Two of the business thinkers I admire most are Jim Collins and Jason Jennings. Collins has written two books in which he explains how certain companies are built to last and how other companies have been able to make a "leap" from good to great. Jennings has written several books in which he explains what all high-performance companies share in common, with two of their attributes being that (a) they have a bold, compelling vision but also "nail the fundamentals, and (b) produce more and better with fewer resources and do it faster. There are important lessons to be learned from business success but, as Paul Carroll and Chunka Mui explain in their book, there are valuable lessons to be learned from business failures. For example, rather than because of lack of execution, poor timing, or bad luck, "many of the of the really big failures stemmed from bad strategies. Once launched, the strategies were doomed to fail, and these failures probably could not have been prevented by even spotless execution - unless the implementers were licensed to kill the strategy itself." That said, are doomed strategies avoidable or are fatal flaws only recognizable in hindsight? To answer this question, Carroll and Mui embarked on rigorous research the "billion-dollar lessons" they learned are provided in this volume.
Among their most interesting revelations is that failures tended to be associated with one of seven types of strategy. "Failures could certainly happen for other reasons, but if a company followed one of these strategies it is far more likely to fail." Here's where it gets really interesting. For as long as I can remember, all of these strategies have been included among those that organizations are most likely to select: synergy, financial planning, rollups, "staying the course," adjacencies, "riding" technology, and consolidation. Carroll and Mui duly acknowledge the merits of each and the fact that they have served many organizations well. So what's the problem? In many instances, excess is the root cause. For example, overestimating the potential benefits of mergers (e.g. AOL Sears, Time Warner, UnumProvident,), aggressive accounting that crosses the line into illegality (e.g. Conseco, Green Tree Financial, and Spiegel), buying dozens, hundreds, and even thousands of local businesses and combining them in a regional or national "behemoth" (e.g. AutoNation, Tyco, and Waste Management), and ignoring or underestimating a serious threat to "business as usual" and then making insufficient adjustments (e.g. Kodak, Mobile Media Communications, and Pillowtex).
Carroll and Mui devote a separate chapter to each of the seven categories of corporate strategy involved in what they assert are avoidable failures. "We aren't saying that these seven strategies are doomed to failure. Far from it. In the right circumstances, all of these strategies can succeed splendidly. All we're saying is that these strategies are danger zones. If you are pursuing one of these strategies, you need to be extremely alert to what could go wrong, and ready to react before your business is flirting with disaster." In Chapters 10 and 11, they explain several processes by which to "build disagreement into the formulation of strategies." On of them is identified as the "devil's advocate review" to bring all possible objections to the surface, to enable those involved to consider every possible risk and reward and then cross-rank them in terms of relative importance and degree of probability. The objective is not to generate an alternative to the proposed strategy. Rather, to subject that which is proposed to rigorous scrutiny. "The process isn't designed to produce the best answers; it's designed to produce the best questions." For these and other reasons, Carroll and Mui view the information, insights, and recommendations they offer in their book as "failure insurance."
Throughout most of their narrative, I especially appreciate their brilliant use of real-world mini-case studies as well as their strategic application of two reader-friendly devices, "Red Flags" and "Tough Questions," that serve two very important purposes: they help to create and then maintain what is (in effect) an early-warning system for those engaged in a strategy planning process or who have only recently embarked on executing a strategy; also, the "Red Flags" and "Tough Questions" material facilitates, indeed expedites frequent review of key points later. Redundant verification is imperative, especially in a competitive marketplace in which change is the only constant.
One of my favorite New Yorker cartoons features two parents in formal wear seated at one end of a long table in a vast dining hall, their son seated at the other end of the table. High above them, chandeliers hang from a cathedral ceiling. Elaborate tapestries adorn the walls together with family portraits in lavish frames. Several uniformed attendants dutifully stand nearby. The child stares at the dinner plate that has just been placed before him. "I say it's spinach and I say to hell with it."
I thought of that cartoon as I neared the conclusion of this book when Carroll and Mui make a point worthy of special attention and emphasis: The need to establish and then sustain what could be characterized as a "culture of candor," one in which principled dissent is not only strongly encouraged but indeed required and (yes) gratefully acknowledged. Many corporate strategies resemble a naked emperor. Its benefits are analogous to a wardrobe that doesn't exist. In Hans Christian Andersen's tale, only a child speaks up. Who will do so in a corporation about to commit to a flawed strategy, one that is doomed to fail? "We're willing to bet that in every failure that we studied, there were critical thinkers in the heart of the organization who saw the dangers of the proposed strategy. We hope to legitimize their voices [especially of those in middle management] to question and, when appropriate, to quash doomed strategies while they are still on the drawing board." It is a result devoutly to be wished.
