Practice Productive Paranoia (Avoid the 5 Stages of Decline)

The first step in being built to last is don’t die. The only mistakes you can learn from are the ones you survive. Every company is vulnerable to decline. There’s no law of nature that the most successful companies will inevitably remain at the top. Any can fall and most eventually do. Entrepreneurs who build great companies differ from less successful comparisons in how they maintain hypervigilance in good times and bad. Leaders who navigate turbulence and stave off decline assume that conditions can unexpectedly change, violently and fast. They obsessively ask, “What if? What if? What if?” By preparing ahead of time, building reserves, preserving a margin of safety, bounding risk, and honing their discipline in good times and bad, they handle disruptions from a position of strength and flexibility. Productive paranoia helps inoculate organizations from falling into the 5 Stages of Decline that can stop the flywheel and destroy an organization. Those stages are (1) Hubris Born of Success, (2) Undisciplined Pursuit of More, (3) Denial of Risk and Peril, (4) Grasping for Salvation, and (5) Capitulation to Irrelevance or Death.

Yet the tendency of human organization is to move in the opposite direction —to seek control and order, to minimize unexpected surprises. To remain innovative, this tendency must be resisted, and resisted with crushing vigilance.

The oppressive desire to exchange life and soul for sterility and order is like a persistent vine, constantly creeping up the sides of an organization and wrapping itself around its limbs until it can no longer move swiftly and nimbly. Eventually, if left unchecked, the vine will wrap itself around the organization’s throat, tighten its vice-grip, and strangle away the company’s life spirit.

What is perhaps most strange about the invocation of competition as the primary driver of our economies is that behind the masculine bluster of ruthlessness, most businesses and businesspeople operate in a manner far more similar to real ecosystems. This is why all big organizations, for instance, have ambitions to function with the cooperative efficiency of termite mounds; why most business leaders work to establish mutually beneficial, “win–win” relationships with their suppliers, service providers, and customers; and why, even in the countries that most enthusiastically embrace the theology of free markets, a whole battery of antitrust laws exist to prevent excessive cooperation in the form of collusion between businesses, the creation of cartels, and other “anti-competitive behaviors.

The decision to disrupt businesses that are fundamentally working but whose future is in question—intentionally taking on short-term losses in the hope of generating long-term growth—requires no small amount of courage. Routines and priorities get disrupted, jobs change, responsibility is reallocated. People can easily become unsettled as their traditional way of doing business begins to erode and a new model emerges. It’s a lot to manage, from a personnel perspective, and the need to be present for your people—which is a vital leadership quality under any circumstances—is heightened even more. It’s easy for leaders to send a signal that their schedules are too full, their time too valuable, to be dealing with individual problems and concerns. But being present for your people—and making sure they know that you’re available to them—is so important for the morale and effectiveness of a company.

The oppression of false peace: we are taught that our truths are disruptive, and that disruption is a negative act. This one is particularly insidious, and ties back into capitalism—only those moving towards profit can and should create disruption, everyone else should be complacent consumers.