Outstanding Companies Research Articles

Privatisation, decentralisation and production adjustment in the Russian defence industry

PRIVATISATION IN THE DEFENCE INDUSTRY was until 1993 characterised by two features. Firstly, it affected a small number of organisations considered not too important within the sector. Nevertheless, one must point out that, at the end of 1992, some outstanding companies from the defence sector started to be privatised, which marked the first extension of the phenomenon to this sector of the economy. Secondly, the privatisation in this early period lacked organisation and control. Legislation was passed in 1993 with the aim of establishing some order in the privatisation process in the defence industry. From that time (until 1996) the idea was to foster a broad privatisation process with a view to resolving the production problems suffered by the industry, at the same time facilitating reorganisation within defence companies, which would contribute to an increase in the volume of civilian production. This article deals with the second phase of privatisation in the defence industry (from 1993).1 This period is characterised by a strong desire to push through broad privatisation in the sector. In particular, the article analyses the impact of privatisation and one of its major effects, decentralisation, on the adjustment of production in defence companies. First, we shall explain the dimensions of privatisation in this field and its impact on the transformation of production. Second, the main features of the decentralisation will be described, and in particular the creation of small companies within the defence sector. We shall examine the relationship between privatisation and decentralisation and analyse the impact of the creation of this new type of business on the adjustment process in the defence industry.

The icarus paradox: How exceptional companies bring about their own downfall

The old story of Icarus can still teach us new lessons in the dynamics of corporate success, decline, and renewal. ~ he fabled 1 Icarus of Greek mythology is said to have flown so high, s o c l o s e to the sun, that his artificial wax wings melted and he plunged to his death in the Aegean Sea. The power of Icarus's m wings gave rise to the abandon that so doomed him. The paradox, of course, is that his greatest asset led to his demise. And that same paradox applies to many outstanding companies: their victories and their strengths s o often seduce them into the excesses that cause their downfall. Success leads to specialization and exaggeration, to confidence and complacency, to dogma and ritual. This general tendency, its causes, and how to manage it are what this article is all about. It is ironic that many of the most dramatically successful organizations are so prone to failure. The histories of outstanding companies demonstrate this time and again. In fact, it appears that when taken to excess the same things that drive success--focused, tried-and-true strategies, confident leadership, galvanized corporate cultures, and especially the interplay of all these elem e n t s a l s o cause decline. Robust, superior organizations evolve into flawed purebreds; they move from rich character to exaggerated caricature as all subtlety, all nuance, is gradually lost. Many outstanding organizations follow such paths of deadly momentum-t ime-bomb of attitudes, policies, and events that lead to falling sales, plummeting profits, even bankruptcy. These companies extend and amplify the strategies to which they credit their success. Productive attention to detail, for instance, turns into an obsession with minutiae; rewarding innovation escalates into gratuitous invention; and measured growth becomes unbridled expansion. In contrast, activities that were merely de-emphas i z e d n o t viewed as integral to the recipe for success--are virtually extinguished. Modest marketing deteriorates into lackluster promotion and inadequate distribution; tolerable engineering becomes shoddy design. The result: strategies become less balanced. They center more and more around a single core strength that is amplified unduly while other aspects are forgotten almost entirely. Such changes are not limited to strategy. The heroes who shaped the winning formula gain adulation and absolute authority, while others drop to third-class citizenship. An increasingly monolithic culture impels firms to focus on an ever smaller set of considerations and to rally around a narrowing path to victory. Reporting relationships, roles, programs, decision-making processes---even target markets--come to reflect and serve the central strategy and nothing else. And policies are converted into rigid laws and rituals by avidly embraced credos and ideologies. By then, organizational learning has ceased, tunnel vision rules, and flexibility is lost. This riches-to-rags scenario seduces some of our most acclaimed corporations; and in our research on outstanding companies we have found four principal examples of it, four very common trajectories of decline (see Figure 1): • The focusing trajectory takes punctilious, quality-driven CRAFTSMEN organizations with their masterful engineers and airtight operations, and turns them into rigidly controlled, detailobsessed T I N K E R E R S f i r m s w h o s e insular, tech-

The Icarus paradox: how exceptional companies bring about their own downfall: new lessons in the dynamics of corporate success, decline, and renewal

Just as the fabled Icarus of Greek mythology was able to fly so high, so close to the sun, that his wax wings melted and he plunged into the sea, this same paradox can apply to outstanding companies - their very success seduces them into the excesses that cause their downfall. The Icarus Paradox is a breathtaking account of what creates stellar business success, and at the same time, sows the seeds of corporate failure. After researching over 200 companies, Miller discovered that success imperils an organization through the momentum it creates and he has coined a new language to describe the rise and fall of major corporations. Craftsmen such as Ford and Texas Instruments have become concerned only with the products they have created, totally oblivious to the markets they have lost. Pioneers such as Wang and Apple have become escapists, so caught up in searching for breakthroughs that they create often brilliant yet commercially useless products.

The stenographer in a machine age

A short time ago one of the leading scientists in America said, time will come when the machine will do everything that demands only routine operations. That this prophecy is true can be readily seen by observing the trend in almost every line of work. Is this trend noticeable in the business office, or more specifically, are dictating machines taking the place of shorthand? If so, to what extent? Do employers demand that their stenographers know shorthand? With these and other questions in mind a questionnaire was formulated and sent to fifty large business firms in different sections of the United States. The mailing list was selected with the greatest of care in order to insure a good geographical distribution. Care was taken also to select the outstanding companies in the various types of manufacturing, as well as wholesale and retail trade.