Success Can Kill Your Competitors

"Success often hurts, and even mortally wounds, well-run small businesses,” said Daryl Wyckoff in his landmark book Organizational Formality and Performance in the Motor Carrier Industry about the “U” shaped profitability pattern in the motor carrier industry. Small and large companies were profitable, but medium-sized companies were not. (Nov 14, 2005 “The Bottom Line,” a monthly column by Jonathan Byrne on www.hbsworkingknowledge.hbs.edu)

His studies of the industry showed that many entrepreneurs could not make the management transition when the firms grew to a new stage of complexity. Entrepreneurs were successful when they could manage hands-on or personally see what was going on in the business. When the business grew, usually by establishing new terminals, many entrepreneurs could not understand the need to hire competent managers for the terminals and manage through plan and control processes instead of hands-on. The companies became unprofitable. If the entrepreneurs could make the transition to a more complex management structure, the organizations prospered and continued to grow.

Wyckoff found that this phenomenon occurred in other industries, including the restaurant and hotel businesses.

Does it occur in your industry? Most CI analysts focus on the large, existing competitors, but are asked to spend some times on emerging competitors. If this pattern exists in your industry, you could do a psychological profile of the top executive of your emerging competitors to determine which ones are likely to recognize the need for a different management style as their companies grow and prioritize your resources on those entities. The rest are likely to flounder as they grow to need a new management structure, but do not change.

Comments

[David Carpe]

great point - beyond the top 5 competitors, or top 10, there are always the outsides that creep up and take the industry by storm. knowing who to even follow is a formidable challenge, but profiling leadership is a bit more tricky. when i went to babson to study entrepreneurship (a top program, my own focus was finance), there were many cases about this particular transitional issue.

however, one thing that was particularly interesting to me came not from bschool, but rather from the ci industry: have a team of outsiders (eg a marketing team, ci team, or others) take a myers-brigg in which they imagine themselves to be that 'leader' of the competitor taking the test himself/herself...then correlate results and you will see a near 70+ percent accuracy rate for many common personality profiles (yes, entrepreneurial personalities - while unique in their own ways - are in fact common when it comes to standardized testing input/output)

just a thought...