Fly the Plane, Run the Company
by Janet E. Lapp, Ph.D.

One Time Rights Only - 2587 words

When Business Misses the Change Point

When things go wrong, executives, like other people, typically blame external factors—unions, attitudes, costs, government interference. This belies a belief that the magic solution will be found from an outside source. But while current external challenges don't make it easy to do business, they have not been found to be the cause of decline. Robert Hayes's 1994 analysis of American industries, showed that an organization's failure to compete has little to do with economic, governmental, cultural, or labor issues. It is primarily a failure of management.

According to Martin (1993), the key to the process is self-examination. Even educated professionals prevent change by engaging in organizational defensive routines to preserve status and security. One recent study found that 95% of failing companies blamed poor economic conditions, and only 13% said poor management had anything to do with present problems. Organizations defend against change because they are made up of individuals who are working at what 'always has worked.' Companies, like individuals, think that to change means that they have been wrong all these years. Not so.

This faulty attribution is similar to when one faces a mirror, and seeing a blemish, wipes the mirror in an effort to remove the blemish. Sooner or later, one discovers that the blemish is not on the mirror. The remedy is to remove the blemish from your own skin, not to spend time removing the reflection in the mirror.

Management's failure to do internal work is usually found to be the primary causative factor leading to defeat.

These are the top 13 reasons why a business gets into trouble. Notice that the top seven reasons result from simple lack of attention and/or a failure to 'let go,' the next three (Nos. 8-10) from lack of training, and only the last three have anything to do with economics.

1. Shifts or changes in marketplace
2. Inadequate control systems
3. Changes in technology
4. Precipitous change in distribution system
5. Abrupt location disadvantages
6. Over-dependence on single customer
7. Growth of business beyond skills of management
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8. Management short of courage
9. Internal conflicts
10. A group exerts selfish influence
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11. Limited financial resources
12. Growth beyond working capital
13. An increase in cost of debt

Low Medicare and Medicaid payments didn't close over 100 hospitals last year, a link espoused by hospital industry executives, and swallowed by the media. The blame, in many cases, rested with hospital executives who waited too long to respond to changes in their market. Poor management has been responsible for at least half of the recent hospital closings. Despite changes in their markets, many troubled hospitals waited too long to adapt to those changes.

What Went Wrong?

One criticism of abandoned re-engineering efforts is that there is typically no analysis of why the effort failed. A 1995 AMA study of more than 150 new products concluded that 'the knowledge gained from failures [is] often instrumental in achieving subsequent successes.... In the simplest terms, failure is the ultimate teacher.' Most of us learn through our errors rather than our successes. Thus, it could be heuristically useful to analyze the most serious system errors that most commonly lead to derailment. When these have been ignored, the consequences have been, at times, disastrous. At the very least, painful consequences could have been averted had these errors been tracked.

For example, IBM became a world-wide 380,000-member employment club, while it's mainframe business went flat. Coca-Cola Co. wasn't paying attention to it's German-made miniature soda fountain BreakMates. Someone forgot that Coca-Cola's business was large volume, the deutsche mark rose, but Coke pushed doggedly on. The Limited and Victoria's Secret deteriorated while Leslie Wexner was distracted by outside pursuits. While he engaged in outside political interests and limited-market consumer electronics, Apple Computer Inc. John Sculley's one-foot-in-one-foot-out management style left Apple Computer in the dust. Once you lose focus, it's hard to regain it. A pilot doesn't notice that she is 45 degrees of course because she has fixated on a malfunctioning attitude indicator. A non instrument-rated pilot ignores increasingly menacing weather, pushes on into the clouds, then spirals out of control.

Successful companies, like successful pilots, examine their failures. Xerox examined three troubled products in an effort to understand why the company's new business initiatives failed so often. British Petroleum established a post-project appraisal unit to review major investment projects, write up case studies, and derive lessons for planners that were then incorporated into revisions of the company's planning guidelines. These companies know that a productive failure is one that leads to insight, understanding, and an addition to the wisdom of the organization. An unproductive success happens when something goes well, but nobody knows how or why.

