Disclaimer: this blog-post is somewhat of a rant.
Reading Carroll and Mui’s article “7 Ways to Fail Big”, my interest was first piqued right at the very beginning when the authors, in their research, claimed to have identified that “seven strategies accounted for failure, and evidence of their inadvisability was there for the taking”. This, coupled to the advice that flawed strategies and not inept execution accounted for failure, instantly had my curiosity. I really wanted to learn about these condemned strategies that heralded dark prophecies of imminent doom.
Reading through the articles and examining the articles, I realized that the strategies identified by the authors had equal potential to fail or succeed thus waylaying claims that they always led to organizational demise. The key to failure lay in some other factor, and not in the choice of the strategy itself. I scrutinize each one of them below in more detail.
The synergy mirage:
The basic concept here is that the sum is not always bigger than the parts. Very true, and the article gives great examples to back up that point. However, chasing synergy is not always a bad strategy. The merges between Disney and Pixar and Exxon and Mobil are proof that, given proper direction, mergers can be successful and the emerging organizations are leaner, more efficient and more profitable.
Faulty financial engineering:
This seems a misnomer in itself as hardly any company would have a strategy of “faulty” financial engineering. While poor financial engineering might lead a business towards long-term failure, a strategy of financial engineering - if implemented properly - can bring about enormous rewards. The success of financial services firms like Merrill Lynch, Goldman Sachs and Fisher Investments is a testament to that fact.
Stubbornly staying the course:
“Why fix what ain’t broke”? At times, sticking to core strengths is necessary for a company’s continued success. The New Coke fiasco that Coca Cola went through, and the 26% devaluation of Philip Morris’ stock on Marlboro Friday serve as reminders of that fact.
While attempting to tap into pseudo-adjacencies can be potentially debilitating. Smartly done, however, adjacencies can have an immense positive impact on organizational revenue growth and operational efficiency. UAE-based airline Emirates has integrated across industries into airport and facilities management, tourism operations and cargo services to build a leaner cost structure and a diverse products and services portfolio.
Bets on the wrong technology:
The identification of a “wrong technology” is best done with the benefit of hindsight, which is what the authors are inadvertently accomplishing in their article. Betting on technology is always a gamble that has to be companied by sound marketing and advertising efforts. At the time of their launch, products like the Sony Walkman, Apple iPod or Toyota Prius seemed destined to failure as strong market demand did not exist – they seemed like the “wrong technology”. A workable idea, coupled to the right implementation, can change any “wrong technology” to the “right” one.
Rushing to consolidate:
At times, rushing to consolidate is the smartest thing a company can do. Google best personifies this “first mover’s advantage”. Google’s timely consolidation in the digital market with vital purchases like Android, YouTube and NestLabs ensured them a strong foothold in fledgling markets which entitled them to greater leverage in the future.
Roll-ups of almost any kind:
Roll-ups, like mergers and acquisitions, can create an organization that is leaner and more focused. The roll-up of GE’s numerous businesses into six macrobusiness units encouraged efficiency and increased strategic focus.
In conclusion, the strategies indicated in the article can account for both, success and failure. The path taken depends on the implementation of the strategy, timing and several other external environmental and economic factors.