Buzz, bang and fizz is the trajectory of too many companies. We experience their loss as "I used to go there," "I used to drive one," or, perhaps, "I didn't know they were still around!" Since I have never met a leader hell-bent on building a mediocre or failed company, I have long wondered why this is the fate of so many "hot" companies.
One explanation is that their leaders confuse the good fortune of being in the right place at the right time with the hard work of building an enterprise that flourishes. Enterprise building is more about standards, value creation, and durability than it is about the size. The objective is to be worthy of growth, regardless of whether growth is an objective.
A friend of mine recently shared a classic example of this confusion. In his role as a member of a company’s Board of Directors, he challenged its executive team’s enthusiasm for acquiring a smaller company. The CEO and CFO told the board that they were excited about the acquisition, mentioning that the target company was very well-led. They also mentioned that the object of their affections had never made money. After listening to the CEO and CFO’s rosy scenario, my friend asked them what they would do differently that would somehow make a well-led but unprofitable company profitable.
The challenge he raised was as old as leadership itself: knowing the difference between hubris and savvy. Hubris works in mysterious ways. It can cause leaders to create business models based on clearly wrong assumptions, forget about culture building, and see a customer base that simply does not exist. One of its sure-fire symptoms is the tendency of the CEO and those close to her to dismiss naysayers as not being “on the bus.”
In our economic system, success ultimately boils down to a company’s ability to make money. And while that is not the only thing, there are many leaders who believe that it is or that, at the very least, it is the great enabler of all other results. That’s arguably true, but when it comes to the “how-to” of sustained ability to make money, success is more nuanced than that and boils up to: earning a reputation for human goodness, flawless execution, and being best-in-class. Achieving this trifecta of success is what it takes for a company to be worthy of growth and is a tangible symbol of excellence.
Excellence is obviously a good thing, but achieving goodness + execution + first-choice present a daunting challenge. If it didn’t, the authors of Built to Last and Good to Great would have found far more than 29 companies (out of the 5,000 they studied) that met their standards for being visionary (eleven) or having made the move from good to great (eighteen). Chance alone would lead you to expect a better outcome than that and makes me wonder not about the path to success, but if there is a compelling path to mediocrity. What we know for sure is that excellence is the path least traveled; perhaps because it’s hard to see in the bright glare of fast growth.
By this I mean that having a good idea upon which to build a company is not the same as making it worthy of growth. A good idea carries with it the potential of a company being worthy of growth; however, it is largely silent when it comes to the methods of excellence. So if excellence is the nirvana of enterprise success, why is it to rare?
On February 26, 1966, legendary restaurateur Norman Brinker opened his first restaurant. He named it Steak and Ale after the raucous banquet scene in the popular movie Tom Jones as it perfectly captured the wide-open excitement and good fun Norman wanted his new restaurant to be known for. It was a good idea and superb timing as the emerging casual dining segment of the restaurant industry rode the wave of growth in two-income families and the popularity of restaurants as places to meet, mix, and be seen. Norman and his team focused on four core ideals: (1) distinctive quality, (2) a small well-executed menu, (3) a lively bar, and (4) irreverent but attentive service. On the back of these basics, the rapidly growing chain was soon known as a great place to eat and the place to be. Success seemed all but inevitable.
And Then the Wheels Came Off
A few short years later, Steak and Ale was losing some of its steam. New entrants to the fast-growing market were part of the problem as was selling the company to Pillsbury in 1976. The latter marked a shift from being a restaurant company to being an asset in Pillsbury’s enterprise portfolio and a leadership mash-up of Burger King and Bennigan’s. In 1982, the “asset” was spun off as part of the Steak and Ale Restaurant Corp. By the mid-1980s, the chain had grown to include 280 restaurants nationwide. In 1988, Metromedia purchased the company to make it part of a restaurant portfolio that included the low-end Bonanza and Ponderosa brands. It is hard to say when the Steak and Ale brand peaked, but from a proof of concept perspective, I would say it was in the early 1970s. From there, it was a descent into mediocrity and, finally, death on July 29, 2008, when the chain filed for Chapter 7 bankruptcy protection. Steak and Ale was simply the first in a long list of companies that started with a bang and ended with a whimper.
To continue reading about what caused Steak and Ale’s demise, as well as learning about the competitive key and why growth is the enemy of excellence. Download the Whitepaper: Why Great Startups Wobble to Mediocrity