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What You Can Learn From The Most Inexcusable Business Failures Of The Last 25 Years
Portfolio Hardcover
September 2008
On Sale: September 11, 2008
310 pages ISBN: 1591842190 EAN: 9781591842194 Hardcover
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Non-Fiction
Welcome to Business Failure 101
In the 1960s,
IBM CEO Tom Watson called an executive into his office after
his venture lost $10 million. Watson asked the man if he
knew why he’d been called in. The man said he assumed he was
being fired. Watson told him, “Fired? Hell, I spent $10
million educating you. I just want to be sure you learned
the right lessons.” In Billion-Dollar Lessons,
Paul Carroll and Chunka Mui draw on research into more than
750 business failures to reveal the misguided tactics that
mire companies again and again. There are thousands of books
about successful companies but virtually none about the
lessons to be learned from those that crash and burn.
Lesson One: The Cold Hard Facts
Between 1981 and 2006, 423 major publicly held U.S.
companies with combined assets totaling $1.5 trillion filed
for bankruptcy. Hundreds more took huge write-offs,
discontinued major operations, or were acquired under
duress. Again and again, companies follow the same
wrong-headed strategies that brought down businesses in the
past. The sub-prime mortgage crisis that cost companies tens
of billions of dollars in 2007 and 2008 echoes the
ill-conceived strategies that pushed Green Tree Financial
and Conseco into bankruptcy years earlier. Tom Watson’s
executive’s $10 million lesson seems cheap by
comparison.
Lesson Two: Failure
Patterns
Carroll and Mui found that the number
one cause of failure was misguided strategy—not sloppy
execution, poor leadership, or bad luck. These strategic
errors fall into seven categories, including: * Pursuing
nonexistent synergies: Quaker Oats’ purchase of Snapple was
supposed to capitalize on distribution synergies but instead
led to a $1.7 billion write-off. * Moving into an
“adjacent” market that isn’t really adjacent: Avon decided
its “culture of caring” qualified it to operate retirement
homes. Subsequent write-offs totaled $545 million. *
Buying more problems than efficiencies through misguided
consolidation: Despite pioneering the discount department
store years before Sam Walton came along, Ames Department
Stores flubbed consolidation efforts, landing in bankruptcy
twice before eventually liquidating.
Lesson
Three: Avoid Making the Same Mistakes
But
there’s light at the end of the tunnel: Billion-Dollar
Lessons provides proven methods that managers, boards,
and even investors can adopt to avoid making the same
mistakes. While there’s no way to guarantee success, this
book draws on vivid, off-the-beaten-track examples to help
you avoid failure by showing you how to thoroughly assess
potentially disastrous strategies before they bring your
company down.
Required Reading
Think
of Billion-Dollar Lessons as the flip side of Good
to Great, but just as eye- opening and essential as that
business classic. There’s enormous value in learning from
companies that lost millions (if not billions) in pursuit of
strategies that led to spectacular flameouts. Everyone makes
mistakes, but why make the same mistakes over and over?
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