Companies collapse slowly, and then all at once.
I was reminded of this reality while reading the book "The End of the Cold War" by Robert Service. [ Amazon ]
The book starts out with the election of Ronald Reagan, and while I haven't finished reading it yet, I know how it ends. (-;
It's a fascinating story of the complex geopolitical trends that were unfolding throughout the 80's, leading to the eventual fall of the Berlin Wall, the collapse of the Soviet Union, and the emergence of a form of freedom that endures, for some, to this day.
There's a lot of political analysis throughout the book about the the efforts by Reagan and Mikhail Gorbachev to reduce nuclear stockpiles and avoid tension and confrontation. As a child of the 60's who grew up in the fear of nuclear holocaust, the story resonates powerfully with me as I look back at that time.
What really caught my attention, tough, were the parts that took apart the slow - and then sudden - collapse of the Soviet economy. One section in particular near the start drew my attention, and a phrase jumped out at me - as you will see below. First, to set the stage:
The 'military-industrial complex' was a law unto itself. Diplomat Anatoli Adamishin understood the true scale of the long-term economic damage. Truly massive over-production of missiles took place. Stockpiles were increased for the contingency that a protracted sequence of nuclear strikes would occur if and when the Third World War began.
There were officials in the Party Defence Department, Soviet patriots all, who knew that this made no military or economic sense. But what the General Staff laid down, no politician was going to challenge.
Adamishin was shocked by what he learned on joining one of the policy-planning groups under Andropov in 1983. The economic prospects were grim and getting grimmer. By the 1990s, it was suggested, industrial output would grow annually by less than one per cent. The productive base had been neglected. The state budget had been wasted on defence, agriculture, housing and foreign aid. The leeway for dynamic initiatives within the current framework had vanished and it was only inflation that disguised the fall in average household incomes.
Adamishin was horrified: "The future's been eaten up!'°
The technological gap between the USSR and the West gave rise to frank discussion at a meeting of the Party Secretariat as early as 4 August 1979. Ivan Frolov, deputy department chief, reported that the country was sixty per cent less effective than capitalist societies in replacing manual labour. Nothing said on behalf of the ministries or the State Planning Commission contradicted this gloomy picture.
Ministers struck back at Andrei Kirilenko when he rebuked them; they told him that ministries could hardly do better with their resources unless they were told how to go about it - and Kirilenko manifestly had no idea - he was merely handing out the usual threats and admonishments.
If you were around during this era, you would remember reports like this; dribbling in through limited news sources, it was becoming clear that the Soviet economic system was slowly collapsing. With that came the inevitable result:
The USSR was at an impasse. its leaders knew that it aced economic competition that it stood no early chance of matching. Its institution mechanisms of party rule and state industrial coordination, and nobody was coming up with any ideas that would lead to basic improvement. There was plenty of criticism and too little thought about solutions. The Politburo was filled overwhelmingly with people whop were habituated to an organizational and ideological order that had undergone scant change since the death of Stalin.
The part of that phrase that really caught my attention was the one about an excess of criticism over solutions.
I thought to myself - this sounds like many companies that I know!
Digging further into this idea, I decided to explore what went wrong with the Soviet Union - and came up with a list of several issues that contributed to its downfall in addition to the fact that the system resulted in people who were busy generating more criticism than ideas.
- Resistance to change and a preference for the status quo: The Soviet Union had an extremely rigid system based on clearly defined hierarchies - the old 'command and control' structure from military thinking that is all too common for some organizations today. This type of structure is engineered to result in a culture that resists change and innovation - instead relying on central planning and long, slow decision making chains.
- Lack of communication and collaboration between departments and teams: Teamwork in the Soviet Union? As we might say, LOL! The Soviet system was characterized by tightly controlled silos which did everything they could to prevent the sharing of information, characterized by a lack of communication between different agencies and levels of government. Hoarding of insight was common; sharing of ideas was verboten (and risky.)
- Insufficient investment in research and development: The Soviet Union claimed to be a a leader in science and technology, but the simple fact was that it fell behind in many areas of research and development, particularly in the areas of computing and information technology. Why was this the case? A lack of an entrepreneurial mindset or a startup culture; no rewards for innovation and product invention beyond those for military use; no compensation or reward system for those who might dare to think 'big and bold.'
- A rigid bureaucracy impervious to change. Creativity hates structure - it is stifled and smothered by a top-down approach to decision-making and the lack of 'runways' to encourage the launch of creative ideas. The future hates bureaucracy and despises structure.
- A focus on short-term goals and profit at the expense of long-term innovation: The Soviet Union was heavily focused on achieving short-term economic goals and meeting production targets, often at the expense of long-term innovation and sustainability. Numbers and plans were more important than ideas, to the detriment of great ideas!
- Fear of failure or even punishment for taking risks: The Soviet system was characterized by a culture of fear and punishment, which discouraged risk-taking and experimentation. Step out of line? Off to the Gulag!
Todays' successful company is different; they embrace change and innovation, invest heavily in research and development, and ensure they have a more flexible and decentralized structure. There is a cultural mindset in which individuals are empowered to explore ideas, and a team-oriented and shared goal mindset that encourages communication and collaboration.
The Soviet Union's political and economic system was massively resistant to these kinds of ideas, which contributed to its eventual collapse. The interesting thing is that these issues bubbled along for a long, long time, until they simply became too overwhelming. This is what drove Gorbachev to seek a peace deal - he knew the collapse was imminent, and was trying to pursue economic reforms and a chance for growth by opening up to the West. Unfortunately, he was too late.
Today's world? Many organizations continue to struggle in the same way, because they haven't made the leap beyond Soviet-style thinking. Consider the list above, and take a look at the company you work for, consult to, or are somehow involved with. Do you notice anything similar? Does it sound like anyone you know? Does anything on the list resonate?
The Soviet Union died slowly, and then, all at once.
So too do companies.
A child of the 60s, Jim Carroll has a glimpse of a memory of his mother placing large jugs of water and boxes of food in the basement at his home. He realized later on that this was at the height of the Cuban Missile Crisis, a moment in time when the world came closest to nuclear annihilation and fear of survival drove society. That memory and others shaped his worldview for a long, long time.