From Winners to Losers in Record Time

A year ago, the company was flying high, with an enviable stock price and drooling press coverage. Then things went south: The stock price dropped by sixty percent amid stiff competition, production backups, and supply-chain problems—followed by layoffs and stakeholder criticism. 

This year alone, the same fate has come for a major tech manufacturer, a dominant pharmaceutical company, and multiple A-list tech companies. And it’s a reality for a dozen or so Fortune 500 companies every year, most often in healthcare, tech or retail. “Their slip back into mediocrity is not an aberration,” says Marnix Boorsma, senior client partner at Korn Ferry. “It’s the default.” 

Talking heads on news shows attribute the situation to contextual factors like market conditions, competition, and regulatory pressures. But experts say the reality is often that the company has calcified internally. A firm that was once a risk-taking machine achieves success, then narrows its focus to repeating that success. Employees are encouraged to do more of the same and to protect the flagship product line. Soon enough, complacency reigns.

“The very people once selected for boldness now find themselves rewarded for preservation,” says Boorsma. As the Dutch management scholar Manfred Kets de Vries has suggested, success often leads to narcissistic corporate tendencies, blame, overconfidence, and denial of problems. The firm becomes internally isolated.

In the Eighties and Nineties, such falls from grace tended to occur slowly, over the course of a few years, which gave some companies time to reverse course. Today, they can happen within a couple of months. “Industries are operating at a pace of transition that has never been seen before,” says Matt Bohn, senior client partner in the Technology practice at Korn Ferry. Competitive threats can creep up within a matter of weeks, sometimes from new, slapped-together executive teams facing few barriers to entry. This unexpected surge of competition often emerges just as leaders at the successful company are enjoying a victory lap. “Executives become a bit of their own worst enemies,” says Bohn. 

Even firms that avoid these pitfalls can face structural challenges. Dominance is a drag—literally: It taxes infrastructure, supply chains, and endurance, say experts. Meanwhile, a company’s myopic concentration on its leading product line can divert its attention from the pipeline of future services or merchandise for years to come. 

Still, experts say the slide from winner to middle of the pack is not fated. They note that companies with a dominant market share often have enough time and resources to develop alternative products, as well as devise fresh tactics for the current market. Bohn encourages firms to maintain a culture in which people want to stay and grow—and to notice and respond if talent begins jumping ship. “If you’re not obsessively leaning in and transforming and looking for new opportunities, you flatten out,” he says.

Learn more about Korn Ferry’s Organizational Transformation capabilities.

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