As I watched the MA Senate race for the late, great Ted Kennedy’s seat this week, it occurred to me that I was witnessing an historical oddity of epic proportions.  I watched a “can’t lose” lose.  That got me thinking about business variants of the same theme – and there have been several.

In the past I’ve warned those who thrive about much bigger, much more established entities that seemingly would persist forever, but suddenly found themselves fossils – unable to adapt to a shifting environment.  Martha Coakley is Digital Equipment Corporation.

Martha ran a milquetoast campaign in a state that ALWAYS votes Democrat (when sending someone to Washington or electing local officials), looking for a seat that has been Democrat since there was such a thing, that was owned by a Kennedy.  She was endorsed (albeit tepidly) by the widow of the legend.  Thirty days ago, the challenger – Republican Scott Brown, had as much of a chance of winning this seat as I do of becoming 6’4″ tall, attractive, and a nobel laureate – none.  She couldn’t lose.

DEC owned the mini-computer market – at least $11B of it.  They had the best stuff, bar none.  They couldn‘t lose.

Ken Olson said, “why would anyone ever want a computer in their house?”

Martha said, “Curt Schilling is a Yankees fan.”

Boom.  In a flash – they lost.  Did what couldn’t even be fathomed by most with any logic or common sense – they actually lost.

Both lost for some similar reasons:

Arrogance – they each believed that they couldn’t lose, regardless of their decision making.

Ignorance – they each had enormous environmental factors occurring all around them that they chose to ignore – or hoped would just go away, instead of taking them on and adapting.  DEC had the PC (Intel/MS) and Client/Server movement (enabled by the standardization of IP networking) pulling at their entire value proposition.  They chose to act as though those things were for peasants, and didn’t represent any real threat to “business computing”.  Martha felt standing outside Fenway park pressing the flesh was beneath her.  She didn’t pay attention to the fact that the country was universally concerned with the President’s health care bill Congress was trying to jam through.  She was planning on jamming.  She didn’t listen to those who questioned.  Scott Brown did.  Microsoft did.  Intel did.

Dementia – Both simply couldn’t get their brains to acknowledge that the threat was legitimate, therefore they couldn’t act rationally towards that threat.  Instead, they acted crazy.  In the end, they both looked like Monty Python’s black knight – unable to comprehend what was really happening.

The Soviet Union couldn’t fail.  AT&T couldn’t fail.  The Roman Empire couldn’t fail.  The Titanic can’t sink.  You think that just because your business is $500B and 100 years old, it can’t fail?  Think again.

The keys to not failing in times like this are self-evident – good companies use them all the time.  Healthy paranoia – never actually believe their own real bullshit, and always believe that the hoards are at the wall.  The best companies force the environmental changes that they then adapt to – they don’t wait around.  When those changes do take them by surprise, they act – they don’t hope.  Whoever said “hope is not a strategy” was brilliant.  Seems obvious, but damn if half the companies (or more) who fail aren’t clinging to some half-assed hope that the bogey man will go away and leave them to their riches.

Because you won once, or twice, or for a century, does not make it a birthright.  Success is a privilege – but no outcome is guaranteed.   Once a company (or person, I suppose) reaches this level of presumption, the wheels are almost guaranteed to fall off.  This is when companies start spending like morons, stop caring about listening to their customers’ complaints, hire egotistical boneheads that won’t listen to anyone, etc.  This can also be the start of the “invincibility factor”, where CEOs feel so untouchable they do outrageous, immoral, unethical, and illegal things.

Look at Henry Nichols formerly of Broadcom.  How drunk on invincibility are you when you not only build an underground sex dungeon, but you use it (mostly by drugging) on your own employees and customers in order to drive business – or just to get  your rocks off?  CEOs who have a healthy bit of paranoia don’t do that, I’m pretty sure.  CEOs who think they simply cannot be bothered with the pedestrian thoughts, laws, and mores of mere mortals can.

Summary:  If you are considering building a corporate/personal sex dungeon, you are probably going to fail eventually.

Related posts:

1. Fail Factors – Why Startups Die: The Golden CEO
2. Fail Factors – Why Startups Die: Revenue versus Valuation
3. Fail Factors – Why Startups Die: The Money Is In The Problem, Not The Solution
4. Fail Factors – Why Startups Die: Launch Now!
5. Fail Factors – Why Startups Die – The Zealot

Tags: AT&T, Broadcom, DEC, Ken Olson, Martha Coakley, Scott Brown