Why good companies go bad

One of the most common business phenomena is also one of the most perplexin g: when successful companies face big changes, they often fail to respond e ffectively. Many assume that the problem is paralysis, but the real problem , according to Donald Sull, is active inertia- an organization's tendency t o persist in established patterns of behavior. Most leading businesses owe their prosperity to a fresh competitive formula -a distinctive combination of strategies, relationships, processes, and val ues that sets them apart from the crowd. But when changes occur in a compan y's markets, the formula that brought success instead brings failure. Stuck in the modes of thinking and working that have been successful in the past , market leaders simply accelerate all their tried-and-true activities. In attempting to dig themselves out of a hole, they just deepen it. In particular, four things happen: strategic frames become blinders; proces ses harden into routines; relationships become shackles; and values turn in to dogmas. To illustrate his point, the author draws on examples of pairs o f industry leaders, like Goodyear and Firestone, whose fates diverged when they were forced to respond to dramatic changes in the tire industry. In addition to diagnosing the problem, Sull offers practical advice for avo iding active inertia. Rather than rushing to ask,"What should we do?" manag ers should pause to ask, "What hinders us!" That question focuses attention on the proper things: the strategic frames, processes, relationships, and values that can subvert action by channeling it in the wrong direction.