#300 from Innovative Leader  Volume 6, Number 10          October 1997

Do You Have a Titanic Mentality?by M. Michael Markowich, DPA

Dr. Markowich, a consultant, speaker and author, specializes in organizational development and the management of change, and is on the faculty of Temple University School of Business.  He is located in Huntingdon Valley, Pennsylvania, and can be reached at (215) 938-1687.

Many companies seem invincible.  And, then the unthinkable occurs.  They topple; why?  This was brought home to me when I read that half the companies described in Tom Peters In Search of Excellence, had lost their “excellent” status only five years later.  In response, I feel the decline results from management being blind to considering “crazy ideas.”  Consequently, instead of maintaining a leadership position (which past crazy ideas helped to propel), many of these companies “stayed the course.”  Why change if you are on the top!  I call this view Titanic Mentality.  We all know what happened to the Titanic.

Companies That Hit the Iceberg

  IBM insisted that customers wanted mainframes, even while they saw the business world moving towards personal computers.  This allowed Microsoft and others to advance rapidly in the hot personal computer market.  Compaq passed IBM as the major seller of personal computers in 1994.  IBM executives were blindsided by their past mainframe successes and did not see changes (icebergs) in the marketplace.

  In 1982, Bill Gates and Paul Allen approached Bell Labs to jointly develop a standard for Unix.  AT&T, which then owned Bell Labs, turned down Gates’ offer.  AT&T felt it didn’t need help from a “puny” Microsoft.  In 1997, sales of Microsoft’s standard (Windows NT) is projected to exceed $1.8 billion.  And, Gates now refers to NT as Microsoft’s centerpiece.  Not bad for a company AT&T thought was too puny to do business with.

  There was a time when Wang Laboratories’ word processor (forerunner of the personal computer) was the favorite of every secretary.  Wang’s staff urged the company to take the next step and develop the PC.  The company refused. Instead, the founder felt his instincts were unerring.  Had he heeded his staff’s counsel, Wang may have owned the PC market since its word processor already had a huge share of the market.  Wang’s shortsightedness (or Titanic Mentality) was similar to Apple Computer’s strategic error of not selling its (Windows-like) software separate from its hardware.

  In the early 1960’s, I worked at a Ford Motor Company stamping plant.  In those days, all Ford employees drove Ford products.  If one of us used a competitor’s car, we would take a lot of “heat.”  As the years progressed, however, the Ford parking lots started to fill up with competitor’s cars.  I often wondered what top management was thinking when they saw their employees not buying what they produced.  And, what was the union leadership thinking when they saw their members driving non-Ford cars?  Someone should have wondered why the product employees produced wasn’t good enough for them.  Consequently, the Titanic Mentality caused the loss of hundreds of thousands of jobs, and Ford (along with GM and Chrysler) lost billions.  High price for the Titanic Mentality.

How to Avoid the Iceberg

The way to avoid Titanic Mentality is to think the unthinkable—and then take action.  This is easier said than done.  Especially, since the prevailing attitude in a successful company is “what got me here will keep me here.”  So, why should executives even consider to think the unthinkable?  Consider the following:

Reject the “market is predictable” viewpoint.  Many top executives want to believe in their almost “divine power” to know what will happen.  In reality, their ability to predict is not that exceptional.

When we accept that we may not know what will happen, and accept limitations associated with not knowing, then our mind is open to consider that the impossible can become the possible.  How else can we explain Galileo’s assumption that the earth circles the sun (and not the reverse); or Jefferson’s notion that “all people are created equal”?  These statements don’t rattle us today; but they were revolutionary (and some thought, crazy) when first pronounced.

What possible “icebergs” could your company crash into?  Have mental disaster drills.  What would we do if…?  Could a newly discovered material give the competition an edge?  What would happen if a competitor were involved in a new kind of partnership?  How could we handle an unjustified perception of our company or product?  I’m sure you can think of many more nightmares.  Don’t ignore them since the best defense against the Titanic Mentality is to see what changes need to be made before outside forces drive you to the brink of annihilation.  At that time, when you are speeding directly into the iceberg, morale is low and panic overwhelms the potential for creative ideas and actions to avert the tragedy.

Companies That Overcame the Titanic Mentality

  In 1992, Sears was considered by Fortune Magazine as a dinosaur.  Sears had lost almost $4 billion, and its retail leadership position.  However, Sear’s return to investors from August 1992 to March 1997 was 300%.  What happened?  Sears changed its focus.  The new CEO asked tough (unthinkable) questions, and launched what many experts feel will be the “stuff of future management texts.”  Sears wanted to emulate GE, Coca-Cola and Disney rather than its competitor, Wal-Mart.  Crazy notion? 

  In the 1960’s, Gillette was dominating the shaving market.  But, as always happens, a small competitor, Wilkinson Sword, did the unthinkable.  It introduced a new blade, a coated stainless steel blade that cut sharply into Gillette’s market.  Wilkinson caught Gillette off guard.  Gillette could have easily dismissed Wilkinson as an insignificant niche player.  Instead, Gillette immediately countered and introduced its own stainless steel blade.  Although Gillette was humbled, the company learned from the incident:  never take a rival for granted, no matter how small.  Not bad advice for avoiding icebergs.

  Revenues began slipping at Taco Bell.  The company decided to expand, but in an ingenious way.  The restaurants had been designed with 70% of the space used for food preparation, and 30% for customer use.  This ratio made expansion (for more customers) very expensive.  Management thought the unthinkable.  Reverse the formula—have 70% for customer use, and 30% for food preparation.  Consequently, the company expanded within reasonable cost.  The change required a rethinking of how to prepare food, but the course correction avoided hitting another iceberg.

It’s ironic that a company’s own success can be the seeds for decline.  This occurs because success creates a habit of thinking, behaving and reacting.  Habits are good.  Unfortunately, habits can create a corporate “calcification” that makes it difficult to see “outside the box.” 

See any icebergs approaching your company?  No?  Then imagine them.  They could do a lot of damage.  Prepare for them before it’s too late.

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