Archive for the ‘business failures’ Category
Not very long ago, on a cold, wintry day of January 1985 the top man at GM, Roger B. Smith, unveiled ‘Saturn’, the first new brand to come out of GM in almost seven decades. A stand-alone subsidiary of GM, Saturn had a promising birth and was touted as a ‘different’ type of a car. Having its own assembly plant, unique models and separate retailer network, Saturn operated independently from its parent company. It was a cut above the rest in using innovative technology and involving its employees in the decision making process. Conceived as a fighter brand to take on the Japanese brands, the small car of superior quality was the product of strong principles with a mission of being America’s panacea to Japan’s challenge. It reaffirmed the strength of American technology, ingenuity and productivity with the combination of advanced technology and latest approaches to management.
Though a revolutionary idea, Saturn wasn’t able to live up to the hype or the hopes of Roger Smith. The case of Saturn is definitely one for the books. Its marketing campaign fired up the public’s imagination and interest perfectly while the product was a miserable failure. Everything the company did was just another leaf out of the handbook of perfect PR. When the first lot of cars had a bad engine antifreeze, the company replaced the entire car instead of just the coolant much to the customer’s delight.
Besides clever marketing, Saturn’s biggest assets were its passionate employees and customer-centric approach which rewarded it with a quick victory. The victory was however short-lived as GM was reluctant to expand Saturn’s offerings for fear of cannibalization on the sales of its other divisions. For the existing models, Saturn’s engine had inferior motor mounts with the plastic dashboard panels giving it a cheap look and even the plastic-polymer doors, the so-called unique feature, failed to fit properly. Overall, the car neither had an identity nor a USP. To make things worse, Roger Smith was on a spending spree from throwing recall parties when vehicle problems were solved to hosting “homecoming” celebrations at plants. This saddled GM with high costs leading to increased doubts of Saturn’s survival among the leaders of GM.
Disaster struck further when Saturn’s sub-compact prices failed to cover the huge costs gobbled up by a dedicated plant with massive operating costs. The fact that the plant churned out cars that barely share any common parts with other GM brands did not seem to help at all. To top it all, at a time when buyers were snapping up minivans and SUVs, Saturn’s offerings were just limited to 3 small models for over a decade, thereby losing out on locking customers in. Just when GM was pondering over the decision of scrapping the car, the UAW visited one of Saturn’s production facility with its international contract, only to be rejected by the workers. As obvious as it seemed, the unique labor contract of the company was dissolved and GM had no choice but to part with the brand by dividing the production among other GM plants.
Automotive history has witnessed myriad failure stories of brands that were supposed to be world-class products but ended up biting the dust. One such underachiever brand was Vector which sprouted out of the aim of producing an American supercar but doomed due to cash flow issues, mismanagement and failing to keep up their insane promises. Sterling, Rover’s disguise into the American market, was another lost car of the 80s which most people haven’t even heard of. Their promise of delivering “Japanese reliability and refinement with traditional British luxury and class” couldn’t save them from continuous sales drop and combating competition from new Japan rivals. Few other epic automotive experimental failures which can be recalled in this scenario would include Chrysler’s TC by Maserati , Subaru SVX, Jaguar X-type, Lincoln blackwood, GMC Envoy XUV, Chevrolet SSR, Chrysler Crossfire and Dodge Durango Hybrid/Chrysler Aspen Hybrid. While some were design disasters, the others just couldn’t perform.
The automobile industry is governed by various factors which include the technology advancements of the time, economic conditions and fluctuations of consumer needs. The latest automotive chip on the block are the electric cars which are set to revolutionize the entire industry. LeEco, a Chinese electronics company is taking serious steps to target Tesla, what with it investing $1.08 billion on developing its debut electric car. Tesla was the name which paved the way for an electronic vehicle era. Whether LeSEE, LeEco’s concept sedan, can surpass Tesla’s performance and give them a run for their money is only something that time will tell. If successful, these electric cars could be the game changers of this century to usher in an electric future. If not, it will fade away and claim its place as a bittersweet memory on the list of flops that the industry has had.
About 2,700 years ago, Archilochus wrote that “The fox knows many things, but the hedgehog knows one big thing.” Taking that as a starting point, Isaiah Berlin’s 1953 essay “The Fox and the Hedgehog” contrasts hedgehogs that “relate everything to a single, central vision” with foxes who “pursue many ends connected … if at all, only in some de facto way.”
And so we have become a society of specialists with much heralded “learn more about your function, acquire ‘expert’ status, and you’ll go further in your career” considered the corporate Holy Grail. But is it?
