Costly Lessons From Business Failures

The number one cause of failure is misguided strategy

Business failure is hard to swallow. I once founded a small software business that initially achieved some success but failed after we hooked-up with another software business whose products we introduced to our market. We failed because there were no synergies, their technology sucked (Intersolv - formerly Sage Software) and we simply did not change course.

I was reminded of this venture when I recently read an interview, "Examining the Costly Lessons from Business Failures", from Knowledge at Emory. From the interview, "Between 1981 and 2006, 423 major companies with combined assets totaling $1.5 trillion filed for bankruptcy. Hundreds more took huge write-offs, were acquired in fire sales, or just called it quits."

Paul Carroll: "There are a number of mistakes being made, but the number one cause of failure is misguided strategy—not sloppy execution, poor leadership, or bad luck. In Billion-Dollar Lessons, we break the strategic errors into seven categories, including pursuing non-existent synergies; moving into an adjacent market that really isn’t adjacent; misguided consolidations; faulty financial engineering; rollups, or buying up businesses to create a monopoly; staying the course instead of adapting; and chasing the wrong technology.

The one mistake I see repeatedly today is staying the course.

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How can a manager avoid costly mistakes and failure? Carroll recommends that a business set up an informal devil's advocate process using anonymous surveys.

Of course, since we our in the internet consulting and software development business, we see a lot of out-of-date web sites. So, one aspect of business failure can be neglecting the company website. And, it seems, the problem is with both the site's technology foundation as well as the content that supposedly represents the business.

I wonder if this could be a leading indicator of business failure?

 

 

 

 

 

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