Watching the University of Kansas Jayhawks (my alma mater) lose to the Northern Iowa Panthers in the second round of the NCAA Tournament today got me thinking about arrogance and how it can get you in trouble. KU was ranked #1 in the pre-season and they stayed there throughout most of the season.  They played unbelievably well a few times, but many other times, got by on their talent and the expectation that because they’re KU (a top-five all-time basketball program), winning was a given.

If you step back and apply those same lessons to business, countless examples certainly exist, and here’s a couple that I thought of immediately:

The Big Three (Ford, GM and Chrysler): in the 1960′s, those three companies had 87.6% market share in the United States; GM alone had 48.3%. Imagine that, almost one out of two cars was a GM brand. In August of 2009, the Big Three’s share stood at about 41.7%. What caused that massive decline in just about 40 years?

Well, when Honda, Toyota and other imports started entering the market in the 1970′s, the Big Three didn’t take them serious enough. The Arab oil embargo caught them with lines of big, gas-guzzling cars and thus began the rise of the import. Even after the embargo ceased, the Big Three didn’t change their ways and as the 80′s began, the quality of American cars continued to decline as more and more people began buying their cars from Japan.

However, there were moments of glory for the Big Three.  Inventing the minivan in 1984 was a huge win for Chrysler, and even through decades of turmoil, they’ve continued to be a force in that market segment; unfortunately, they didn’t adapt as the segment declined from its heyday in the 90′s. Ford had two massive success stories too. In 1986, they introduced the first Taurus and, hard as it is to believe, it was a groundbreaking design at the time and for the next six years, it was at the top of the sales charts, or very near it. But they let the innovation and quality slide until the car’s 21st century death and rebirth in 2009. Ford followed that up by producing the first SUV to really go mainstream, with the Explorer in 1991. Again, Ford was happy to bring in big profits instead of continuing to innovate and the Explorer went from the best-selling non-pickup truck in the US to barely a blip on the radar today.

It wasn’t until the hiring of Alan Mulally that Ford really woke up from its long slumber of arrogance. It remains to be seen if GM or Chrysler has done the same.

The events of the past few months have shown us again the cost of arrogance; Toyota’s arrogance and desire for market share made them abandon their core principles and damage their painstakingly-built brand heavily.

Microsoft: the company at the center of the computer revolution for over twenty years has never ceased to be a powerful force, yet I can’t help but think about the opportunities they’ve blown over the years. Think of the areas of technology where they surely could have innovated, yet sat back and let other companies become the dominant force:

• Portable Music Players: in less than ten years, the iPod has revolutionized music distribution, saved a company on the verge of bankruptcy and left Microsoft scrambling to catch up (Zune) and now they’ve seemingly given up the fight.
• Video Games: Sony came out of nowhere in the 1994, catching market leaders Nintendo and Sega off-guard, and Microsoft was nowhere to be seen. For seven years, Sony made huge profits with the Playstation console and subsequent Playstation2 and 3. It took Microsoft until 2001 to get their own contender on the market and many more years to pass Sony.
• Search: back in the days of WebCrawler, Lycos, AskJeeves, Yahoo and MSN, there were a ton of choices and no dominant force. Then, here comes Google and the rest is history.

So many opportunities to continue their dominance, and instead Microsoft was happy to keep cashing in on profits of Windows and Office, rather than finding the next big thing.

So what am I trying to say here?  In business, just as in sports, you’ve got to act like you’re never the best, compete and innovate like you’re still the little guy and maintain a culture built on ideas. You’ve got to prepare better and smarter than your competitors. And never, ever rest on your laurels. It’s the culture Avis built in an industry dominated by others – “We’re #2 – we try harder.”

That’s the culture Apple, McDonald’s and Google have, what Honda and Toyota had, what Ford has again, and what the Northern Iowa Panthers had today.

Sources:

http://www.carofthecentury.com/answer_to_gm%27s_market_share_plunge.htm

http://www.automotivedigest.com/content/displayArticle.aspx?a=61337

http://www.tgdaily.com/trendwatch-features/43289-nintendo-wii-surrenders-market-share-in-weak-game-console-market