A framework I use to examine system errors is one that I learned while becoming instrument-rated as a pilot. After observation of companies of all sizes over several years, I have found that there are common system errors to both failure as a pilot and failure in business. When these errors have been recognized and acted upon, the system has righted itself.

Let's return to the instrument flight described in the introduction. We are flying in the clouds. Nothing is familiar. There are no familiar indicators to judge distance and position. If we are the pilots of our aircraft, however, although the world outside the cockpit has become unfamiliar, there are reliable instruments inside which guide us to our destination. If we fail to trust our instruments, we can commit fatal errors. The following are the most common factors involved in fatal accidents in instrument flying. Can you relate them to your current situation in your business or personal life?

1. Fixation
You realize that you have stopped scanning and are staring at just one instrument. Typically, that instrument is malfunctioning and feeding you erroneous information. If it's the Directional Gyro, for example, chances are that you are not only chasing the wrong direction but your altimeter and attitude are seriously off, and you're heading for a spiral.

During stressful periods, animals scan the environment for danger. When stress overloads, the animal may fixate on the most threatening danger signal and ignore the rest. This may be adaptive for small animals, but fatal for business. In business, you find that the one customer who gives you all of your headaches and the least percent of your income, is taking up most of your time. If you're concentrating on one area of your business debt structure, asset deployment, or even on just one client, you may be fixing on a highly troubled-low-return area. Pull out and re-focus. You should be scanning constantly, interpreting information, and returning to the area of greatest consequence. One West Coast electric utility put 80% of its trading efforts into a California trading partner who never intended to do significant business with them. Unfortunately, the sheer difficulty of the venture intrigued and obsessed the CEO, and he became fixated. In your personal life, you may have become obsessed with a relationship that is throwing you off-balance. You cannot change the relationship. Get back on course and focus on what you can do, and do have.

Keep scanning all instruments. Cover up the malfunctioning instrument.

2. Ambiguity
You have information from two independent sources that disagrees and cannot be resolved. Two instruments may contradict each other, but there is typically a third instrument that can verify which of the two is faulty. If you find you are stuck between two sources of information, stop trying to resolve it. Go outside and get further information. Instead of trying to resolve the discrepancy, go to a third source to verify it.

3. Complacency
The better you think you're doing, the greater should be your cause for concern. There is never time for rest. That doesn't mean that every time something positive happens to you, you wait for, 'the other shoe to drop.' It does mean that events occur randomly, and that your grandmother was right: "always expect the best, but prepare for the worst.” Real estate developers who became complacent in the 1980's began to understand the concept in the early 1990's when financing dried up. Fly 'ahead of the plane' and be prepared for the worst scenario. Be constantly on the lookout for a decent emergency landing spot.

4. Emotion
If you're ecstatic about a new acquisition, achievement, or relationship–you're emotionally clouded, and may be unsuitable for flight. Give the controls to someone else for a spell. Similarly, if you're depressed, your judgment is clouded. Because emotions are results of thought processes, get the thought processes under control before you fly. Don't fly when you are emotion focused. Get emotions under control before you lead others through change.

5. Confusion
You have lost situational awareness and you have a gut feeling that something is not right. This feeling is called a 'pinch.' The worst thing to do is fail to acknowledge your situation and continue to fly blindly. The best thing is to admit your situation and get immediate air traffic control feedback. Ask for help.

6. Distraction
You are aware that your attention is being drawn to an item that is not really important. Bring your attention back into focus, immediately.

7. Underload or overload
Similar in concept to #3 (complacency), if the flight is easy or boring, you may not be paying attention to important information. A fellow pilot came too close to a fatal error during his weekly commutes through the Los Angeles basin from San Diego to Monterey, California. With the plane on autopilot, casually reading the newspaper, it wasn't until he was at a 35 degree bank did he notice that his Flight Director was malfunctioning, putting him into a spiral.

