The Gap famously stumbled as a design leader, but recovered to at least carve out a sustainable niche. Jetblue almost self-immolated over a five-day period, but recovered to become an industry leader. Starbucks and Netflix both suffered similar fates, with equally successful turnarounds.
On the other hand, Kodak lost its mojo and never recovered it. TWA and Pan Am are ancient history. Montgomery Ward disappeared from the high street forever in 2000, Blockbuster is on life support, and Borders is a sad memory for bibliophiles.
What's the difference from a painful, even humiliating, stumble and the final throes of irrelevancy?
If you're running Zynga, or Yahoo, or Microsoft -- all accused, in varying degrees, of having lost their way-- how do you know if you can pull off a Starbucks-like resurrection or if you're doomed (eventually) for the bankruptcy court?
All stumbles have their own uniqueness, of course, but here are three key distinctions between those stumbles caused by healthy growing pains, and those that are signs of arthritic decline:
Role of the Founder
Organizations often pull through tough times when they're still in the hands of the original founder. Reed Hastings at Netflix and David Neeleman at Jetblue both pulled their businesses out of a tailspin (although Neeleman did subsequently fall on his sword and resigned from the company), as did Donald Fisher at Gap and Howard Shultz at Starbucks (although Schultz is not technically a founder at Starbucks, he's as close to it as makes no difference.)
Without a hand at the tiller that truly has "skin in the game" -- not just performance based compensation, but the fear of public failure, both personally, and of their entire life's dream -- it's much harder to pull an organization out of a tailspin.
I remember walking in to both Montgomery Ward and Border's stores in the last few years of its existence. I also followed the public pronouncements of the senior executive teams tasked with finding a way out of their seemingly imminent collapse. In both cases, a sense of learned helplessness seeped down from the top of the organization to the people on the front line.
Larger organizations, often those with a storied history, reach a stage of growth when everyone becomes comfortably numb. When bad things happen, they're dismissed with a shrug, or the data is manipulated to pretend it never happened at all.
Younger, vibrant organizations typically generate an enormous pride in what they're doing-- a pride that rises up in times of calamity and evidences itself as embarrassment, as a joint commitment to (a) beat this thing, and (b) make sure it never happens again.
If you're embarrassed by mediocrity, or underperformance, or outright disaster, there's a good chance you'll fix it. If you're post-rationalizing it all away, chances are you wont.
When younger, vibrant organizations stumble, they typically emerge with something very specific: a deeper understanding of the precise systems and processes needed to achieve scale. It may be inventory management, or in-store training, or quality control-- it could be any of a thousand granular processes. But whatever the learning points are, they're specific, relevant and actionable.
Watch the pronouncements from monolithic organizations that are facing irrelevance. Moving around the deck-chairs, swinging for big acquisitions, putzing with irrelevancies. Want to know if your company will make it through a current period of difficulty? Watch for precise, granular changes to core activities driven by un-manipulated data. If that's happening, you stand a chance that this may just be a bump in the road, not the end of the road.
Download a free chapter from Les's WSJ best-seller, "Predictable Success: Getting Your Organization On the Growth Track - and Keeping It There" to learn more about navigating your organization's growth obstacles.