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Competition, Sound Thinking, and Success

Businesses, in contrast to governmental agencies, have the "advantage" of needing to make a profit to survive. Unlike governmental bureaucracies, which become largely a world unto themselves, businesses must continually pass the muster of competition. Only a few, like large oil companies colluding on a world-wide basis to fix prices, are able to force everyone else to conform to their demands. Most businesses face genuine competition they must meet to survive.

For example, out of new (small) businesses, 3 out of 4 fail in the first year; 9 out of 10 over a ten year period. Failure is much more common in business than success. The market is a stern task master. This forces companies to do some critical thinking, at least enough to survive the competition.

Nevertheless, large-scale success in business, even over 20 or 30 years, is no guarantee of success in the future. When businesses become large they become bureaucratized. When they become bureaucratized, they verge toward organizational stagnation. Their thinking is paralyzed by red tape and policies and procedures that prevent growth and adjustment to changing circumstances and realities.

When bureaucratic thinking rules an organization, it tends to lose market strength and growth potential. It's earnings decline; it becomes less competitive, and rigidity becomes the order of the day. Examples include the American auto industry (from 1960-1980), Woolworth, Motown Records, the Sears catalog division, and Rolls-Royce. All significantly declined despite holding a previously strong place in the market. Each lost the spirit of innovation. Sears began to significantly decline when it failed to successfully participate in the mail-order boom and General Motors when it ignored the small-car revolution until it had lost major market share to Japanese auto makers.

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