Successful companies that fail all have one thing in common: they ignore the one change management strategy that would otherwise ensure their continued success. They become complacent in their attitudes, and internal culture accentuates this. Some organisational failures are ?excused? by a single destructive action: the collapse of Barings Bank, then one of the UK?s premier independent financial organisations, was blamed on the actions of ?rogue trader? Nick Leeson who made losses of nearly £1 billion in the futures markets. More common, though, is the slow bleed of successful companies as they slip from market leader to average player and then into oblivion.

GM: the company that wasn?t ready to lead for 100 years

One such story is that of General Motors (GM), and its fall from grace serves well to illustrate the five reasons that successful companies fail. GM, you?ll remember, was bailed out in the height of the global financial crisis with $13.4 billion of funds from the US government. In return for the rescue from bankruptcy, GM?s Chief Executive Officer, Rick Wagoner, was fired. And yet just a few months earlier it was he who had declared GM to be a company ?ready to lead for 100 years to come.?

Rick Wagoner may have been GM?s youngest ever Chief Financial Officer, but as a CEO he failed to see the value of the one change management strategy which would have ensured GM had been ready to lead for 100 years.

GM?s slow bleed to bankruptcy: what went wrong?

GM?s fall from grace wasn?t a quick jump off the cliff. For four decades it had been resting on its laurels. Sure, every now and again it would produce a market leading product ? the Cadillac CTS-V and Chevrolet Malibu spring to mind ? but these small victories were lost in the sea of below par GM vehicles flooding the market. Yet Wagoner made his claim despite the evidence. You see, GM had come to rely on its financial side to sell its cars, rather than product mastery.

At the time of its collapse GM was shifting plenty of cars, primarily because of the favourable financial terms it offered. But it couldn?t build cars as cheaply or efficiently as other manufacturers, features were sub-standard when compared to other models on the market, and components lacked longevity. When the credit crisis hit, GM was one of the first companies to fall to its knees. Today it survives, seemingly gaining in strength and stability, but its saving has written in losses to the American taxpayer of over $11 billion.

Before declaring Chapter 11 bankruptcy, GM had lost 90% of its worth. Given the depreciation in market value during Wagoner?s tenure, his departure was inevitable.

The five reasons that successful companies fail

GM, of course, is not alone in failing to maintain its market leading position. There are plenty of other companies which have failed to see the need for change management (Kodak was scuppered by the digital age, and EMI downloaded its own failure by failing to recognise the downloadable future). Why do such successful companies fall into failure?

1 The bigger you are, the harder it is to grow

A company that is worth $50 million requires a single new business worth $10 million to show 20% growth. When your organisation is worth $100 billion, 20% growth becomes far more difficult to achieve. Jack Welch took on GE when it was valued at $140, and by the time he retired from his role he had seen its market worth grow to $400 billion. The rate of growth was never likely to be replicated by the incoming CEO, Jeff Immelt.

As growth strategies play out, rates of growth slow. New markets become saturated and competition increases. More effort is required to produce diminishing returns: few organisations manage this transition phase well.

2 Business strategies decline as progressive tools

As soon as a business strategy is implemented, it begins to fade in relevance. All strategies have a limited life, as competitors learn to copy what is being done so successfully and even improve upon it. Products soon become replaced by the next big thing (vinyl replaced by CD replaced by download).

Profitable strategies become replaced, and the internet has been particularly prevalent in this as power has shifted from producers to consumers. The information age is posing new competitive threats for which many companies are ill-prepared.

3 Change catches companies by surprise

Change in markets, customer practices, products, regulations, and so on, should, perhaps, not come as a surprise. After all, the world of business is in constant flux and has been since business was first introduced into society. This pace of change has speeded as technological advances have cascaded through recent years.

Advantages held by products and technology last but a moment, and no longer are organisations protected by monopolistic distribution and production agreements and laws. The world is more global now than ever, and companies that were founded to be good at one thing fail at the one thing they should be good at: change management in a fast changing world.

It?s not simply companies that are subsumed by change ? the publishing world is currently undergoing a rate of change that threatens the big five publishers with obscurity.

4 Success breeds a culture of failure

This may sound something of a contradiction, but as companies grow everyone from the cleaner through to the CEO has more to lose. Proactive attitudes give way to reactive cultures as people look to protect what they have rather than strive for growth. Instead of reaching for the stars, business leaders reach for regulations and rail against regulatory and industry change (one only has to look at how the big five publishers are currently ?facing? their challenges, even enlisting their authors to bang the drum).
This fear of failure serves only to deplete an organisation of the qualities which made it successful in the first place: innovation, adaptability, and agility.

5 Success breeds a culture of complacency

?Why fix what isn?t broken?? is a question that is often repeated in the boardrooms of successful companies. CEOs of successful companies become entrenched in their own success, the strategies that they may have put in place, and see no reason to instigate change. In a word, organisations and business leaders become complacent.

The state of complacency is the ultimate driving force behind the failure of successful companies

Fight complacency with paranoia as a change management strategy

If there is one change management strategy I would advocate above all others for leaders of successful companies to continually observe it is to be paranoid. Treat everything you know about your organisation, all your conceptions about your industry, and all your beliefs about competitors as no more than theories which must be tested and retested. Nothing remains the same forever, questioning your own judgement and position in your market will help you to understand that change and change management is a daily necessity of any successful business that wishes to remain so.