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Posted: November 01, 2011

Seven symptoms of “Executive Think”

The Netflix debacle is a good example

John Heckers

Netflix's stock is rapidly becoming almost worthless, thanks to the failures of its executive team. Todd Ordal recently wrote a great article called "Netflix's CEO: Traitor or Hero." While I understand and appreciate Todd's point about leaders needing to make difficult and controversial decisions, I also think that (Netflix CEO) Reed Hastings and the debacle at Netflix is emblematic of a large problem in American businesses - "Executive Think."

"Executive Think" is the tendency of the people at the top (of a business or a country) to surround themselves with others who think in dysfunctional ways that have little to do with the real world. Here are some symptoms of Executive Think.

1). An overly optimistic view of the company or organization. Those in the executive suite tend to see their company as being able to run faster and jump higher...and even leap tall buildings in a single bound. This is often delusional, sometimes pathologically so. As stock plunges (as Netflix stock has been doing) and customers scream, many of the good ol' boy networks pat one another on the back and tell themselves they're doing a "heckuva job."

2). Inability to change direction. Today's business environment requires a speedboat, not a battleship. Larger companies (and many smaller ones) persist in counter-productive behaviors long past the time they should recognize a problem and take counter-measures.

3). Lack of a customer center. Executives often neglect to poll customers or do research on customer reactions to company moves. They frequently discount warnings of negative reactions to company moves (New Coke and Quickster, for example), and underestimate the reaction on the part of customers.

4). Underestimating negative customer reaction impact on the business. Netflix executives knew there would be some negative customer impact to their pricing plans. What they underestimated, and what many businesses underestimate, was the degree to which such negative customer reaction would hurt their business.

5). "Foxhole mentality." When a company gets in trouble, rather than face the issue, many executives hunker down in the "foxhole" and come up with dysfunctional explanations for why their "great" idea is tanking hard. The reasons they come up with are rarely the correct ones, and usually add to the problem rather than solve it.

6). Lack of understanding regarding finances of the majority of people. "Broke" for many executives means that they're down to their last $5M. There is a general "let them eat cake" attitude among many executives that assumes the rest of the country, when they say they're broke, actually has a great deal of assets. The 90% of Americans who are not at the top are facing very real financial issues. Companies like McDonalds and Denny's who understand this, and offer their product at a very low price, are doing much better than companies that are unconscious to this fact. But executives tell themselves that they just need to make their product more attractive and people will "find the money" to buy. This may be true in good times. It is not in our current economy. Pro-active companies take the financial climate into account before making pricing decisions.

7). "Group-think." It can be very dangerous for an executive to raise these issues in the executive suite. Rather than being rewarded for wisdom, the dissenting executive is likely to be ridiculed or even fired. They'll be seen as a traitor who is just "thinking negatively." In executive suites, any introduction of reality is pilloried as "negativity." This keeps executives from facing very real problems in the real world, and can result in the downfall of the whole company...with everyone remaining "positive" until the massive lay-offs start.

The solutions to these issues of Executive Think are not easy. In fact, as stated above, an executive who breaks ranks with this kind of thinking might well become unemployed. Restricting "incestuous" board memberships, having outside advisors (the proper role for a board), and constant customer input can help. In the end, though, it is business Darwinism. Those companies that persist in operating in Executive Think will, sooner or later, go extinct. Those who overcome it are the next stage of corporate evolution.

Are you in the management or executive ranks and looking to network with those who have great job leads. Please join me and up to 30 of your colleagues at Structured Networking November 14th. Registration and more information here.

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John Heckers, MA, CPC, BCPC was an Executive, Relationships, Life and Spiritual Coach in Denver with 30 years of experience  helping people with their lives, relationships and careers.

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Readers Respond

Fair enough Bart (Publisher). I actually do think that, if other market forces behave themselves, Netflix will time. BUT, Netflix has certainly harmed its brand with many of its customers. The ongoing issues I see that Netflix will need to overcome are: 1). Bandwidth restrictions by Comcast and other cable companies. Netflix's streaming business competes with their "on demand" business. I think we may well see some restrictions to customers, or a surcharge for customers using high bandwidth. 2). We DO stream Netflix, BUT, their selection for streaming is very limited. They need to expand their selection and include movies that are younger than my 25 year old daughter. Their selection is pretty bad on the streaming side now. 3). More creative and cheaper "on demand" services from the cable companies...along with partnerships like Blockbuster forged with Dish. 4). The availability of proprietary shows from the premium cable channels. 5). Netflix has also GOT to fix its lousy customer service. Even Comcast, which is known for not taking care of customers, is doing a bit better job. I think that, for companies, the real differentiator in the future will be how well they take care of their customers. Netflix needs to move rapidly on lots of this stuff. Hopefully, for them (and us, as we like Netflix), they'll get out of the executive think and make some needed corrections and get creative in marketing and delivering their product. By John Heckers, MA, CPC, BCPC on 2011 11 02
John, great examples, generally, of insular thinking. I've witnessed some first-hand. I also enjoyed Todd's article - and tend to think Hastings will emerge more intact than you infer? Certainly Netflix's stock should make a comeback of sorts. I've heard Hastings communicate his vision. It's compelling. Much of it rests on the one constant in technology, proven true time and again - Moore's Law. Though some have it slowing (finally), the bandwidth gains forecast through 2020, say, suggest that we can't even imagine the streaming capabilities we'll experience at home in the coming years. Streaming is Netflix's future. Coca Cola recovered; will Netflix? I wouldn't bet against it. By Publisher on 2011 11 01

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