Have you heard of a psychological phenomenon called “Repetition Compulsion”? This was a theory developed by Sigmund Freud. While studying his patients he found that many of them keep on repeating events or circumstances despite the fact that these events and circumstances have had a negative impact on the lives of the individuals. This included re-enacting an event or even recreating actions that would
lead to an event which had happened in the past.
This theory explains the logic behind some people who have had an abusive relationship continue to seek to continue the relationship or if it is broken, look for a partner with similar nature of abusive pattern. People in general find comfort and contentment in repeating an act even if it means it does not bring in the required result for them.
This theory holds good in the business and corporate world too. We are all familiar with business houses and business tycoons making a fortune by building up businesses from scratch. When they started their business certain strategies and plans were followed and since they produced the desired results, the CEO or the Chairman of the Company now feels that it is not necessary for them to think of a new theory or new management concepts.
Strategy and Timing
It is important for us to remember that every strategy has its time and place. A strategy which was successful in the 1990s will not be effective in the current times. A successful strategy is one which it executed on time and under the right circumstances. The timing of the implementation of the strategy can make the difference between success and failure.
There are of course innumerable examples of how strategy and timing resulted in the success of the business. In the current era, examples of Airbnb, Uber, Amazon are all examples of right timing leading to success of a business. Companies which did not time their strategy well, always find themselves on the wayside. Blackberry, perhaps is a classic example in the recent past. While it was a sensational success when it was launched, it failed to see the changes in the technology and the way the customers accepted the touch screen phones from Apple. They failed to review their native operating system and found it too late to change with the IOS and Android operating systems flooded the market and made the Blackberry operating system obsolete.
Family run businesses and Strategy
There are many businesses, especially family run and individual centric business which have had tremendous success when they start and over the time grow up to be a sizeable company with impressive turnover and high staff strength.
Family run businesses are a quintessential part of any economy. You can find family run business anywhere in the world – be it the Italian mafia or the giant Reliance Group of India. According to a study conducted by Insead Business School, family run businesses account for 70% of the global GDP and 60% of the global employment. They contribute a significant role in the value creation and the global economy.
Deloitte’s extensive research published in September 2019 found that “family business tend to lean towards a long term view rooted in their shared values, vision and culture, which can help them maintain family control over many years. However, family ownership alone does not guarantee business longevity”. In the research Deloitte interviewed 792 executives from 58 countries about the challenges and opportunities they face. Retaining family ownership is a key element in their long-term goals, yet only 41 percent feel confident in their success plans. (Global Family business survey 2019:Long-term goals meet short term drive – Deloitte).
While the Deloitte survey mentions that family ownership alone does not guarantee business longevity, there are some companies which have been in existence for many generations. Houshi Ryokan is a hotel chain that was founded by the Houshi family in 718, in Japan! It has been owned and managed by the Houshi family for forty six generations spanning over 1300 years!
Japanese companies dominate the list of the oldest companies in the world. In fact the oldest family owned company was a construction company Kongo Gumi Co Ltd. It was the worlds’ oldest and continuously ongoing independent company operating for 1,427 years! Unfortunately in January 2006 it became a subsidiary of Takamatsu and thus lost its independence.
According to a popular Chinese proverb, “Wealth does not pass three generations”. The first generation builds the organization virtually from scratch, braving all odds. We have heard of stories of how the wealth was built up by the first generation facing severe hardships and financial constraints. It is this generation that has a strong faith in the way they have built the business and believe strongly in the strategy they have followed to be the foundation of the success in the business. They believe that the various strategic directions the company has taken during their tenure and which have proved successful have to be continued.
Repetition Compulsion
It is at this stage that generally the family run business face the repetition compulsion. The first generation patriarch, who would have now ended up as the Chairman of the Company would strongly advocate the continuation of the traditional processes and strategies and would be reluctant to implement anything new. In line with the Freud’s theory of Repetition compulsion, they continue to practice the processes and strategies which brought them the initial success.
As a management consultant I have faced innumerable obstacles in convincing these first generation entrepreneurs that the strategies of the twentieth century will not work in the twenty first. I have demonstrated to them scientifically how aligning with the new norms is important. Some of these recommendations are received by these entrepreneurs with strong reservations and often agreed to be implemented half-heartedly.
As there is no management buy in for the strategy, in most cases they fail giving the first generation entrepreneurs the “aha” moment and an opportunity to say “I told you”!
Because of this ‘Repetition Compulsion’ syndrome which clouds their judgement and turn them to an ostrich who is buries itself in the sand refusing to see the change in the winds. The ‘Repetition Compulsion’ ensures that the businesses are stuck in a timeline and unless there is a change in the thinking process of the first generation entrepreneur or the second generation takes over the reins of the company.
Conclusion
Sigmund Freud’s theory of ‘Repetition Compulsion’ clearly establishes that even in business executives implement certain strategies and processes because it was proven successful in the past – ignoring the fact that times have changed and strategies of yesterday do not work today .
Change is the only constant which needs to be embraced.
“Progress is impossible without change. And those who cannot change their minds cannot change anything” – George Bernard Shaw