The annals of business history are full of tales of companies that once dominated their industries but fell into decline. The usual reasons offered—staying too close to existing customers, a myopic focus on short-term financial performance, and an inability to adapt business models to disruptive innovation—don’t fully explain how the leaders who had steered these firms to greatness lost their touch.In this article we argue that success can breed failure by hindering learning at both the individual and the organizational level.
We all know that learning from failure is one of the most important capacities for people and companies to develop. Yet surprisingly, learning from success can present even greater challenges.
To illuminate those challenges—and identify approaches for overcoming them—we will draw from our research and from the work of other scholars in the field of behavioral decision making, and focus on three interrelated impediments to learning.
The first is the inclination to make what psychologists call fundamental attribution errors. When we succeed, we’re likely to conclude that our talents and our current model or strategy are the reasons. We also give short shrift to the part that environmental factors and random events may have played.The second impediment is overconfidence bias: Success increases our self-assurance. Faith in ourselves is a good thing, of course, but too much of it can make us believe we don’t need to change anything.The third impediment is the failure-to-ask-why syndrome—the tendency not to investigate the causes of good performance systematically. When executives and their teams suffer from this syndrome, they don’t ask the tough questions that would help them expand their knowledge or alter their assumptions about how the world works.
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