The modern corporation has grown out of the Industrial Revolution (IR). The IR started in 1712 when an Englishman named Thomas Newcomen invented a steam-driven pump, to pump water out of a mine, so the English miners could get more coal to mine, rather than hauling buckets of water out of the mine. That was the dawn of the IR. It was all about productivity, more coal per man-hour; and then it became more steel per man-hour, more textiles per man-hour, etc.
The largest impact of the IR was the “socialization” of labor. Prior to the IR, people were largely self-sufficient, but the IR brought increased division of labor, and this division of labor brought specialisation, which brought increased productivity. This specialisation, though, decreased self-sufficiency and people became increasingly inter-dependent on one another, thus socialised more. Also, with the division of labor the individual needed only to know how to do a specific task and nothing more. Specialization also caused compartmentalization of responsibility and awareness. On a national level, it has allowed nations to become increasingly successful while the citizens become increasingly ignorant. Think an average American. You can be totally wrong about almost everything in life, but as long as you know how to do one thing good you can be a success, and in fact in a society such as this increased specialization becomes advantageous due to the extreme competition of our society. Environments with more competition breed more specialists.
But is the formula that ushered humanity in 20th century of rapid technological industrialisation and economic development still valid or as impactful in 21st century as it was for last 300 years? In our modern VUCA world, who (specialist OR generalists) have a better chance of not only surviving but thriving?
According to a number of independent research papers, employees most likely to come out on top of companies and becoming successful in long term are generalists—but not just because of their innate ability to adapt to new workplaces, job descriptions or cultural shifts. For example, according Carter Phipps (author of Evolutionaries) generalists (will) thrive in a culture where it’s becoming increasingly valuable to know “a little bit about a lot.” More than half of employees with specialist skills now consider their job to be mostly generalist despite the fact that they were employed for their niche skills, according to another survey. Among the survey respondents, 60% thought their boss was a good generalist, and transferable skills – such as people skills and leadership – are often associated with more senior roles.
We’ve become a society that’s data (from all various specialisation, industries and technologies) rich and meaning poor. A rise in specialists in all areas — science, math, history, psychology — has left us with huge amount of data/info/knowledge but how valuable is it without context? Context in a data-rich world can only be provided by generalists whose breadth of knowledge can serve as the link between various disciplines/contexts/frameworks.
A good generalist, David Christian gave his 2011 TED talk called “Big History” of the entire universe from the big bang to present in 18 mins, using principals of physics, chemistry, biology, information architecture and human psychology.
To conclude, it seems that specialisation is becoming less and less relevant due to 1) increasing, interconnected and overlapping data and information that permeates all aspects of our lives, 2) increasing VUCA-ness of social, political and economic situations of individuals and nations, 3) need to envision and derive from a bigger context or connect few contexts/disciplines/frameworks. All points seem to be better addressed by generalists.
This is a guest blog by Eve Baxton.
Owning a professional business is a huge responsibility. It involves all the potential risks and traps that are imaginable. According to a survey in 2009 by PrinceWaterHouseCoopers more than half of the enterprises suffered from the economical crimes. In most of the cases, small sized enterprises are the best prey to fall for potential traps around.
These dangers include employees or managers misrepresenting or manipulating the financial information, customers misusing the enterprise’s borrowing in criminal activities and contractors producing false bills. Along with that, other elements exist that perpetrate fraud against the enterprise by electronic means. This includes hacking, manipulating the telephone service and robbing customer’s confidential data, such as credit card numbers or usernames and passwords.
The ultimate quest that should be taken care of as soon as possible, to protect your business is identifying the sources of potential fails. That is not an easy task to take on, for a less experienced businessman. By just considering some basic and yet important things, the enterprise can be easily protected from potential frauds, however.
According to the statistics, the most common reasons for falling into these traps are the lack of experience, commitment, and, most significantly, management. Let’s take a look at the potential traps that most of the enterprises, no matter big or small, fall for.
- The Innocent Employee Trap
According to the facts, most of the time insiders; employees, managers, or company’s officials, are the main reason for an enterprise to fall and fail. These employees “innocently” steal the assets of the company, and commit accounting frauds. Detecting such actions is vital; it requires a lot of methodologies and commitment to be employed, however.
- The Clever Customer Trap
Another hazardous trap that most of the enterprises fall for is the clever customer trap. It has been found that many customers are using fake identities, stolen credit cards, or are filling out fake liability and injury claims to perpetrate the company. All these actions by “the sweet customers” only results in the enterprise’s money being taken away.
- The Fake Return Scheme Trap
The most common victims of this type of frauds are retailers. It is the best scam for the clever customer to perpetrate against any enterprise. Most of the times, the customer brings back used merchandise that has not been bought from the same place and tries to return it and get new merchandise under the shelter of the fake return schemes.
