Friday, 6 January 2012

Peggy Noonan On Steve Jobs And Why Big Companies Die

Peggy Noonan wrote on management in her Wall Street Journal column last year, raising an insightful paragraph from Walter Isaacson’s biography of Steve Jobs: Job's theory about 'why decline happens' at great companies:

"The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesman, because they’re the ones who can move the needle on revenues.” So salesmen are put in charge, and product engineers and designers feel demoted: Their efforts are no longer at the white-hot center of the company’s daily life.
The salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products.

According to Fforbes, it’s not just the salesmen: "it’s also the accountants and the money men who search the firm high and low to find new and ingenious ways to cut costs or even eliminate paying taxes.

In this mode, the firm is basically playing defense. Because it’s easier to milk the cash cow than to add new value, the firm not only stops playing offense: it even forgets how to play offense. The firm starts to die."

Fforbes points out that “milking the cash cow” used to go on for many decades; today, globalization and the rapidity of changing markets dramatically shortens the life expectancy of firms that are merely milking their cash cows.

And as every management guru from Tom Peters down will tell you time and again that it’s more difficult to add value than to cut costs. RC