Innovation, Leadership, Member/Customer Engagement, Organizational Culture

The Golden Handcuffs: How Success Can Trap you into Complacency

handcuffsAMSA (the American Moving and Storage Association) had enjoyed stability and growth for decades, largely because of what is commonly referred to as Golden Handcuffs. In AMSA’s case, its rate-making authority and antitrust immunity allowed it to “tether” members to the association as the only way they could set pricing tariffs. (From case in book). When Linda Darr, currently President of ASLRRA, became AMSA’s CEO in 2007, she was inheriting a stable organization.  Yet she questioned the sustainability of the organization’s success with a model that was dependent on one product. Moreover, Darr was concerned that this “hook” of price-setting did not engage members’ strategic needs, making their relationship with the association tactical and shallow and, hence, easy to sever. Shortly into her tenure Darr’s concerns proved true. In 2007, the Surface Transportation Board reviewed industry pricing agreements and decided to end joint rate-making. Without the “golden handcuffs” of rate setting, there was nothing to connect members to the association and AMSA experienced a dramatic decline in revenue and membership. Darr was able to turn the association around by shifting to an entirely new basis for competitive advantage– from helping members set pricing tariffs to helping members’ customers in selecting certified, reliable movers and thus growing the market.  Other associations depending on similar golden handcuffs may not be that lucky. What will happen, for example, to the many associations whose stability and health are based on the monopoly they hold in certification and credentialing if these entry requirements are no longer needed or for-profit companies take over? I have often written about associations that are struggling or declining but, mind you, these are mostly large and very successful associations. And this success become an obstacle to change and flexibility. “The most dangerous part of every business,” writes Lior Arussy in an article in Inc. is success. Success breeds complacency. Success turns you from a ready-to-invent person to a ready-to-enjoy person.’ Associations and other non-profits are flush with organizations whose success is narrowly defined, for example through membership and retention numbers as they relate to the sales of one product or product category. What is not being measured, however, includes factors such as: their customers’ levels of engagement; their organization’s relevance to members’ strategic challenges and the solutions needed; their ability to constantly deepen their relationship to members and expand the value they provide to them; their capacity to adapt, innovate and reinvent the basis of their value proposition. It is hard to think beyond business as usual when your products and processes generate steady streams of revenue, however. And this is just the problem. “The success trap,” the article explains, “is the attempt to continue to do what worked in the past instead of evolving. It’s the loss of hunger, succumbing to incremental corrections as opposed to bolder exceptionalism. For a period of time, your success formula will carry you. You will repeat the past and customers will pay for it. But, eventually, they will get bored. Your competitors will reinvent themselves, and you’ll be repeating yourself.” Success attaches you to the way things are done, blinding you to possibilities that do not fit that framework. Even Google failed to recognize the potential of an experiment, known by the name of the engineer that designed it, Orkut.  “Google shut it down despite its success because it didn’t fit the Google success formula. For the company that developed a superior algorithm and eliminated most of the search engines in the way, it was difficult to see a future in which people, not algorithms, determine search and popularity ranking. Past success blinded Google to future development. This is a classic case of success by repeating the past, not creating the future.” In my research and client work, organizations experiencing relative success are the most likely to be on auto pilot and resist strategic thinking and change. Clinging to what worked in the past creates cultures of complacency; blocks continuous learning and innovation with unexamined assumptions; and generate standard and reflex responses to situations, for example:

Reflex Response Underlying Attitudes Stemming from Success
We are the biggest, greatest, most prestigious, oldest etc. organization of this kind.   Narrow, inside out view of the world: self-satisfaction vs. hunger; internal vs. market perspective  
I get all the advice I need from my excellent staff, peer network, other CEOs who have been my friends for years and I respect. I don’t need help. Attachment to business as usual; driven by routines and habits that may no longer be relevant or effective  
We know what we are doing and have no interest in using a different perspective or framework to challenge my thinking and assumptions and push the limits of what I thought was possible. Closing the door to discovery and exploration; settling for what there is and missing what could or might be.
We already know our members well. We have already considered all these things in our last strategic planning. No real interest in members. Members have become commodities and their value is perceived very narrowly–only in terms of the short-term sales they generate.
We have already tried this and it didn’t work Loss of motivation and urge to experiment and innovate; results in opportunity loss, “disconnect” with the market
We have 90% market penetration and 96% retention through our certification program. Everyone in the profession has to take our exams to qualify. Narrow and short-term metrics that results in delusions about the association’s ability to survive for the long-term. Why go to the extra effort of long-term investments and capability-building when it is so easy to keep milking the same cow?
That’s not what we do:
  •  There is increasing demand for X technology products among our members and we have a potential partner, willing to invest in a new business line we would develop. But this is not what we do, and has not been identified as a core strength in our SWAT analysis.
  •  We are an association, and associations don’t do consulting (or retreats, business development, joint ventures etc.)
Defining your business by the products you create at a given time in your history; inability to re-define the nature of your business to match changing market needs and opportunities  
It is difficult to be motivated to learn, experiment, reinvent and keep growing in new directions when you are relatively comfortable –at least not in crisis.  Yet this is what leaders are called to do today. The article cautions: “But while you’re preoccupied with your present success, someone else is busy redefining it through some breakthrough experience that will excite customers all over