Stuck in Gear: Risk Factors of Active Inertia

Picture yourself behind the wheel, making your way up a steep, icy hill on a cold winter day. Because of your familiarity with the route, you didn't factor in the change of weather. Your car suddenly starts to lose traction, and you push down on the accelerator to power over the incline. Still, your wheels spin uselessly on the treacherous surface, and with every passing moment, you feel your momentum slipping away as your car burns fuel without making any headway.

Have you ever heard of active inertia? It's a term that describes how some companies fail to adapt to changing environments, even when they see the need for it. Sounds familiar? In this blog post, I will explain active inertia, why it happens, and how to avoid it. Let's dive in!

Active inertia is a concept that Donald Sull first introduced in a 1999 article,?Why Good Companies Go Bad, in the Harvard Business Review. He defined it as "the tendency of well-established companies to respond to strategic threats by accelerating activities that succeeded in the past".

Active inertia is an organisation’s tendency to follow established patterns of behaviour—even in response to dramatic environmental shifts. Stuck in the modes of thinking and working practices that brought success in the past, market leaders simply accelerate all their tried-and-true activities. In trying to dig themselves out of a hole, they just deepen it.

For example, consider a company that sells high-quality cameras. They have a loyal customer base, a strong brand, and a profitable business model. However, a new competitor entered the market one day with a cheaper and more convenient product: a smartphone with a built-in camera. The customers start to switch to the new product, and the camera company sees its sales decline. How does it react?

One way to stay ahead of the game is to explore new and innovative approaches that can help you meet evolving customer demands. By taking a fresh look at your core strengths, value propositions, and target audiences, you can experiment with novel concepts and introduce exciting new products or services that will keep your customers engaged and satisfied. With a constructive mindset, you can embrace change and adapt to new challenges while staying true to your brand identity and vision.

Another course of action would be to rely on the firm's inherent advantages, such as double-down on the marketing budget, refining the quality of products, and cutting costs to stay competitive against emerging competitors. This strategy hinges on leveraging the company's capabilities, operational procedures, and corporate ethos.

The second response is an example of active inertia. Refraining from acknowledging and responding to changes in the market conditions and customers' evolving preferences can lead to a detrimental feedback cycle that hinders learning and adaptation. It is crucial to stay alert and agile to avoid getting trapped in such a loop and ensure continuous growth and progress.

So why do companies fall into active inertia? Sull identified four main reasons:

1. Strategic frames: These mental models guide how managers perceive and interpret the world. They help them filter information, identify opportunities and threats, and make decisions. However, these frames can become outdated and misleading when the environment changes. They can blind managers to new realities and prevent them from seeing new possibilities.
2. Processes: These routines and procedures coordinate and standardise the organisation's activities. They help managers execute their strategies efficiently and effectively. However, these processes can become rigid and inflexible when the environment changes. They can lock managers into fixed behaviour patterns and prevent them from responding quickly and creatively.
3. Relationships: Managers use ties to their stakeholders, like customers, suppliers, partners, employees, and investors, to establish trust, loyalty, and commitment. However, these ties can become limiting when the environment changes, as they may bind managers to existing expectations and obligations and prevent exploring new options.
4. Values: These are the beliefs and norms that shape the culture and identity of the organisation. Managers often rely on values they hold dear to guide their actions. However, it is essential to note that these values can become inflexible and outdated when the environment shifts, impeding progress towards new goals. Therefore, managers must remain adaptable and open to change to navigate shifting circumstances and drive their teams towards success.

These four factors form what Sull called "the success syndrome". They are the sources of competitive advantage for successful companies, but they can also become sources of inertia when success breeds complacency, arrogance, or denial.

So, how can companies avoid active inertia? Sull suggested four strategies:

1. Reframe: This means challenging and updating the strategic frames that guide decision-making. Managers should constantly scan the environment for change signals, question their assumptions, and seek diverse perspectives. They should also be willing to experiment with new ideas and learn from failures.
2. Reprocess: This means adapting and modifying the processes that enable execution. Managers should balance efficiency with flexibility, standardisation with customisation, and control with empowerment. They should also encourage innovation and creativity at all levels of the organisation.
3. Reconnect: This means redefining and expanding the relationships that support collaboration. Managers should listen to their customer's needs and wants, collaborate with their partners' strengths and weaknesses, and engage their employees' talents and passions. They should also seek new alliances and partnerships to offer new capabilities or access to new markets.
4. Redefine: This means revising and renewing the values that inspire action. Managers should align their values with their vision, mission, and strategy. They should also communicate their values clearly and consistently to all stakeholders and ensure they are reflected in their behaviours and actions.

With these strategies, managers can break free from active inertia and unlock their potential for strategic agility. They will be able to detect and adapt to environmental shifts, take advantage of opportunities that arise, and revitalise their organisation for long-term success.

It is not uncommon for successful companies to face the risk of active inertia, which can ultimately lead to stagnation or even extinction. It is crucial to embrace strategic agility through reframing, reprocessing, reconnecting, and redefining to avoid these potential pitfalls and remain competitive in a constantly evolving landscape. By thoroughly reexamining and adapting critical aspects of business operations, companies can successfully navigate the challenges of a dynamic world and continue to thrive in the long term.

That's it for this blog post. I hope you found it helpful and thought-provoking. If you have any comments or questions, feel free to leave them below. Thanks for reading!