Why Top Management Fails: A Flip Side

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Why Top Management Fails: A Flip Side

Innovation has always been a hot topic of conversation in organizations, cultures and ethnicities. You call it either a radical change or a breakthrough; it has been so influential that it is been able to transform the lives. Be it the Six thinking hats of Edward de Bono; DNA principles of Clayton Chritnsen or theories of Min Badasur, many organizations are using them in different combinations to fetch the revenues and profit out of industry. These organizations are so dependent on it that they do not talk of anything else. But the excess use or the improper use of anything may be harmful. And sometimes the reason is top management. Yes, top management which is responsible for a driven fruitful change in the organizations.

We always talk about the positive side of the management fiascos and rarely get acquainted with the negative side. Let us now talk about the flip side of the coin; why even top management is not successful.

Let me tell you the reason why leading companies in three different industries (fast-paced disk drives, slower-paced mechanical excavator industry, and process-intensive steel industry) which frequently innovate get stumbled or failed. It was not because of the engineers who got stuck upon the technology paradigm or ignored innovations. No doubt, these problems affected some of the companies. But there is core strong evidence which is found beneath the surface. As long as the new technology is required to address the needs of the customers, establish firm must able to muster the expertise, capital, suppliers, energy and rationale to develop and implement the requisite technology both competitively and effectively. And the most important outcome of the problem was ruled out which was top management a root cause. With no reason the top management here had a good track record of understanding the unarticulated needs of the customers, finding which technology can address best to their customers and could be capitalized. It was only when confronted with disruptive technologies in which they failed.

Here comes the role of disruptive technologies. And this is one of the reasons why good management can lead to failure. There are three parameters which can lead good managers to a bad dawn.

1) The first one is strategically important that is unable to identify what I call sustaining and disruptive technologies. The concept is way different from incremental change or a radical change.

2) Technology progress map. There may be an unmatched behavior between different technologies which may outstrip the market needs. This will surely be a hindrance to identification of unarticulated needs.

3) Customers and financial structures of various companies color heavily the sort of investments which appear to be attractive to them, relatively to other entering firms.

Sustaining technologies always foster an improved performance. These can be discontinuous or radical in nature while other may be incremental. Products associated with sustaining technologies always have an improved performance factor.

While sustaining technologies believe in enhancing performance, disruptive technologies lead to innovations that is the worst product associated with disruptive technology is likely to outperform.

Disruptive technologies bring a unique value proposition to market. Generally, disruptive technologies underperform in mainstream markets but as a whole they create value to the customers. Products based on disruptive technologies are simpler, cheaper, smaller and convenient to use. Examples could be the small off-road motorcycles introduced in North America and Europe by Honda, Kawasaki, and Yamaha were disruptive technologies relative to the powerful, over-the-road cycles made by Harley-Davidson and BMW. Transistors were disruptive technologies relative to vacuum tubes. Health maintenance organizations were disruptive technologies to conventional health insurers.

Let us talk of second cause of failure that is technology progress map. Technology can progress at very high pace which is not required by the market demands. This is illustrated in the figure below.

Source: Harvard Business School

Because of this sometimes suppliers give customers more than what is needed. This means the disruptive technologies which are underperforming today may outperform in the same market tomorrow leaving a bridging gap between technologies. For example many who once needed mainframe computers for data processing, no longer need or buy mainframes. That is mainframes performance has surpassed the requirements of original customers.

The last and the final cause which leads top management towards failure is that companies making aggressive investment in disruptive technologies are not a rational investment. This has three different bases. Firstly disruptive products are simpler and cheaper and hence offer low margins and not great profits. Secondly, disruptive technologies are sometimes commercialized in an insignificant emerging market. And lastly most of the leading companies initially can’t use the products based on disruptive technologies as they promise lower margins.

Thus it is not the case that top management will bring a radical change every time. Excessive use of innovations may create an unmatched gap between technologies which thus leads failure of the decision of the top management.

—–Vaibhav Sharma

Note:This article has been earlier published on http://indianinnovator.blogspot.in/ on 22 feb, 2012 by the author. It has been republished for the article writing event competition 2012 by the permission of author.

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2 Comments

  1. Vaibhav Sharma says:

    Thanks Deepankar. Cheers!!!

  2. Deepankar Gaur says:

    Well written

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