complacency: ‘a feeling of quiet pleasure or security, often while unaware of some potential danger, defect, or the like’
Arguably the biggest risk to sustained success in business is success itself. Why? It is probably because there is a tendency to believe that long periods of success means more of the same will come. This creates undue confidence. Unassailed by misfortune or adversity, there can be a propensity for this confidence to erode healthy paranoia. After a while you check the rear view mirror less and less.
“Nothing’s gone wrong so far - why would that change?”
Personally, I really like businesses that worry. Equally, I like leaders that are paranoid. I also value a healthy degree of scepticism. At this point I should state that I am not flying a flag for organisations that are frightened of their own shadows. It’s about appropriate balance.
Over the years, I have seen complacency as a reason for failure, more times than I care to remember. Complacency is the reason things ‘fall through the cracks’, its why we drop the ball, its the reason we are blind-sided by events we might have foreseen had we been a little more paranoid. Complacency is not the exclusive reason why successful companies or teams fail - but it can have such serious consequences that it is hard to ignore.
Complacency is often accompanied by an arrogant side-kick: over-confidence. Confidence is a wonderful characteristic, over-confidence is a curse. It can lead to the perception of being self-centred, untrustworthy and indifferent by customers who increasingly start to re-evaluate their options. It’s the beginning of a slippery slope which invariably finishes with you being put in your place or ‘taught a lesson’. Perversely, it is always the case that you immediately cease to be complacent and over-confident when you have fallen from grace. That’s always the time when you decide to pull out all the stops. Rest assured though, the climb back up is long and hard - time in purgatory was not meant to be easy.
So there we go, an introduction to a pair of ruinous bedfellows. Do they have an undeserved reputation? I don’t think so. Having spent most of my career in or around technology, I always feel drawn to what happened to Nokia when the iPhone launched in the summer of 2007. At its peak in 2000, Nokia was worth around $250Bn and its annual budget was more than the Finnish government’s. It faired better than most riding the fall-out of the dotcom boom and by 2007 it still had a market cap of $150Bn (Apple’s was $75Bn) and retained a huge 40% share of the mobile handset market. Nokia was a brand on the global stage and seemingly untouchable. Fast forward to 2020 and Nokia’s market cap is $22Bn whilst Apple’s is a staggering £2Tn. So, what was its undoing? At its most simplistic, the answer is ‘the iPhone’. But how was it possible for a relative newcomer to single-handedly shake the market leader to its core?
There is a wonderful documentary, produced by the BBC, called ‘The Rise and Fall of Nokia’. It contains so many lessons for business managers, yet at the same time, this documentary feels more like a dramatised tragedy. I will summarise the part of the tale that relates to complacency and over-confidence but there is a link to the full programme at the bottom of this story.
In 2002 Johannes Vaananen, the co-founder of a small tech company called MyOrigo presented his revolutionary handset, called MyDevice, to Nokia. MyDevice included a touch screen with ‘swiping’, automatic landscape/portrait orientation and full web access. The Nokia team dismissed the new device in 5 minutes, describing it as a ‘gimmick’. Johannes gives a simple explanation for Nokia’s response, by saying, ‘What crazy company is going to say ‘hell’, this guy’s device is better than ours… We’ll keep making our own successful phones’? Commentary from a former Nokia employee explains that he believes that ‘hubris’ had crept in and there was a view in the company that every product they launched was always going to be ‘massive’.
On January 9th 2007, the day Steve Jobs presented the first iPhone, Nokia was still market leader. On January 10th everything changed. As soon as it was launched on the 29th June, Nokia ordered a consignment of the new ‘iPhone’ and began to study them. When a former executive took one home, his 5 year old daughter asked if she could keep the ‘magic phone’ under her pillow. He knew immediately that Nokia were in trouble. At the iPhone’s launch convention back in January, Steve Jobs had held it up and explained their approach, “Well. What we’re gonna do is get rid of all these buttons and just make a giant screen.” You know the rest and I bet most of you have an iPhone.
What you might not know is that the wonderful innovator, MyOrigo, went bust in 2005 and Apple bought their key technology patents.
The day after the launch a Nokia manager received an email from up the Nokia chain of command that said, ‘Next year, we have to have, an iPhone killer.’ Reading this back to myself it shocks me to think of the scale of the over-confidence and complacency that led to a sense of, almost blind panic prevailing. Profits plummeted and job losses ensued. There is no other way to put it, it was a catastrophe. By 2013 Nokia had exited the mobile handset market and had a market cap of $19Bn whilst Apple’s was $475Bn. As I said, it was an epic fall from grace.
I was dropping my kids off at the bus stop the other day and listenening to BBC Radio 4. Someone was discussing why the world was able to come together to produce not 1, but at least 4 vaccines for Covid-19 (in 1/3rd of the usual timeframes) yet humanity is seemingly unable to come together with similar resolve to address climate change. The explanation given was simple and shines an uncomfortable light on our human psyche and emotional intelligence: we have a natural, flawed, instinct to only react to danger when it tangibly threatens our very existence. Coupled with that, we tend to believe that our past success indicates that we will march on, unlikely to be knocked off our comfortable perches. The effects of Covid-19 are visible for all to see, whilst the effects of climate change are gradual - more of a case of death by 1000 cuts. We react to the pandemic because we see it, we react late to climate change because the day-to-day impacts we directly experience appear relatively minimal. The irony is the worst-case end game for climate change scarcely bears thinking about, whilst pandemics will have comparatively minor impact on the world as we know it.
It struck me that there are parallels here with how businesses react to risk. There are those that pay close attention to what is going on around them - ever mindful of the fact that another is jealousy coveting that top spot and there are those who become so confident in their own abilities that the idea that their fortunes might change is simply preposterous. Invariably these are the organisations where over-confidence and complacency are out of balance with humility, paranoia, and customer-centricity. The corporate graveyard is littered with such companies; none were seemingly able to learn the lessons from those that fell before them.
There is a cautionary note to end on and, perhaps rather appropriately, it comes from Bill Gates who summed it up by saying:
“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
For the full, fascinating story about Nokia: The Rise & Fall of Nokia - BBC Documentaries