Similarly, if you're so busy that you can't think, you are likely to overlook something. One evening in Kansas City, Missouri, because of a blinding snowstorm and ice build-up on the wings, I made an unplanned landing without instrument charts. With an overloaded ATC, the only available assistance were other pilots. Even though they came through at the last minute with instrument approach information, the overload during that time made the approach somewhat of a challenge, and something could have easily been missed.

For overload or underload, follow your checklist. Always carry your charts!

8. Poor communications
Difficulty communicating with ATC or another crew member may indicate that someone does not know what is really occurring. The crew that crashed a jet near Cali, Colombia was misled by an air traffic controller who didn't know where the jet was as it approached the airport. The crash came shortly after the controller told the crew to fly over a radio beacon about 40 miles north of the airport. At the time, the plane already had passed the beacon. The crew was trying to turn around to go back to the beacon when they impacted the mountain. In this instance, the controller and the crew had different ideas of the airplane's location because of misunderstandings throughout their conversations. Similar to every crash, there was an unusual sequence of events. The controller and pilot didn't understand each other, and the controller was giving clearances that made no sense because he had no radar and could not see the airplane.

Be clear.

9. Failure to meet targets
If you're reaching checkpoint significantly early or late, or if speed or fuel consumption is very different than planned, find out why. In the example above, it was in turning toward the checkpoint that had already passed that impact was made with the mountains.

Keep targets clear, visible to everyone, and track them frequently.

10. Nobody is flying the aircraft
One of the most reassuring words a student pilot can hear from an instructor is, "I've got it.” But many student-instructor fatalities occur when nobody is sure who is flying the plane. With uncertainty, nobody is directing the aircraft, even if it is still flying. Toward the final hours of my instrument training, my instrument instructor and I landed at the busy San Francisco airport. Of course, he assumed that I was tracking and responding to ATC's directions to switch approaches and runways. Because of the traffic, we received several such switches in both instrument approach and runway use. At one point, I simply let my instructor take over. My error was in not clearly stating that he had the plane. Still under the impression that I was 'in control' my instructor became complacent with heading and approaches. After we landed on the wrong runway, narrowly missed by another aircraft, we were asked to "call the tower.” During our mandated conversation we learned that we had seriously erred in the approach, landed on the wrong runway, a Delta Airlines 757 jet had narrowly missed our aircraft and was forced into a go-around.

Clearly indicate who is in control and who is responsible.

In summary, the time to change may be now. Predictable errors are preventable errors. Change may not be as mysterious as you think. The massive global change our world is currently experiencing is similar to biological change, and is thus more predictable and understandable than previously thought. Most biological change happens suddenly. Just prior to the most dramatic and successful biological changes, are periods of upheaval and chaos. The transition period we are currently experiencing, though, however understandable, is nonetheless turbulent and chaotic.

Biological processes are self-organizing systems that balance between order and chaos. Too much order makes change impossible; too much chaos, and there can be no continuity. Changing a living organism such as a company, therefore, is a delicate process requiring wisdom and balance.

Some of the worst mass extinctions happened for no obvious reason. Small evolutionary advantages over another system have been enough to bring down a huge ecosystem. Organizations may disappear from sight for no apparent reason, However, those that are aware of the 'slight edge' phenomenon in biology, tend to survive and continue to be competitive.

An organism cannot let go of anything unless there is a clear pattern for it to follow. Biologically, change occurs when genetic coding permits a new emergent property or form. In my clinical practice, I have found that, to undertake real change, patients have needed permission to let go of the past, a reassurance of their survival during the transition, and a blueprint or model of the new form.

However, the best time to change is not necessarily at the beginning or leading edge of a new trend. The best time to make changes is about one-third of the way through. An airplane wing is constructed so that air flows unevenly over the top and bottom, thus creating a 'suction force' over the wing. Because of the shape of the wing, most of the lift is about one-third of the way back on the wing. The front or leading edge may collect bugs and ice, but doesn't do anything to create lift. The time to take action is at the place of maximum lift potential; about a third of the way behind the start of a new trend.

Begin by anticipating trends and investing 10% of capital and time. Trends are easily anticipated through changes in technology although it isn't any easier to predict future.