Most companies are run by highly intelligent people, and it's usually those smart people's flawed thinking that ends up costing the business.
There are many famous examples of this – Kodak and Blackberry, to name just two – but there are many more companies that go bust without anyone noticing.
In fact, the average lifespan of a company listed in the S&P 500 is just 15 years (that's down from 67 years in the 1920s).
It's easy to think that these leaders simply weren't paying attention – after all, you wouldn't let something catastrophic happen to your own business, would you?
It turns out, that sort of thinking is exactly the reason why many companies fail; when leaders think that their businesses – and they themselves – are untouchable. That's when disaster is most likely to strike.
This comes from new research done by Sydney Finkelstein, a professor at Dartmouth's Tuck School of Business, and recently published in his book, Why Smart Executives Fail. He spent the last six years questioning the management teams and CEOs responsible for over 50 of the business world's most spectacular failures.
Finkelstein wanted to explore the minds of these key executives and find out what led them to make the decisions that ultimately cost them their companies.
He found that while the poor decisions that leaders make are either preventable or accidental, each came from a place of hubris; the leaders took success for granted. They believed that their competitors would never catch up, that market conditions would never change, or that no disruptors would ever rise to challenge them.
Of course, there's nothing wrong with having lofty goals for your business, or a healthy amount of pride for your wins – but over time, it's easy to view your success as absolute. This is unrealistic at best.
Finkelstein found that the best leaders never let themselves fall into the trap of permanent self-gratification. The best leaders (read: those who didn't run their businesses into the ground) continually question their positions, and never let themselves get too comfortable. Especially when they thought they were on top.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.