Jagdish Sheth, currently Charles Kellstadt Professor of Marketing at Emory University's Goizueta Business School, and consultant to companies ranging from Fortune 100 corporations to start-ups, speaks to Priyanka Sinha on his new book, The Self-destructive Habits of Good Companies and How to Break Them. Excerpts:
Bad habits are not something that one associates with successful companies. So how did the idea come about?
I met the chief executive officer of Delsouth who put the question to me: “Why do good companies fail?” The question came about because he had read my earlier books like In Search of Excellence, which spoke of renowned and successful companies like Kodak.
Personally, I never thought that companies could fail, but it was an intriguing question so I followed it up with research and the result was this book.
Which are the seven deadly corporate sins then?
The bad habits include denial, arrogance, complacency, competency dependence, competitive myopia, territorial impluse and volume obsession.
What are the truths you unearthed during the research?
Well, companies don’t destroy by competition but by themselves.
At what stage do these bad habits form?
On their way to success, companies acquire these bad habits, which are like bad karma.
Any other discoveries?
That the life expectancy of companies has declined from 50-60 years to about 10 years.
How has that come about?
Well, because these companies have not been adding value to their shareholders. After the first energy crisis in 1970s, inflation has been rising with no economic growth. Also, there have been too many mergers and acquisitions—since January 2007 itself mergers worth $ 2 trillion have taken place across the world.
Why have these acquisitions and mergers not worked?
Mergers and acquisitions are the easy way out. The main thing is that the environment is changing tremendously. Markets in the west have a fast ageing population and American companies have not diversified in emerging economies. The good part is that the current scenario will work in India’s favour.
Several Indian companies have been going the M&A route…do you think it will work for them?
In the short term, it is a good thing because it allows Indian companies access to their capital and those companies are ready to be sold. However, it is important that Indian players consolidate within India, which they haven’t. The other problem is that we have too many companies (in each segment). Indian companies should buy each other out. Domestic consolidation is a must. China has already consolidated into a few large players.