10 great companies that lost their edge

interns Contributor
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There are a few, but many of the world’s top companies in 1985 have foundered, shrunk, grown obsolete, or been acquired by rivals that grew stronger. General Motors and Ford, the world’s two biggest carmakers in 1985, spent the last decade in a dizzying tailspin, bleeding cash, losing market share, and struggling to turn themselves around. Venerable industrial firms like ITT restructured and drifted down the Fortune 500, while Wal-Mart, Verizon, banks, and technology firms displaced them. Digital Equipment and Wang Laboratories, once leading computer firms, disappeared completely. Even resurgent titans like Apple and IBM stared into the abyss of irrelevance and made painful changes before clawing their way back to the top.

Most companies, of course, never get to the top, and the few that do find it daunting to stay there. Vijay Govindarajan, a professor at Dartmouth’s Tuck School of Business and co-author of The Other Side of Innovation, says successful companies tend to fall into three traps that make the glory days fleeting. First is the physical trap, in which big investments in old systems or equipment prevent the pursuit of fresher, more relevant investments. There’s a psychological trap, in which company leaders fixate on what made them successful and fail to notice when something new is displacing it. Then there’s the strategic trap, when a company focuses purely on the marketplace of today and fails to anticipate the future. Some unlucky companies manage a trifecta and fall into all three traps.

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