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Transcript for "active inertia":
In my Gamble model post I argued that the military, like most large organizations is incredibly inert to change. I made the case that most organizations are unable to change because of an entrenched culture. Individuals that try to enter the organization with different thoughts and views usually get frustrated, leave, or quit because reward structures are rarely set up for innovation. The individuals that do move up share the values and beliefs of the current leadership and are promoted. This self perpetuating cycle doesn't allow for the needed influx of innovation to keep up with environmental change and the organization usually dies.
Don Sull has come up with another concept to explain why most large organizations go bad. He calls the concept "active inertia". In it's most simple form, active inertia is described as a company that is facing a disruptive shift in the market and instead of adapting to the change, the organization simply accelerates the activities that succeeded in the past. What is interesting is that Don argues that the things that made the organization successful in the past, actually create the pitfalls after the market disruption. Take an organization built like GM. GM was so focused on competing with Ford and Chrysler that they failed to see the signs that Toyota was causing a disruptive shift in the market. The way they framed the their "competition" blinded from the market shift and their real competitor.
The second pitfall occurs when organizational processes solidify into routines or standard operating procedures. Using the same routine that worked in the past does not help overcome the new obstacles presented by the market shift, and actually help a company fail faster. Don's third pitfall is that a companies resources become millstones. Having intellectual property, resources, R&D projects, and engineers that specialize in creating bigger, faster vehicles, creates a suck on resources and capital when the market demands smaller, more fuel efficient vehicles.
I personally think the next two pitfalls are the most devastating, and they can be the most costly. They happen when an organization recognizes the market disruption, adapts, but stays relatively inert because past commitments prevent full engagement in the new market. It's ridiculous to watch, like a sailboat not being able to leave the shore because of a previous relationship with the gas company that prevents them making relationships with a sail company. To me this is similar to GM putting a hybrid engine in the Cadillac Escalade to get it up to 20 mpg. Clearly they saw the change, but were unable to completely adapt.
The last pitfall happens when old-school values ossify into dogmas. These are the things that used to identify, inspire, and define employees. If you have ever seen the pride in a sailboat captains eyes when she tells you she still only navigates the ocean by using the stars, then you know what I mean. It is a great story for purposes of nostalgia, but in a competitive environment keeping a value in place simply for nostalgia can drive a company into the ground. Software, technology, and outsourcing have allowed many processes to become automated, less expensive, and far more exact with real time feedback.
The most fascinating thing about understanding active inertia is that simply remaining flexible is not the answer. Without the right strong commitments a company will become too flexible and die before reaching the disruptive shift. Rather, it is recognizing that a shift in the market has occurred and understanding that previous commitments may need to become more flexible in order for the organization to adapt, engage, and be successful in the new marketplace.