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Your Leadership on the Line: Four Business Lessons from National Turmoil

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It would be insensitive to the point of crassness to compare the current travails in the Middle East and North Africa with the daily experiences which we in the West are typically exposed to.

It would also be naive in the extreme to pretend that there are precisely zero similarities between running a country and running a large organization.

Turns out that in fact, any group of two or more people who are working toward common goals (not just nations and companies) go through the exact same seven stages of development. Here they are:

Predictable Success lifecycle

This isn't the time or place to examine all seven stages, so I want to focus on what we've so clearly seen over the last few weeks -- the final stage, which I call Death Rattle.

We've seen the Death Rattle of a number of regimes in the recent past -- most spectacularly the collapse of the Soviet Union and the fall of the Berlin Wall, and similarly we can all recall (perhaps have personally experienced) the Death Rattle of major organizations: Enron, Arthur Andersen, Bear Stearns, Lehman Brothers and others. We've also watched as other organizations avoided Death Rattle only through colossal intervention -- GM and Chrysler being prominent examples.

Strangely enough, studying the Death Rattle stage in itself yields few clues about how any group -- whether organization or nation -- got there. Aside from the triggering event (commodity prices and grinding poverty in many countries recently, the financial meltdown and/or fraud in many industries in 2008-2010), there isn't much to learn from the final events in the collapse of a company or a country.

The real lessons come from studying the stage immediately before collapse -- the stage that I call "The Big Rut." It's only from examining what happens here that we can truly understand what leads up to, and causes, the final collapse of any endeavor.

As you can see from the graph above, there are only two steps from being at the peak of development (the stage I call "Predictable Success") to falling into Death Rattle: "Treadmill" and "The Big Rut." Treadmill is a perfectly normal (though sub-optimal) stage in any group activity -- a stage where systems and processes have begun to choke entrepreneurship, risk-taking, adventure and creativity. Most relationships of any duration hit a period of Treadmill, when each party is to a degree going through the motions. The US and much of Western Europe is in Treadmill. And every organization that has experienced success will unavoidably slip into Treadmill -- just think of what it's like to deal with your bank, or your cable company, for example.

The Big Rut is another matter entirely. Because Treadmill is a natural, if unwished stage in development, any group -- a company, nation, family, even a sports team -- can recognize the situation they're in, reverse course and recover to Predictable Success. However, once you're in The Big Rut there's no going back. While it may take a very long time, and the decline may seem glacial (though not always -- sometimes an organization can hurtle through The Big Rut), once you're in The Big Rut, you're toast. Death Rattle will follow, sure as night follows day - it's literally just a matter of time.

Here are the four defining characteristics of an organization that has fallen into The Big Rut -- four flashing red lights for leaders in any organization:

1. They've established a monopoly or near-monopoly

It might be called "autocracy" in the world of nation-building, and in business it might be called "large market share," but however it's defined, organizations in The Big Rut typically have supra-normal control of their competitive environment.

2. They have (relatively) prolific revenue streams

This point is often connected with the first, especially in business where high market share usually translates into high revenues. In the case of nations, the prolific revenue stream most often comes from natural resources (oil, diamonds, cheap labor). The size of the revenue stream and its sustainability is one of the key factors in determining how long The Big Rut stage will last -- think Microsoft and the Windows / Office franchise.

3. They have a paternalistic attitude toward their market

Leaders of organizations (and nations) in The Big Rut believe that they know what's best for everyone else in their ecosystem. They may act benignly or not, and their attitudes may or may not lead to ethical and moral calamity, but either way, for good or ill, they dictate to their people, their customers, suppliers, employees and stockholders.

4. The have lost the power to self-diagnose

This is the defining difference between regimes and businesses in Treadmill and those in The Big Rut: an inability to read the writing on the wall -- self-denial, if you will. While an enlightened leader in Treadmill can see what's happening and reverse the process (in business, by lifting the choking hand of creeping bureaucratization), in The Big Rut, those in power actually like things the way they are -- they don't want change, and resist it at all costs.

So there you have it: High market share + Prolific revenue stream + Paternalistic management + Denial = The Big Rut.

Many well-known organizations evidence one or more of these attributes - BP, Microsoft, Apple, Google, Goldman Sachs to name but a few who have been in the press in recent months. The challenge for their leaders - and for you, if you lead an organization - is to ensure you don't exhibit all four. As many regime leaders have found in recent weeks, that combination, inevitably and eventually, leads to Death Rattle.

Want to know how close you are to Treadmill, or (gulp) The Big Rut? Take the Predictable Success Lifecycle Quiz.