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Failure factors
The top 7 reasons things go wrong.
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By Annette Bourdeau


1. Flawed strategy: 

Even perfect execution can’t save a bad plan or one based on faulty assumptions. For their book “Billion Dollar Lessons,” Chunka Mui and Paul Carroll studied 2,500 large business failures over the past 25 years. “The most surprising result was that almost half stemmed from poorly designed strategies, as opposed to poor implementation or market factors beyond the company’s control,” says Mui, managing director of Chicago consultancy The Devil’s Advocate.

 

2. Underestimating the challenge: 

If there’s one rule in business, it’s “easier said than done.” Mui says companies frequently overestimate their abilities. He points to school-bus firm Laidlaw’s rocky foray into the ambulance business in the 1990s as an example. Laidlaw thought it could seamlessly transition into a similar market, and assumed that its expertise in transportation justified an expansion into ambulance operation, without realizing that ambulances have complex regulatory issues because they’re considered a health-care business. The firm wound up losing billions because it didn’t take the time to validate its assumptions.

 

3. Lack of governance:

Brad Desaulniers, a corporate-turnaround specialist based in New Westminster, B.C., cites this as the most common cause of failure. He defines governance as the process of individuals being held accountable: everyone answers to someone, even the boss. At a smaller company that doesn’t have a board of directors, says Desaulniers, the owner should always involve someone else in decision-making processes. “It’s about making sure each decision is transparent and reviewable,” he says. “If the circle of accountability doesn’t close, failure is likely.” Another corporate-turnaround specialist, Washington, D.C.-based Earl Smith II, who has worked with companies such as Paramount and Warner Bros., calls lack of account- ability “the core of failure.”

 

4. Refusal to adapt: 

Mui and Carroll name this as one of the top seven ways to fail big. They point to Kodak as an example of a company that hurt itself by desperately clinging to its original core offering (film) while ignoring the future of photography (digital). The company didn’t take digital photography seriously until after 2000—some 20 years after the technology emerged—and, as a result, has lost 75% of its market value over the past decade.

 

5. Failure to plan: 

A great idea is meaningless unless you have an execution plan in place—particularly with entrepreneurs, who have a “go-go-go mentality and don’t take the time to do business cases,” says Barry Linetsky, partner at Toronto-based consultancy The Strategic Planning Group. “Projects sort of bounce around, and they don’t get the results they wanted in the end.” Linetsky recommends adhering to project- management fundamentals, such as establishing the project’s objectives from the outset and determining who’s in charge of what, what the budget is and when everything needs to be done by. Creating a road map makes you think about which kind of resources you should allocate to the project so your team doesn’t run out of money. “Think things through before you begin,” says Linetsky. “It can be expensive to wing it.”

 

6. Poor leadership: 

Failing to empower and motivate employees is a leading cause of failure, says Charles Manz, author of “The Power of Failure.” He has studied the “human side” of leadership—for example, how a leader’s attitudes and emotions toward setbacks impact a company’s ability to overcome challenges. If, say, a leader appears downtrodden and too ready to give up when things start going badly, the whole team becomes demoralized and the chances of turning things around diminish significantly, says Manz. “Put your emotions in check and pick yourself back up,” he advises. “You’re supposed to be inspiring everyone.”

 

7. Gaps in communication: 

Sometimes project teams can get so focused on a launch that they forget to communicate their plans to other departments—the ones that will be instrumental in carrying out the plans once in-market. For example, if a marketing team spends months developing a special offer but forgets to bring the retail and procurement staff into the loop, the company may not be able to deliver on what has been promised to customers—and the offer, says Linetsky, could wind up doing far more harm than good. 


Originally published by PROFIT Magazine, Visit PROFITguide.com.


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