When a business loses it's way and starts to decline, irrespective of size or age, the core reason is almost always some version of numbness.
Numbness to the customer, numbness to change, numbness to feedback: any or all of these are usually lurking in the not-yet-obviously-failing company, the usual suspects, silently spreading a lukewarm, sometimes comfortable rigor mortis through the skeleton and organs of the company. First, perhaps, it happens in the fingers and toes (interaction with the customer), now, slowly still, appearing in the arms and legs (supply chain, in and out), then, perhaps a little faster, spreading to the heart and the brain (vision and leadership).
How can this happen to once proud, once vibrant companies? How can a business be the passionate expression of a vibrant vision one day, and a zombie-like husk, a pale comparison of its more successful competitors, the next?
Well, the main answer is that it doesn't. Happen in a day, that is. Businesses don't (generally) suffer the kind of blunt trauma incident that might put a human into a coma instantaneously.
Instead, in a business, the numbness starts quietly, unannounced, almost certainly unrecognized, in a small backwater, somewhere far from oversight. Then it grows--as institutional numbness always will (it being a parasite of bureaucracy, which drives out initiative, creativity and risk-taking), quietly coursing through the veins of the organization. It finally chokes the heart and shuts down the brain, leaving a shell of a business that cannot innovate, cannot compete, and is destined to die.
This process can take a lifetime (literally), or a generation, or a decade. My observation is that generally, eighty percent of the damage is done over a 3-5 year period - a short time, relatively speaking, but still glacially slow enough for the process to go unnoticed until the damage is almost irreversible.
How do you guard against numbness happening in your business? Here are the three most common indicators that you might be losing your mojo--for good:
1. Lack of a challenge function. One of the first things that accelerates the growth of numbness in an organization is the squashing of any serious internal challenge function. If key visionaries leave, either of their own volition or because they're pushed, it's never a good sign.
Take a look around. Increasingly surrounded by yes-men (or women)? Rarely challenged on anything significant? You're probably on your way to Treadmill.
2. Putzing with the data. Organizations on the decline rarely admit it. Call it self-denial or post-rationalization, either way, its so rare to hear a mea culpa from a dying organization that it's news when it happens.
Find yourself re-cutting data to make it look closer to what you projected? Grabbing at statistical straws as evidence that you were right? Arguing in the face of overwhelming quantitative evidence? Or worse, bullying or manipulating people not to present that evidence in the first place? If you do any of these--or you see your senior colleagues doing so--then chances are you're in terminal decline.
3. Growth of "compliance". Is it more important that your website is HTML 5 compliant than it be a marvelous experience for your web visitors? Do new customers have to fill in seven pages of paperwork, just to give you money and do business with you? Are your suppliers forced to jump through hoops before their products and services, your life-blood, after all, arrives in your loading bay or conference room?
Yes, every organization needs systems and processes to scale, but no, having a rigid, pervasive compliance culture isn't a necessary side-effect. Look around-- apart from those areas where you don't want to break the law (financial fraud, product quality, for example) if your compliance police are in charge, you're in trouble.