Business Fears: The Most Off-Putting F-Word
The F-Word that can stop you in your tracks is not literally profane, but it certainly has a way of bringing profanity to mind. Tangible fear justifiably puts our instincts on high alert. Fear, on the other hand, is often comprised of gray matter. Nevertheless, it can be just as dangerous and formidable because it can immobilize business evolution and disrupt progress. Business fears, in short, are obscenely dysfunctional.
There are many companies that have come to embody fearlessness and, in turn, disruptive innovation. But there are many others that have fallen prey to fear-driven complacency, never seeing the cue ball coming, and missing key opportunities as a result.
To be blunt, I believe every industry has its share of complacent companies and executives. I saw it years ago in the brokerage industry and I see it today in the publishing industry. When executives cower to fear, and its sister, complacency, they stifle progress and disrupt the natural evolution of business. The danger here is when arrogance and narcissism takes root in upper management. Their retreat or inaction redefines fear with the vanilla mantra of “let’s not upset the apple cart.” My take is,
if upsetting the apple cart is even an issue in the first place, you may as well be on the offensive now, rather than be on the defensive later.
Here are two examples of business fears, from my own experience. They illustrate how fear of change can whip the smart and the powerful, despite their ability to proactively whip it instead, to their own advantage:
When I was a securities analyst, we placed one of the companies I followed onto the prestigious U.S. Priority List, the top Buy recommendation and an unlikely feat for a small-cap stock in the niche market of manufactured housing. Being the industry’s number four or five, this company’s recent acquisition of number two catapulted it to new heights and expectations.
At an analysts’ breakfast, I asked the CEO a routine question, “Are you on track for first-quarter earnings results?” He replied, “We’re on track to meet consensus estimates for the full year.” That was a signal to me absorption costs were higher than expected; if 1Q earnings came in below my estimate, the stock would tank.
After the company ignored my follow-up phone calls all week, I urged my research directors to allow me to take it off the Priority List with what I thought were valid arguments to back up such a decision and save our investors’ asses. They declined. I begged for two days. They still declined. They were fearful. Of what? Of a young female analyst being wrong and getting egg on their face.
What happened? A day after my bosses turned me down the second time, the company told the whole Street to expect disappointing results. The stock tanked. Guess who had egg on their face? Me. Because I never divulged to angry traders and institutional investors how hard I fought to prevent this, and how the smart men above me were to blame with their resistance to take a bold stance.
It’s a fascinating phenomenon, watching powerful executives make cowardly decisions.
In the world of book publishing, another example of fear looms. One company with swagger from an inflated stock price, and the arrogance that goes along with it, instills fear over the entire industry, bullying distributors, publishers and authors alike, and causing unnecessary disruptions to content flow.
What would happen if the bullied partners in today’s publishing industry stood up to the 800-pound gorilla with a bold, unified stance? There would be a dearth of popular book, ebook, or audiobook content for the gorilla to sell, as well as distributors to fulfill customer orders–a paradigm shift toward the content creators, where it belongs. Why doesn’t the publishing industry stand up to the gorilla? They fear change. That’s unfortunate because they’re large enough themselves, and cash-rich to boot. They can easily transform their business model to go directly to their readers. The gorilla has become a greedy and unnecessary middleman.
But large publishers seem immobilized by their fear of upsetting the apple cart. Perhaps, after seeing one emboldened company finally standing up to the gorilla, others may swallow their fear, put on their capes, and save their industry from chaos.
Fear affects all of us. Executives are only human, after all, and fear affects them too. But when corporate executives allow fear, or its sister, complacency, to steer the company ship, the ripples they float on today may grow into a tidal wave of potential disaster tomorrow, as in the above examples.
Instinctively, we should fear what looks us in the eye because we have no choice but to defeat it. Intellectually, we should never fear the gray stuff because it’s still evolving and we often have time to outsmart it.