How success sets up businesses for failure — and how to avoid the trap

<div class="bodyItems-wrapper"> <p class="yf-1fy9kyt">A version of this article originally appeared in Quartz’s Leadership newsletter. <a href="https://qz.com/newsletter">Sign up here to get the latest leadership news and insights straight to your inbox</a>.</p> <p class="yf-1fy9kyt">In Greek and Roman mythology, we get the story of Icarus, a man who received a set of wings from his master craftsman father with a warning to not fly too close to the sun.</p> <p class="yf-1fy9kyt">Then, in true rebellious youth fashion that many of us can relate to, cocky Icarus flew too close to the sun anyway. His wings melted and he fell from the sky down to a watery grave in a nook of the Mediterranean many still call the Icarian Sea.</p> <p class="yf-1fy9kyt">In 1990, Danny Miller coined the term “the Icarus Paradox” in his book by the same name, referring to the phenomenon of successful companies failing after a long period of success due to the same conditions or attributes that led to their initial success. Famous examples include Blockbuster, which was too committed to physical stores to acquire Netflix, or Kodak, which was too focused on film to embrace digital photography.</p> <p class="yf-1fy9kyt">The Icarus Paradox’s first cousin is The Stability Paradox, or organizational inertia, all of which point to a similar dynamic and potential Achilles’ heel: Businesses tend to overinvest in what already works, which can weaken adaptation over time.</p> <p class="yf-1fy9kyt">As counterintuitive as it sounds, success and stability can set up some organizations for failure. The systems and leadership behaviors that make companies successful can just as easily make it more difficult to adapt when the market changes.</p> <p class="yf-1fy9kyt">Which hardly seems fair. Stability is what most leaders are trying to create. Predictably good, repeatable results from clear processes and as little chaos as possible.</p> <p class="yf-1fy9kyt">But what if one of the bigger threats to organizations isn’t instability as much as the comfortable routine created by success?</p> <p class="yf-1fy9kyt">“The stability paradox shows up when leaders conflate repeatability with resilience,” said Daniel Alcanja, the CEO of Trio, a fintech engineering firm that helps companies build and scale financial products.</p> <p class="yf-1fy9kyt">“The systems and rules that helped you grow lock in so tightly that teams fall into habit and start to assume, ‘That’s the way we do it.’ There comes a time in most companies’ lives when structure — ‘who do I call to get this done?’ — becomes important,” Alcanja said.</p> <p class="yf-1fy9kyt">In the beginning, success often comes from founder intensity, improvisation, and close customer contact, said JD Miller, a company adviser and author of The CRO’s Guide to Winning in Private Equity.</p> <p class="yf-1fy9kyt">Miller often tells clients: “What got you here won’t get you there.”</p> </div> <div class="read-more-wrapper" style="display: none" data-testid="read-more"> <p class="yf-1fy9kyt">“Whenever we've done something that earned us a reward, it's human nature to want to do it again,” Miller said. “And so, if that founder grew my company from $1 million to $10 million in revenues and reaped the rewards, they'll tend to think that they just need to keep doing more of the same.</p> <p class="yf-1fy9kyt">“The challenge is that to take the company from $10 million to $50 million, they can't physically connect with all of those customers and prospects — and need to hire a team of people to sell at scale,” Miller said. “This requires a huge pivot from being the sole, star player to being the architect of a machine that operates predictably, even when you're not in the room.”</p> <p class="yf-1fy9kyt">Miller acknowledges the inherent difficulty.</p> <p class="yf-1fy9kyt">“It means having people who won't initially respond to customer requests as well as the founder could — and the founder will need to resist the temptation to be the first to speak, letting their new hires make the mistakes that will eventually teach them to be successful,” Miller said. “It also means that new leaders will change how things are done, evolving workflows or product offerings from the way the founder initially set them up because they're more efficient, more responsive to evolving needs, or some other reason.”</p> <p class="yf-1fy9kyt">The paradox emerges when leaders keep trying to solve the next stage of growth with the tools for the previous stage.