Want better team results? Don’t kill Laocoon

Last week, in a combined ISM-ODP-TOM [essentially, IT strategy, organizational behavior, operations] class, we discussed the rise of Cisco Systems, and how the burst of the internet bubble of 2001 took them completely by surprise. How did this happen?

In early 1995 Cisco went ‘live’ with a new ERP system, which was so good that they could “literally close our books within hours”, in what the industry called the ‘virtual close’. The same information systems also helped them forecast (so they say) the slowdown in the Japanese market and capture half the switching market there. Cisco, with its ERP systems, seemed to have created a crystal ball to predict the future.

However, at a time when their competitors were scaling down after seeing signs of an oncoming recession, Cisco continued to project increased growth rates. After all, YoY growth rates were very strong – 66% in the first quarter of 2001, increasing from 55% for the last quarter of 2000. They had no cause for worry.

And then the bubble burst.

Bubble burst

In the third fiscal quarter of 2001, sales plunged by 30% and the company had its first negative quarter in more than a decade. Soon enough, 8,500 employees were laid off. In 13 months, Cisco’s stock crashed from $82 to $13.63.

In hindsight, it seems that these very IT systems that enabled their rapid growth also clouded their judgment. The crystal ball wasn’t really crystal clear. An article by Scott Berinato concludes by saying that Cisco did not need crystal balls, and the “ability to look away from the computer screen and out the window to see the rain coming down just might have sufficed”.

When we discussed this in class, many believed that the management had made a ridiculous error – after all, they just had to ‘look outside their window, instead of into their computer screens’. Had they seen what their competitors were doing, they could have seen the edge before they fell off the cliff.

Then, the discussion evolved – if you were the market leader, growing at such a rapid pace, would you look at those behind you, and try to emulate them? Or would your beliefs (forged through continued success) be further reinforced, to make you continue to rush straight ahead?

When things go wrong, as an outsider, it is easy to say – they were proud, blind to their own faults, and so on. We can blame them for relying on their IT systems too much. We can pick fault with their inability to listen to market signals, to listen to reality, to understand market dynamics. However, none of this ability to analyze past mistakes is going to make us better at forecasting and preventing future ones.

One of the books I am reading right now is The March of Folly – one of my strategy professors at Babson loves this book.

Through four detailed examples, it shows how humans are almost conditioned to ignore bad news, to continue with their wooden-headed inertia down the wrong roads (these provide cases which future MBA students love to critique, criticize and condemn). But what I find most interesting about this book is that it focuses on errors that were apparent and clearly visible, albeit to a minority – whose voices were not heard in the majority’s roar of idiocy.

Even in myths, bearers of bad news suffer terribly – just as Laocoon warned not to bring the Trojan Horse into the city, serpents from the sea came and killed both him and his two sons. Cassandra, suffered to a lesser degree, though she now epitomizes what is now known as the Cassandra Syndrome – the ability to see the future, along with the curse of not being believed by anyone.

Laocoon

The underlying theme of this book is that as humans, especially when working in groups, we are bound to make such errors. Group think, inertia, and momentum, compel us to spread good news and cheer. No one wants to be the bearer of bad news. Who wants to be a spoilsport?

What can be done about this? In groups, designate a person as the ‘Devil’s Advocate’ – the one person who has the right to poke holes and search for flaws, even when things are going superbly well. Block some time in every meeting, to discuss ‘What must happen, for this project to fail?’. And if this happens, what can we do now, to prevent its occurrence. This is the thinking mode Edward de Bono called the ‘Black Hat’ – the hat of criticism and caution.

six hats

Will this ensure we get all the bad news? No.

Will it better enable us to be more receptive to changes and to negative information from around us, and to get a non-rosy perspective? Hopefully, yes!

In Jack Welch’s words, ‘Stop the bullshit’.

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Published in: on February 24, 2008 at 1:42 am  Leave a Comment  
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