Firestone Tire: Why Good Companies Go Bad

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Table of Contents

Question One
Question Two
Question three
Reference

Question One

In an organization, active inertia is a tendency to follow or stick to established patterns of behavior even in response to environmental changes. Companies tend to stick in the modes of thinking and working that had brought success in the past. Management and marketing teams trust all the activities that they have tried and have brought benefits to the company. By so doing, the performance of the company deviates from the normal to the worse. Executives, therefore, need to investigate the source and symptoms of the active inertia which is usually very common nowadays. They should realize that action alone cannot solve the problem but rather emphasize what needs to be done and also what may prevent them from doing it, what we regard as acting appropriately.

The active inertia that occurred in Firestone Tire with the introduction of radials from Michelin occurred simply because the company failed to meet the challenge of environmental change by acting inappropriately. Some of the active inertia that occurred are: First and foremost, the company did not want to destroy its relationship with its loyal customers. It considered its biggest challenge is keeping up with the increased demand for tires by its key customers. It is for this reason that they designed the company’s operation and capital allocation processes to exploit the rising demand for tires by ensuring new production capacity is being catered for quickly.

Even after introducing a strategy of investing millions of money in radial production by building a new plant meant for radial tires and converting several existing factories, it did not improve on the process. Although their response was quick it was far from effective because they stick to their old ways of working. It did not redesign its production process for the manufacture of radial tires requires many high-quality standards. Due to long-standing success and a unified sense of values, Firestone delayed in closing down many of its factories that produced bias tires even after a clear indication that bias tires will become obsolete as soon as radial tires hit the market.

Firestone chief executive officer even after realizing that radial tires last twice as long as bias tires clung to the assumption of ever-growing demand and declared that there was no need of closing the plants. Active inertia hurt Firestone Company, for example, the high stock of unsold tires, incurring costly and embarrassing product recalls, and plants running at low capacity.

The stakeholders in the organization allowed active inertia to occur because the company had become a monument to its success and therefore they saw no need to change. Also, they considered the company to have a strong and unified sense of strategies and values, relationships with employees and customers as well as unique operation and investment process.

The organization and stakeholders could have brought people with fresh viewpoints and executives not to concentrate on building loyalty by recruiting and promotion. As for the production process, new technologies could have been having applied and redesign the production process. Executives and stakeholders could have voluntarily agreed to close down the plants which were producing bias tires that were highly marketable and superior.

Last but not the least, stakeholders should have looked for new leaders from within the company but from outside the core business.

In conclusion, we should not forget that for any organization to succeed, it must build strong relationships with employees, suppliers, leaders, customers, and investors.

Question Two

The leading organizations associate their prosperity with a competitive formula which is a distinctive combination of strategies, relationships, processes, and values that sets them apart from the crowd. As business succeeds it reinforces executives’ confidence that they have found the one best way of operation and what remains is to refine and dedicate their energies to make sure they dominate in the job market.

Executive consequently becomes adamant to change and embrace fresh views and they prefer to stick to the formula that had brought success. Problems arise when the executives resist change if the environment calls for change in the company’s markets. This may affect the company negatively.

Incidentally, four hallmarks of active inertia happen.

Strategic frames become blinders

Strategic frames are the mental assumptions and mindsets that tell how the executives see the external and internal environment of the business. Apart from helping the executives to see, they can also blind them. Managers can be easily deceived that these are only things that matter and be prevented from noticing new options and opportunities.

Strategic blinders can be removed from the organization by managers being flexible and adopting any change that will help improve the performance of the company and enjoy competitive advantages over its rival companies. However, strategies that may prove to be strong may be restored to keep the company right on track.

Process harden into routines

It has been noted that once employees find the way that works well, they stick to that and they do not want to try several different ways to carry out the activity. Processes are followed not because they are effective and deficient but because they are well known and comfortable therefore becoming a routine. This condition can be removed from the organization by allowing employees to try and implement different ways of carrying out an activity of the production, reduce the cost of production as well as increase the output. However, we should not rule out the process which had been tried and proved to be effective and efficient. The process should be restored.

Relationship become shackles

Strong relationships with employees, customers, suppliers, lenders, and investors must be built if the company wants to dominate in the job market. However, when a condition to change arises companies find that their relationship has turned into shackles limiting their flexibility and consequently leading them to active inertia. The desire to maintain existing relationships with loyal customers can be a hindrance for the company to explore a new market, develop new products or improve or modify the existing ones.

The relationship of executives with employees can also hinder it from responding to environmental changes especially when the employees are not creative and managers do not want to sack them because of mutual relationship.

This can be removed if the management can impose the necessary discipline and if need be exert more control. A clear cut of employees’ roles should be spelled out. As for the distributors, the organization should promote direct sales and do away with middlemen who sometimes may be obstacles to their success.

Values harden into dogmas

Any organization’s values are the set of deeply held beliefs that unity and inspire its fraternity. It defines how employers and employees see themselves.

However as the organization grows, their values often harden into rigid rules and regulations and the once values are replaced by the cold stone of dogma.

The living values therefore can be longer inspired. To remove this, the company should make sure that the centripetal force that holds together a company’s far-flung operations should be kept intact.

In conclusion, we can deduce that active inertia brought by success can be overcome or avoided if the company has to break free from the assumption that their worse enemy paralysis.

Question three

“When business conditions change the most successful companies are often the slowest to adapt”. The quote has validity because when successful companies are confronted with disruptions in business conditions, they freeze. The contrast is that managers recognize the threat early carefully analyze its implications for their business and initiate a response, though the companies still falter even after action being taken, the underlying problem being the inability to take appropriate action.

There can be many reasons for the problem built the most common is for a company to resist change and persist in its current mode of thinking and working that brought success in their past. A good example is Laura Ashley who was a fashion designer targeting to evoke a romantic vision of English ladies tending roses at their country manors. When Laura died in 1984, Bernard took over but continued to pursue the outdated designs and processes that had several to so well in and processes that had served to so well in the past not realizing that as more women entered the workforce, they increasingly chose practical professional active over Laura. Ashley’s romantic garb afflicted with active inertia, Laura Ashley went through seven chief executive officers in a decade but the company’s decline continued.

Another example is the Firestone Tire company which decided to strike to its mode of production because it was successful even after the executives realizing that radial tires that were being produced by Michelin Tire company were marketable. Michelin Tire Company slowly penetrated the market and took over the job market.

Successful companies are often the slowest to adapt to business change because the pull of the business change is so strong. Successful companies can become stuck in the modes of thinking and working that brought them their initial success. When business conditions change, their once winning formulas instead bring failure.

In conclusion, to avoid decline successful companies should build on the foundation of the past even as they teach employees that old strategies frames, relationships, processes, and values need to be recast to meet new challenges.

Reference

Donald, N. (1999). Why Good Companies Go Bad, Harvard, Harvard Business Review.

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