From the Peak to…
Many articles are written these days to comment on GM’s bankruptcy. One of the most insightful so far is the one by Hamel, were he reflects on the reasons that cause great companies (the kind that case studies are written for), to turn mediocre or worse. Hamel states three reasons:
- Gravity wins
- Strategies Die
- Change Happens
Just to add some arguments to the debate: on the first point I remember a quote by a P&G executive that to keep the growth rate expected by shareholders they needed to create equivalent of a brand the size of “Tide” every year – a nearly impossible feat! Also, it is just natural that huge corporations will underperform due to the inherent complexity that size brings: the only reason this does not happen everywhere is when there is a huge moat (to quote Buffet) that protects the company’s uniqueness. This is where we get to the second point of Hamel’s argument – a strategy does not a permanent moat build! It doesn’t matter how good the strategy is – most times it can be copied by a hungry competitor. As Hamel says:
Over the past few decades, product- and technology-based advantages have become more fleeting. At the same time, the correlation between current and future earnings performance has become progressively weaker.
Is there a way out of this vicious circle? Can companies escape senescence? I don’t know, but the solution surely isn’t applying the latest buzzword, or copying the latest successful company as some gurus will have you believe: after all, today’s Nintendo will be tomorrow’s Sony!