- The Greedy Contractor Trap
Most companies rely on outside service providers for its survival. Therefore, many of the enterprises fall for the greedy contractor trap. It is not uncommon for the contractor to bill more than the task he has done is worth, and more often even asks for the billing of a task that has not yet been completed. Strong policy, terms, and conditions should be presented to the contractors, before entrusting them with any task, to avoid these attempts, and leaving no room for the contractor to commit such frauds.
Protecting Your Professional Businesses
After viewing the potential traps, let’s take a look on the precautionary measures that an enterprise can take to avoid unnecessary fails; these important methodologies can fraudproof your business against its very own employees.
- The Method of Anonymous Employee Reporting
Utilizing this method is one of the best methods for detecting the potential dishonesties that can occur within your business; compared to scheduled employee reporting, the violators’ opportunities to destroys any vital fraud traces are severely limited.
- The Method Of Surprise Auditing
Along with the regular, scheduled internal audits, surprise auditing should also be performed in the enterprise, as it significantly increases the chances of detecting potential irregularities, thus making your company more protected.
- The Method of External Auditing
Along with the above mentioned methods, this is also a significant tool to determine a potential fraud; it should be held at regular intervals.
Business Insurance – The Ultimate Protection
Along with all the above methodologies, the most important step in stabilizing an enterprise is business insurance. It plays an important role in the art of preventing the failures related to undetected frauds. Professional business insurance protects the business from many unexpected frauds, and it enables a recovery from what may seem as a catastrophic loss. Even when insuring your business, you should consider several key factors, however; for your business insurance to be viable for you, it needs to offer an equal protection for any business, regardless of its size, and to provide protection from all sources of frauds and failures. First thing that comes to mind is protection from theft. Theft is the most common and uncontrolled source of assets loss that occurs in most enterprises internally and externally, making insurance without theft protection almost useless. Protection from litigation is another important aspect; while unfounded law suits from wealthier competition are likely to turn out in your favor, the costs before you prove your innocence can cause your business to fail, so proper insurance has that covered. Protection from unwanted liabilities provides you with protection, when the assets, coming from your company, are used for any illegal activities, which is not a rare occasion with internal frauds and thefts.
It’s your responsibility to implement a fraud proof protection method, that suits best to your enterprise’s needs, properly. All it requires is some commitment and dedication towards the business; no matter how malicious the fraudster’s aims are, you can stop your company’s fail before it’s to late!
What is consultancy and is there a value in it?
The truth is that only a comparatively small number of consulting projects seem to be successful. Either consultant recommendations fail at implementation phase, or don’t even survive reality checks. In the worst of cases, these have disastrous consequences for the organization. As Ferdinand Piëch, the CEO of Volkswagen, famously said: “If you want to ruin a company, you only have to try fixing it with the help of external consultants.”
Story of Bag, Borrow or Steal, one of the first online sites allowing rental of expensive items (from several days to months) comes to mind. In securing venture capital, a consulting firm was brought in to take the company to next level. It recommended that, in order to attract a more high profile customer, the company change its name – the very name that, in addition to being instantly recognizable and very descriptive of the nature of the business, was also forever immortalized in the movie Sex and the City. The new (proposed) name was Avelle, thought by the consultants to sound more luxurious.
Following the consulting firm’s advice, the end result was lost sales as loyal customers became confused by the name change and the brand equity built into the original name was lost as people wondered who the heck was Avelle. Top executives of BBS were fired and the company returned back to its original name.
BBS is far from being an exception, nor are consultancies only amateurs. Take McKinsey, one of the best of the breed. Its advice led GE to loose $1 billion in 2007 and Swissair to its bankruptcy. The list of McKinsey screw-ups is long. And if that is the best of the best, it is easy to imagine what other consultancy firms are up to.
Some estimate that about 80% of all consulting projects fail.
Usually, the traditional consultancy firms are called upon for the following reasons:
- Political leverage: CEOs that want or need to make an unpopular decision often bring in a consulting firm to help.
- Pool knowledge across functions: In large companies, cross-functional problem-solving rarely happens. Just getting different functions in a room typically unlocks creative problem solving.
- Pool knowledge across levels: Consultants interview, watch, and tag along with people down the organizational structure, often starting with customers and moving through sales and up. Top management of a company rarely does this. There are tremendous insights to be had by doing this.
- Deep focus on one problem.
- Consulting firms have access to way more data.
- The ability to structure a problem and to approach the task of identifying a solution in a methodical manner.
- A totally unbiased opinion on the topic.
