How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
This passage from American writer Ernest Hemingway’s The Sun Also Rises perfectly summarizes the process almost every organization eventually faces.
Or at least it did up until Tuesday, May 2. Because that was the day when ChatGPT claimed its first victim, the online education platform Chegg.
It seems gone are the days when companies could expect a death spiral of years and years before the CEOs called it a day.
Blockbusters and Blackberry are two examples that spring to mind. But Chegg’s stock plummeted by more than 50% in just a few hours, and at the time of writing this piece, it was worth just a third of what it
was prior to the launch of ChatGPT.
The reason of course, why every business ultimately fails is because the market shifts.
In Blackberry’s case, they lost out as consumers decided they didn’t want keyboards.
For Blockbusters, their customers decided to stay at home and stream.
And for Chegg, Wall Street is predicting that they will lose their students to generative AI.
What’s fascinating and scary though, is we have just entered a phase of business disruption that is exponential in nature. AI, Cloud, 5G, IoT and a host of other technologies are working perfectly in concert to allow anyone in the world to develop new products and services at a fraction of historical costs in record time.
ChatGPT is a case in point.
On release, it registered 1 million users in one week and hit the 100 million mark within two months. That’s 5x faster than TikTok managed; 30x faster than Facebook. So with barriers falling left right and center because of technological advancements, what must boards do to improve their company’s survival chances?
If you guessed innovate, you are partially right. Boards absolutely need to impress on their executive teams the importance of doubling down on their innovation strategies.
But this will only work if boards think laterally about deliberate actions they can take to encourage their executive teams to become less hubristic.
Because leadership hubris is the catalyst of inertia, not innovation, and inertia is what ultimately kills most organizations. To be fair to executives, they operate in environments that encourage overconfidence.
When you are running a successful multi-billion dollar business, it’s not easy to consider the possibility that it could be fallible, or worse, that it might fail on your watch. I for one don’t know many CEOs who’ll admit they are fearful of being disrupted. And those that do typically fail to place the necessary disruptive business bets.
How can companies remove hubris from their executive teams?
I humbly suggest by setting up environments that culture a certain amount of fear and a huge amount of curiosity. One of the best examples of a leadership team that encourages this is Amazon. Jeff Bezos is well-known for emphasizing the importance of staying paranoid and maintaining a sense of urgency.
In his 2017 shareholder letter he wrote: “Day 2 business is stasis. Followed by irrelevance. Followed by excruciating, painful decline Followed by death. And that is why it is always Day 1.”
To encourage his team to continually think like a startup, not a multi-billion dollar listed entity. And this idea then gets consistently reinforced in a multitude of ways, ranging from their choice of building names
(Amazon’s head office is named Day 1) to how they encourage executives to make decisions carefully when the outcomes are irreversible, but quickly in all other instances (the two-door/ one-door model).
These systems and frameworks were deliberately introduced to encourage healthy levels of paranoia that in turn, helped motivate a culture of curiosity.
It should not be surprising when successful innovators state that “curiosity” is mission-critical. What is surprising is how knowing this, so few boards demand their leadership teams implement systems to agitate and encourage curiosity.
Perhaps this was acceptable when we lived in a world where change was glacial. But in a world where bankruptcy may skip the slowly part and just come suddenly, boards need to stop worrying about the risks of doing business and start cultivating leaders who understand the need to adapt or die and have the curiosity and courage to attempt to do just that.
– The writer curates thought leadership events that help executive teams transform their organizations; visit coliniles.com.