"Why Most Things Fail"

Why Most Things Fail: Evolution, Extinction and Economics, by Paul Ormerod I made a very cursory reading of Paul Ormerod’s book, Why Most Things Fail: Evolution, Extinction and Economics. Ormerod emphasizes the unpredictability of things as an explanation for the biological evolution and a high number of business failures. Procter & Gamble is identified as less than a dozen companies that have stayed in the top 100 since 1915. I have, of course, read many books about what sustains success: Built to Last perhaps being the primary one; another, Search for Excellence. Certainly, Procter & Gamble shares characteristics with all of those companies that have lasted the longest. Adaptability, focus on the consumer, discipline, innovation including, very importantly, for P&G technology. Focus on the key strategic advantages and imperatives: product superiority, superiority in recruiting and retention. Adaptability has certainly been critical in our business portfolio, seeking new businesses to grow, focusing relentlessly on improving our existing contract brands to provide better service to consumers, and disciplined balancing of profit and sales growth. These characteristics have been shared by many firms that, at one point or another, were strong and growing. But most have failed because they have not adapted (JC Penney, Sears, and Motorola) or had less strategic focus. Why have a few companies like P&G done better than others in this? For me, it comes down to one thing above all else: the quality of the people and the permanence of the values which they have pursued. Values of superiority, winning, of innovation, but values, too, that make a person want to dedicate their career to a company and values, too, which have honored the importance of balancing the preservation of core values with the need to adapt everything else to carry out the purpose. I believe an absolutely crucial part of Procter & Gamble’s success has been the quality of its top management, and I believe the success of generally having strong top management has been enormously facilitated by a promote-from-within culture. Why has that been important? A number of reasons: 1. The reality that people who advance in the company are likely to share even as they nurture renewal of the core values. 2. The opportunity to appraise people at various positions in their development in order to improve the likelihood of choosing the right person for the top jobs. 3. An unrelenting commitment to the importance of recruiting and development. 4. The impact on the culture of people who know one another, who have worked together over the years, who speak a common language but also, ideally, are “comfortable enough” with each other to speak their mind, to argue, and to stand up for what they believe in. To be sure, this has not happened perfectly. There are pressures to conform, to “go along.” But with the right choice of individuals, the right culture and the right appointments, we will, hopefully, continue to find people at every key position who are ready to innovate, to speak out, even as they know that achieving their business results requires the full involvement of their organization and that they carry no greater responsibility than helping ensure that the next generation of leaders is ready to carry on to sustain the company’s success. Ormerod’s book, deliberately, spends virtually no time in examining what have been the sources of success. While he gives lip service to the reality that social systems like corporations have an opportunity to adapt and think and make decisions that eclipse what is possible in biological evolution, he really over-generalizes the applicability of biological extinction to social institution extinction. Nevertheless, the point he makes rings true. Continued success is by no means inevitable. In fact, it is the exception, just as the continuation of any biological species is not guaranteed. In fact, its natural course would be to become extinct. Yes, some things have lasted much longer than others, and the thinking processes that humans have, hopefully, will enable us to continue on a lot longer. But there is no guarantee of this. At this very moment, we see reasons to doubt it: The breakdown of global alliances, the threat of our climate gone awry, and nuclear proliferation. These are all things being impacted by man and which have to be controlled by man and yet, we are not doing a good job at all of organizing to control them. This, in fact, is our biggest challenge. Along with it is the challenge posed by our difficulty to simply get along, to be united. Obviously, this must start with the family, but even here we have seen a breakdown of significant proportion. We can never forget that the family is the conveyor of values, the nurturing of values, and the creation of standards to which young people will understand and hopefully pursue. All these things are intentional, require conscious recognition of truths that have emerged but also recognize the need to adapt, to change, to innovate, and to improve. Not only to grow but to be sustained. I am glad I picked up Ormerod’s book. He has got me to thinking, even if not agreeing wholeheartedly with the thesis he advanced.