The few studies that one can find identify several reasons for failure, which fall into four groups: personal characteristics of consultants, technical shortcomings of proposed solutions, problematic client–consultant relationships, and socio-political aspects of the client organization.
A trivial machine model logic of traditional consultancy is that it happens between two parties, consultant and client brought together for working on a certain project, and that consultant possesses more experience/knowledge/expertise and can more or less clearly identify a problem and propose a solution. The focus is on analyzing and bridging the gap between the consultant’s body of knowledge and skills and the requirements of the client. Assumptions here are that client information (especially related to weaknesses, problems or any issue that requires an external consultant intervention) is readily available, comprehensive and understandable. It is also assumed that the consultant can freely and efficiently access this information, understand it and process it.
In reality, however, it’s impossible for the client or even the consultancy to arrive at an “authentic” problem description.
The traditional consulting model is not only linear and simplistic but also not realistic, as social factors (social interconnection, interaction and environment in which the consultancy and the client operate) are largely ignored. These factors are essential – decisive in make-or-break of a project – to consider in what von Foerster described as “non-trivial machine model.“ A significant factor that must also be considered – this has to do with the “no one wants to rock the boat” psychology – is that consultants usually don’t feel comfortable telling (and thus don’t tell) to the top management of the client that some processes/structures are not optimized/performing; nor does the client’s top management feel good to have consultants come and tell that they are not doing well (in some cases consultants are dismissed/fired after having implied, in their recommendations, any wrongdoing or suboptimal performance/intention on part of the client’s top management).
Niklas Luhmann, German sociologist famous for his social systems theory, picked up and applied von Foerster’s theory (of trivial and non-trivial machines) to social systems. According to Luhmann, communication is the most important part of any society. All social relations are conceptualized as processes of communication – communications that connect to earlier communications and that call forth further communications. The crucial point is that this communication process takes place relatively independently of individual human beings involved. According to his theory, although communication cannot be effected without the involvement of human beings, the particular development of the communication process is beyond their control.
For example, the same word “yes” might be understood as signaling a confirmation, a doubt or even a rejection (if interpreted as irony). Thus, the meaning of a message, i.e. the concrete communication, is not produced by the speaker but by the listener.
Applying Luhmann’s theory to the social context of consultant-client, we need to differentiate three systems: consultant, client and communication media. The theory suggests that any intended consulting intervention becomes impossible right from its beginning. Following Luhmann, the only reason for the employment of external consultants is the possibility that the client’s systems (internal/external processes, operations, information flows, etc.) get perturbed/“irritated”. However, not all (consultancy) interventions cause such a perturbation, as this is only decided by the client system itself.
This model is more comprehensive, as it includes all considerations of the linear/traditional consultancy logic but also social factors. When determining whether to employ or not a consultancy, the only possibility for clients is to observe and decide which consulting firm has the most potential to perturb its systems. Finally, the stage of evaluation becomes redundant as there is no content or objective to evaluate, and nobody is able to evaluate the degree of perturbation.
All of the above is not to imply that consultancy practice is futile and needs to be discarded with. Even traditional consulting projects can and do sometimes have positive effects for clients, but usually in a different way than intended or planned. Rather than transfer some kind of knowledge, consultant firm should cause (via the communication system) perturbations in client systems that trigger positive changes in its processes and structures, which otherwise might not have been achieved.
The prevalent trend and common thinking (by clients and consultants) is to attribute any success of a consultancy intervention to a consulting firm. This, as it should be noted from above, is misleading and factually wrong. All change, as also for humans, needs to come from within, whether triggered from without (consultancy intervention) or within.
There already exist “systemic consultants,” unsurprisingly mostly in German-speaking world, including Königswieser & Network and OSB international. As can be seen from client testimonies of the former and project descriptions of the latter, the following activities are commonly practiced by systemic consultancy firms:
- organizational development and transformation
- restructuring and change management
- strategic assessment and revision
- systems diagnosis and analysis
Services above are not very different from what traditional consultancies offer. But, they shouldn’t be as an organization has a strategy and an objective, etc – nothing new under sun.
Three points that are different between traditional and systemic consultancy practices are:
- Mutual ownership of the client’s project: traditional consultancies position themselves as experts in terms of knowledge/experience and usually have a more “dictatorial” and outsider approach of “what needs to be done,” whereas systemic consultants come in as an unbiased party that co-owns the client project, trying to add value with their tools/methodologies.
- Social and psychological factors fully weighed: psychology of clients, their top management, framework of social interaction and cultural factors are all heavily considered; also subtleties related to message creation (by consultancy), communication and perception (by clients) are of paramount role as well as analysis of (a perceived) problem and suggestion of possible solutions/improvements.
