Francesca Gino

Gary P. Pisano

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  <p>Virtually all leaders recognize the need to learn from failures, but amazingly few try to understand the true causes of their firms’ successes, which helps explain why great companies fall into decline.</p>
  <p>The reality is, success can breed failure by hindering learning at both individual and organizational levels, in three interrelated ways:</p>
  <p>1. When we succeed, we tend to give too much credit to our talents and our model or strategy and too little to external factors and luck.</p>
  <p>2. Success can make us so overconfident that we believe we don’t need to change anything.</p>
  <p>3. We have a tendency not to investigate the causes of good performance.</p>
  <p>Recognizing that these impediments exist is a big first step in overcoming them. Some basic practices also can help: systematic after-action reviews, tools like Six Sigma, and experiments that test assumptions about what is needed to achieve great performance.</p>
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</article-ideainbrief><p>The annals of business history are full of tales of companies that once dominated their industries but fell into decline. The usual reasons offered—staying too close to existing customers, a myopic focus on short-term financial performance, and an inability to adapt business models to disruptive innovation—don’t fully explain how the leaders who had steered these firms to greatness lost their touch.</p>

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<p>What causes so many companies that once dominated their industries to slide into decline? In this article, two Harvard Business School professors argue that such firms lose their touch because success breeds failure by impeding learning at both the individual and organizational levels. </p>
<p>When we succeed, we assume that we know what we are doing, but it could be that we just got lucky. We make what psychologists call <em>fundamental attribution errors,</em> giving too much credit to our talents and strategy and too little to environmental factors and random events. We develop an <em>overconfidence bias,</em> becoming so self-assured that we think we don&#8217;t need to change anything. We also experience the <em>failure-to-ask-why syndrome</em> and neglect to investigate the causes of good performance.</p>
<p>To overcome these three learning impediments, executives should examine successes with the same scrutiny they apply to failures. Companies should implement systematic after-action reviews to understand all the factors that led to a win, and test their theories by conducting experiments even if &#8220;it ain&#8217;t broke.&#8221;</p>

Why Leaders Don&rsquo;t Learn from Success

What causes so many companies that once dominated their industries to slide into decline? In this article, two Harvard Business School professors argue that such firms lose their touch because success breeds failure by impeding learning at both the individual and organizational levels. When we succeed, we assume that we know what we are doing, but it could be that we just got lucky. We make what psychologists call fundamental attribution errors, giving too much credit to our talents and strategy and too little to environmental factors and random events. We develop an overconfidence bias, becoming so self-assured that we think we don’t need to change anything. We also experience the failure-to-ask-why syndrome and neglect to investigate the causes of good performance. To overcome these three learning impediments, executives should examine successes with the same scrutiny they apply to failures. Companies should implement systematic after-action reviews to understand all the factors that led to a win, and test their theories by conducting experiments even if “it ain’t broke.”

Why Leaders Don’t Learn from Success

Summary.

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