November 20, 2013 Leave a comment
In Indian mythology, there is a story of Trishankhu a king who is suspended mid-air upside down in a parallel heaven created by Sage Vishwamitra when gods refused to admit the King to heaven. There are many companies like Trishanku which have either not risen to the glory of gods (successful enterprises) or fall to the ground (exit). These companies exhibit common symptoms of stable growth, no new additions in customers or products, % of revenue from top 3 customers increasing or remaining constant and no new innovation adopted in any of the departments. These companies seem shy to exit the market or unable to scale to next level and continue to live in oblivion facing a slow certain death.
Why do companies persist in pretention and end up in this state?. There are many reasons for the companies to remain in this suspended animation stage. First many of these companies are prisoners of their past success. Core competencies may turn out to be core rigidity. One major restaurant that popularised Hindu Military hotel concept in 1960 in Bangalore did not wake up to the changes in the drinking and eating habits of the population. The hotel had made a name for itself in traditional meat dishes, mostly catering to middle class and lower middle class south Indian clientele. The hotel had a huge following for its Bheja Fry, Kheema Balls, etc., and it ambience remained mostly card board rooms for family and open seating for others. With increasing migration and urbanization of Bangalore, the clientele became younger, more family oriented crowd preferring open spaces. The hotel time wrapped itself with heavy greasy products (a sure No for desk job struck Bangalorean of 2005). Its interiors and walls that well preserved the rows of photos of Gods and actors reminiscent of a Tamil Movie drop. The generation that enjoyed a sumptuous 3 course heavy meal vanished and was replaced by quick easy and fast food generation that appreciated small bites. The hotel which did not see the changes coming and prepared itself closed its fabled Oak door with a final bow, after bleeding for 8 years.
Secondly, many companies fail to realize their current business model may itself limit their growth and continued stay in that position may cost dearly. A software product company to benefit from 3rd party support and low investment pursued a partner only strategy and focused only on license revenue. As the market matured, many of the clients that were earlier purchasing the IT product were seeking out a total outsourcing partner. This required the software product company to change it business model, move beyond licensing and get into implementation and support not just of its own software, but overall IT. The company did not want to embrace the change in its business model of carrying its partner and extend IT transformation. The company sadly has moved into a suspended equilibrium state.
Thirdly, many of these companies suffer from “founder exodus”. The next generation often miss the intuition and passion of the founder to direct the business. Many successors attempt diversification without enough empirical validation and end up investing in non-value added activities. Risk averse senior management often limit options and experimentation at all levels. Companies with very little diversity in the employee background in terms of ethnicity, education or networks do not benefit from varied information and trends.
How can companies avoid being trapped in “Trishanku Zone?. Companies must cultivate a mind-set of obsessive purposefulness? Keep asking what is changing, its relevance and how it would diminish your revenues. Second, companies need to pursue low cost empirically based creative diversions. These investments allow companies to evaluate diversifications without a high risk. Thirdly, companies must follow a focussed execution approach to ward off equilibrium. Identify new owners, incentivize them with rewards and recognitions to trying out newer stuff, and encourage ownership. Finally, build a culture that has a premium on urgency.
Dr TR Madan Mohan