King Minos of Crete had imprisoned Daedalus and his son, Icarus inside the very Labyrinth that Daedalus had built. In order to escape it, Daedalus formed two pairs of wings by sticking feathers to wooden frame using wax. While giving one pair to his son Icarus, he warned him not to go too close to the sun. Icarus flew free from the prison with the help of those wings. As he soared high enjoying his moments of new found freedom he went too close to the sun, as a result the wings fell off and he died plunging into the sea. The very wings that had led him to freedom were the cause of his death. Hence was born the concept of “Icarus Paradox” coined by Danny Miller.
This concept today is applied to the business scenario where some businesses, which experience a period of outstanding success, fail abruptly. According to Danny Miller, “success seduces companies into failure through fostering overconfidence, complacency, specialization, exaggeration, dogma and ritual”. When we compare the list of Fortune 100 companies in 1966 to that of 2006, according to Harvard Business Review, 66 of the companies don’t even exist anymore. Despite being one of the ominous reasons of business failure very few companies give it its due notice.
There are four trajectories that companies usually make the mistake of taking to end up in the same situation as the fabled Icarus did.
- Focusing Trajectory-This is the path taken by the “Tinkerers”. It is traveled by the operationally efficient, product obsessed and detail-perfectionists who keep on adding features to their products making it more and more perfect without taking the customers into consideration.
Nokia- With the introduction of Symbian series 60 in 2002, Nokia remained the market leader in the mobile phones category for 5 years. Then in 2007 Apple introduced its iPhone, but not gauging the changing trends, Nokia stuck to its Symbian OS. And then came the era of Android and Samsung and Nokia was wiped out of existence. The talented tinkerers of Nokia were too focused on the product and not on the changing customer preference.
- Venturing Trajectory-This path is walked on by the Builders turned Imperialists. The imperialists are the ones who keep spreading their businesses into categories unknown just to get a bigger share of the apple pie. They are led by highly creative planners and imaginative leaders, but then greed leads them astray, urging them to enter into businesses they have no idea of.
Quaker Oats- At one point in time, Quaker’s products were at number one and two positions in the US market in their respective categories. When Quaker bought Gatorade, it captured 84% of the sports’ drink market making it a huge success. This led Quaker to believe it can venture into other drink categories and repeat the success that it had with Gatorade. It bought Snapple in 1994 for 1.7 billion dollars. But it did not understand the niche market and had to set it at a mere 300 million dollars in 1997 which led to a loss of 1.4 billion dollars. So, it had to be acquired by PepsiCo in 2000 to get the financial bailout after the fiasco. The builders of Quaker Oats were left flabbergasted.
- Inventing Trajectory-When the pioneers become escapists, they follow the inventing trajectory. When a company has the best minds as its resources and invests heavily in the research and development division, but focuses on building a futuristic and hopelessly advanced invention, it squanders all the wealth it has earned taking this road to nonexistence.
After the success of Macintosh and the ousting from his own company, Steve Jobs fueled by the success of the technology tried marketing NeXT. Jobs went on to invest heavily in making engineers design custom chips that integrated a variety of functions rather than going for the ones readily available. Also the computer was designed as a perfect cube making most of the parts that went into a computer to be re-engineered to fit in perfectly. This led to too high a cost for a computer and it failed in the market.
- Decoupling Trajectory-The excellent salesmen when lost become the drifters that travel the path of decoupling trajectory. Instead of facing the issues with the products and the market’s demands they focus on just pretty packaging and sophisticated selling. Thus, becoming aimless and get detached from the core product of the company and try to sell increasingly unoriginal products.
After Apple introduced its iPad, HP also wanted to have its “me too” moment where it tried to sell a product just with the sheer force of selling it. Hence “TouchPad” was introduced. It had powerful video compatibility and excellent processing speeds, but despite large scale marketing and promotions, it was a massive failure and was taken out of the market quickly.
Source: The Icarus Paradox: How Exceptional Companies Bring About Their Own Downfall, Danny Miller
This article has been written by Ankita Jena, PGP-1 student at IIM Indore.