Is your revered organisation a slow puncture deflating toward failure?

Marks and Spencer, one of Britain’s venerated corporate icons, fell out of the FTSE 100 stock index this month.

It is hard to describe how central M&S has been to British retailing. It is 135 years old, and when I was a young man studying in London, it was discussed as a case study in excellence, in hushed and reverential tones.

M&S basically ruled the roost; it did everything right, and everyone else was urged to learn from it.

The company was an organising member of the blue-chip “Footsie” index in the 1980s, and went on quite a spree thereafter.

It became world-renowned in shaping the way people shopped. Competitors envied its customer service and its corporate culture.

Customers loved its retail firsts, such as high-quality convenience food offerings for middle-class families. A decade ago it made a record annual profit of a billion pounds.

CHANGING TIMES

Its last profit is one-tenth of that figure. Its share price is now lower than what it was when I was studying it in class.

It is shutting down a third of its traditional full-line stores. Many top managers have gone home. M&S is now truly on the ropes.

What went wrong? The company knows the answer, stating it clearly in a recent annual report: “The only time we have stumbled as a company is when we’ve become introverted, lost sight of the customer or failed to keep pace with modern living.”

Marks and Spencer succeeded very well for a long time in its comfort zone: selling decent-quality, comfortable clothing and convenience food to the middle classes.

But that was 20 years ago. It failed to see the ground changing under its feet. Young people no longer shop there – it’s just not trendy enough.

A plethora of high-street rivals offer similar quality and higher fashion-cred at markedly lower prices. And M&S is late to the online shopping game, too.

DAMAGED BRAND

It is now caught in the shrinking middle, ageing with its core customer. It is in the no-man’s land where it can offer neither quality nor affordability relative to its key competitors.

Its brand has probably taken too much of a beating to ever appeal to the young and fashionable ever again.

A major shrinkage, and renewed focus on its remaining core customer base is probably the only way forward.

M&S is not alone. All over the world, there are dominant names stumbling and falling.

Most of these large corporates do not suffer a sudden collapse. The more appropriate metaphor is that of the slow puncture.

You don’t make the necessary changes in time, and develop a slowly deflating tyre. The journey seems generally okay for quite a while yet, though you start slowing down and becoming unsteady.

Then, by the time you see the shredded rubber and smell it burning, it’s too late. You’ve left the road.

STAY RELEVANT

The fundamental problem is complacency caused by too much easy success in less competitive, more predictable times.

Those who lead organisations through such periods seem unable to adjust themselves to changing markets. Their success formula is set in stone, and it eventually becomes their headstone.

The key leadership attributes needed to avoid this fate are a constant connection with customers, present and future, and a paranoia about change and upheaval.

Those who keep chatting, in person, with their customers spot trends before they become apparent to all.

Those who make special time for focus groups with new customers or non-customers have a chance of not being left aground when consumption tides change.

And those who keep a sharp eye on technology have a hope of deploying it before it upends the game.

INNOVATE

That is not the norm, though. Most successful organisations persist with the same leadership far beyond their sell-by dates, because of the “why fix what ain’t broken” tendency.

Most have board directors far removed in age from their target markets. Most are busy using last year’s figures to understand tomorrow.

In part, these declines and reversals are necessary. Innovation brings renewal and progress, and the dominant are rarely the innovators.

As I often write, the comfortable do not innovate. To be the one changing the status quo, you have to be unhappy with the status quo.

Is that even possible for a large, successful organisation? It’s rare, but it happens. To meet one, see you here next week.

Sunny Bindra’s new book, The Bigger Deal, is now on sale. www.sunwords.com