanese capital Tokyo. Remarkably, Sony was the first japanese company to choose a name in latin letters and therefore created a huge controversy in light of the recently lost war against the US.

The company gained worldwide attention, when releasing the ‘Walkman‘ in 1979. The portable music player was the Iphone of the 80’s and for teenagers a must: you absolutely had to have that Sony-gadget and had to be seen with it by your friends.

1983, Sony invented, in cooperation with Philips, the compact-disc, underscoring the technological advantage made in Japan. With the Playstation, Sony developed a next block buster-product.

The following downfall of Sony is commonly described in missing innovations like the flat screen, who brought former Sony supplier Samsung to the top.

Now, that’s basically true, but I want to focus on the ‘why?’. How could Sony lose the dominance? There are two mayor factors:

1. The former success made the company overconfident to have superior technological standards and only using them. Sony dismissed the mp3-technology for instance and had to witness Apple taking over the music market with exactly this system.
2. Even more important, in my view, are the mistakes Sony made inside the own organization. First, Sony was too long holding on to the japanese ‘Nenko’-system. Within this system, employees were basically promoted by seniority, not meritocracy. Result: older, analog minded managers, were conducting digital minded younger employees – very bad in a world changing from analog to digital! Second, the attitude ‘I know best’ led to a lack of communication between the several divisions (music, movie, mobile) inside Sony and prevented the company from creating a digital platform. What Sony missed can now be seen within the Apple system and the success of it.

The lesson from the Sony-downfall is important, especially in Romania. First, meritocracy is unfortunately not very common here, it’s more important to have the right connections than to be competent, you now what I mean.

Second, I observe the same ‘I know best’- attitude by many romanian bosses. Ignoring the input of younger subordinates is a huge managerial failure. There is not only the risk of missing opportunities, keep in mind, taking the youngsters seriously would motivate them to better performances.

There is a huge potential among young people, when it comes to necessary changes in a company to attract new customers and  innovation. Bill Gates was 20 when founding Microsoft, Larry Page and Sergey Brin were just out of college to start Google and Mark Zuckerberg still went to school, when he created Facebook.

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How Nokia lost 3 important ‘C’ in the mobile market: coolness, customers, cash –  and what we can learn out of it, is explained in the following chapter: http://www.theleader.ro/coolness-customers-cash/