- Education, assistance and support: in most cases, systemic consultants act as educators – this is usually in the face of traditional consultants who think that educating a client might diminish a future chance of being employed by that client; as apparent from many client testimonies, systemic consultants offer assistance and support in vital issues such as drafting organizational strategies or HR incentive systems, etc; systemic consultants also educate their own teams in the client context.
Launched in the beginning of 2011 by Engineers Without Borders Canada, Toronto-based Admitting Failure is intended to be “a collaboration between like-minded NGOs, governments, donors and those in the private sector,” in the site’s own words.
Those involved with charitable development groups can visit the site to submit their own stories of plans gone wrong, or they can browse through the stories submitted by others, rating and commenting upon them along the way. Either way, failures are bound to be exposed and lessons learned.
But why admit to or even share with others a failure?
Failure and success are two sides of the same coin called life, be it a human life or that of an organization. Failure is as natural to humans as it is to organizations consisting of humans. Just like all humans are resistent to failing (and even more so to admitting it) so are human organizations.
Admiting failure enriches and brings one closer to success as formulating and clearly understanding a problem brings closer to its solution.
This is not just to make us feel self-satisfied or justified in front of our consciousness. It is as real as you’ll get. A recent article on HBR, for example, shows how Dominos Pizza – not just some small and insignificant company at that – after much public flogging, condemnation (lot of it online) had its CEO Patrick Doyle admit failure, and not just any failure, but the very essential point of having a rather inferior quality of pizza, on TV. This pain-point served it a good lesson, and Dominos quickly turned itself around and is again living its stellar time.
IBM did it back in 80s under Louis Gerstner Jr.
GE did it under Jack Welch in 90s..
Daimler and Ford did it in 70s and 80s…
A route to success, whether personal or in business, lies in admitting a problem, failure or pain-point.
Why not you or your company? Start anew by submitting your past failures, mistakes and pain-points.
I came across a nice article on Digital Tonto about how companies fail. I previously posted about why smart people and companies do dumb things, eventually ushering in failure. The article however shares some interesting insights and examples of how companies, even very successful ones, eventually commence their decline by following one of the below “attitudes”/approaches (comments are mine).
- Overconfidence: mostly driven by past success and self-confidence.
- Overvaluing Strategy and Undervaluing Process: companies that are obsessed by grand visions and strategies tend to underestimate the incremental changes and the process itself which are the drivers of success.
- Looking for Dragons to Slay: this quality is typical of few very successful companies such as Google who, once at the summit of their success, look into going after other markets, products and companies.
- Disruptive Competition: which might or might not bring value to end users.
- The Lambda Response: instead of solving the problem at hand, it becomes more exacerbated by internal confusions, inefficiences and panick.
Some of those attitudes leading to failure are among the famous Ten Commandments for business failure of Mr. Coke.
The article offers a solution to embrace, a corporate equivalent of Sisyphus:
When company leaders are like Camus’ Sisyphus, they are most likely to be successful. Companies who are focused at the task at hand, rather than building empires and seeking out the “Next Big Thing” are doing their shareholders the greatest service. For a company to be profitable over the long term it has to perform and that can only happen if the organization is united in its purpose.
Constant focus on creating value for existing and potential customers, unity of purpose, corporate humbleness and perseverance are the generic vaccines for companies successful but not yet narcisstic or obsessed by self-grandeur.
Is your company struggling with coming up and implementing innovative ideas?
Does innovation sound good for you but you still have to reap any tangible profit from those nice-looking, suggestive and “innovative” ideas that you hear from your employees, employers and read on Internet?
Do you think that innovation sounds good is but hard to capitalize on?
Before drawing any foregone conclusions and debunking anything dubbed innovative, please check whether your company’s approach to innovation is sound.
The seven deadly sins that choke out innovation in all sorts of companies and industries include:
- Thinking the answer is in here, rather than out there
- Talking about it rather than building it
- Executing when there is need for exploring
- Being smart
- Being impatient for the wrong things
- Confusing cross-functionality with diverse viewpoints
- Believing process will save your company
These are common in both brainstorming, analysis and execution stages of implementing innovative ideas. Additional reasons why (supposedly) innovative ideas might fail are:
- Ideas don’t solve an important and relevant problem
- Ideas take too long to get to market or needs shift
- Ideas are poorly launched
- Understand the adoption cycle or barriers
- Focusing on short-run numbers
- Applying surface economics
- Being strategy-blind
- Failing to see the right context
- Never having an ideal
Use this “innovation failure” checklist of factors to make sure your company is not trapped in or following one of the above factors.