</p> <p class="yf-1fy9kyt">Organizational ambidexterity research tells the same story: Leaders should maintain high-level execution while building capacity for adaptability to changing conditions.</p> <p class="yf-1fy9kyt">“One of the unanticipated detriments of prior long-term success is that it attracts individuals who want to continue pursuing that kind of success (they know how to achieve it and are rewarded for it) and are therefore protective over existing methods and maintaining stability,” said Diya Sagar, CFO of AWA Studios, a publishing and entertainment firm.</p> <p class="yf-1fy9kyt">“To avoid this type of stagnation, employees need to be incentivized to innovate and seek success in a new way, before the business gets left behind,” Sagar said. “If a business can show that the market and consumers are also rewarding these changes, employees will understand that their own individual success, and not just the organization's, requires them to be creative and adopt new ways of working. Over time, the same business will be operating under a new set of rules but may find that it is even more successful than before.”</p> <p class="yf-1fy9kyt">Success breeds comfort, comfort breeds routine, and routine breeds rules that people within the organization stop questioning, said James Weiss, managing director of Big Drop, a full-service digital agency.</p> <p class="yf-1fy9kyt">“Once things start working, it's amazing how quickly the focus shifts from ‘let's experiment and try new things’ to ‘let's not change anything because it's working,’” Weiss said. “You start to create internal rules for how everything gets done. Design process. Development process. Marketing process. Client communication process. And at first, it's all really helpful. Everything is more streamlined. People know what's going on. And leadership is like, ‘Ah, OK, we've finally got some structure around here.’</p> <p class="yf-1fy9kyt">“But then something subtle happens,” Weiss said. “People stop asking why the process exists. I see this happen all the time when our agency works with enterprise companies to redesign their websites. They're following a process that was created five or 10 years ago. But success also creates layers. More people to approve. More departments to involve. More people to protect the status quo.”</p> <p class="yf-1fy9kyt">The solution to this stagnation is simple, but requires effort from leadership, Weiss said.</p> <p class="yf-1fy9kyt">“If we've been successful at something for a long time, we can become resistant to trying new things because it feels risky, even disloyal,” said John Ceng, founder of EZRA, a factory-direct manufacturing partner for start-ups and small to mid-sized companies.</p> <p class="yf-1fy9kyt">“I had to push my own team to rethink things that had gotten us successful in the first place,” Ceng said. “We do little experiments, little pilots, that intentionally test our sacred processes. We don't do this to break them; we do this to stress them, to keep them flexible.”</p> <p class="yf-1fy9kyt">Managers can prevent internal stagnation “by rewarding dissent, by rewarding learning, not just success,” Ceng said.</p> <p class="yf-1fy9kyt">“We want stability to be a foundation upon which we can innovate, not a jail in which we cannot innovate,” he said. “We want to be an organization that is so stable, so grounded in who we are, that we can change the walls we built around ourselves when the market shifts.”</p> <p class="yf-1fy9kyt">Leaders can lose adaptability when they only see their business from the boardroom, said Nicola Leiper, director of Espresso Translations, a global translation firm.</p> <p class="yf-1fy9kyt">“Working in the trenches allows me to remain involved with the business rather than being an outsider who focuses solely on numbers,” Leiper said. “After 15 years, my best insights continue to come from working on the production floor versus being in the boardroom. I review approximately 10.5% of our monthly output to keep my translation skills sharp.”</p> <p class="yf-1fy9kyt">Some tips:</p> <ul><li> <p class="yf-1fy9kyt">Identify processes no one feels allowed to question.</p> </li><li> <p class="yf-1fy9kyt">Ask where the company is still optimizing for yesterday’s market.</p> </li><li> <p class="yf-1fy9kyt">Look for areas where efficiency has replaced curiosity.</p> </li> </ul> <p class="yf-1fy9kyt">Strong leadership doesn’t abandon stability, but rather makes adaptability part of stability.</p> <p class="yf-1fy9kyt">“The companies that are questioning their own processes are usually changing more quickly than those trying to hold onto tradition,” Weiss said. “Leaders should be uncomfortable with their own success.”</p> </div>