In most organizations, senior executives dominate planning and resource allocation processes and therefore have disproportionate share of influence over key decisions. Problem is, when you concentrate the responsibility for setting strategy and direction at the top of the company, you give a small group of long-serving leaders the right to veto change—and they often will, since most of their emotional equity is invested in the past. Nostalgic CEOs will often resist the need to revisit decisions they made years earlier, or will cling to a beloved business model long after it’s lost its competitive vitality.
Empirically, we know that deep change is usually precipitated by a crisis, or a long period of under-performance, and that it usually takes a change in leadership (aka “regime change”) to set a company on a new course. In other words, strategic realignments are infrequent, belated and convulsive—just as they are in totalitarian states, and for the same reason: too much power vested in the “party of the past.”
In a world of accelerating change, we can no longer tolerate top-down organizational models in which the gating factor on the pace of change is the willingness of a few senior executives to write off their own depreciating intellectual capital.