I was lucky to be a leader at Amazon during a period of great inflection for the company, from early 2002 through late 2005. This was a critical time at Amazon as we began to prove to ourselves and others that many of our early bets were working and that Amazon was really two types of companies: a retail operator, and a platform company building and operating services other companies could use—like AWS and the marketplace.
Following my tenure at Amazon, I was equally fortunate to have 12 years as a managing director at Alvarez and Marsal (A&M) helping to start and scale the west coast geography for the corporate consulting practice.
Guess which consulting clients were more open to making meaningful, impactful improvements and change? The answer is clear: the companies and executives most willing to change, to innovate, to make hard quick decisions, are those companies in crisis and restructuring clients. Why? Because they have nothing to lose, and they have a sense of urgency to act.
The healthier the company, the harder it is to drive true innovation and change inside its walls. The executives at these successful and profitable companies say they want to innovate, to invest in the future, to become the company that leads in innovation and agility, but they typically are not willing or able to make the hard decisions, to invest at the levels required or have the patience to let small seeds develop into fertile capabilities.
Why? Why is it harder for healthy companies and their leadership teams to change the traditions that digital businesses demand?
Think of it this way: why do musicians typically release terrible second albums? Why do athletes struggle to perform after signing a large contract? Well, they spent years creating or training to become successful. When they actually achieve success, something natural happens—they are no longer quite as hungry. Suddenly, they want to protect what they have, play it safe and not get injured. The sense of urgency and desperation that enabled the “go for it” mindset may switch to a “don’t lose it” or “let’s enjoy it” mindset.
Like newly successful rock bands or athletes, these healthy client organizations have all options open to them. They can make long-term investments, and they have the luxury of positive momentum. They recognize the opportunities, saying they want to change. But in reality, they have lost their underdog attitude. They start playing it safe, and they get comfortable. In short, they have created a country club culture. Without even being conscious of it, an attitude of “don’t risk it” subconsciously influences how the business is approached.
Urban lore has it that in the 1990s at Microsoft, employees could be seen wearing T-shirts with “FYIFV” on them, which stood for “F*&? You, I’m Fully Vested.”[i] This notion was well known in Seattle, and it was an early reference point for Jeff Bezos.
Bezos was addressing a meeting in 2003 when he turned in the direction of Microsoft, across the water from Seattle, and said he didn’t want Amazon to become “a country club.” If Amazon becomes like Microsoft, “we would die.” [ii]
Warren Buffett refers to this disease as the “ABCs of corporate decay—Arrogance, Bureaucracy and Complacency.” [iii]
Here are a few ways to avoid or recover from country club disease. The cure starts with recognition. How do you recognize the onset of country club-itis? A bit too much self-congratulation; too much stock price watching and managing to Wall Street; more focus on internal affairs than on customers. Other symptoms include slowing growth expectations, reducing innovation and new market risks and investments, and starting to optimize for short-term financial results instead of aggressively investing in new businesses. Basically, playing it safe and playing “not to lose.”
What do you do? Here is a specific exercise: With both internal leaders and external advisors such as a startup leader or venture capital operator, have the group develop specific plans answering questions such as, “How would you pitch to an investor or competitor a business to compete and disrupt your existing business?” With insider knowledge, how would you disrupt the legacy company? The internal leaders need to represent the “general managers” and senior management of key divisions, plus any strategy skills you have in the organization. Depending upon your team, the advisors need to be a combination of strategic consulting skills, startup experienced operator perhaps from your industry, and venture investment skills. I prefer to do this as part of a retreat so that mindsets are away from the daily operations.
Essentially, build business plans to disrupt your own business. After development, review these plans with additional external leaders (internal thinking will be limited and biased). Then conduct a board and leadership team retreat to thoroughly discuss these ideas. Go on the offense!
As the beer brand Dos Equis ad campaign’s “Most Interesting Man in the World” advises, “stay hungry, my friends” and avoid becoming a country club.
2- Jodi Kantor and David Streitfeld, “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace,” New York Times, August 15, 2015.
3- Ian McGugan, “How Buffett Believes Berkshire Can Avoid the ABCs of Business Decay,” Globe and Mail, March 6, 2015.