Book – Billion Dollar Lessons

lessonsOh – it is a wonderful and rather humbling read 🙂  As the authors emphasize, people do make mistakes and we need to learn from these mistakes (particularly those that seem to be part of our nature 😉 ).  These mistakes were made by people…  by very smart people.  Many of these mistakes can be avoided – 46% .  Other mistakes can be mitigated.

A very good point for people who may not be at the level of the organization that allow make any actions about the mistake – recognizing the mistake may help us to associate ourselves with the projects that are more likely to succeed and invest our energy there.  It would be more beneficial for the company and for the person.

Business failures have a repeated pattern.  These are usually not the execution mistakes (as many people believe), but rather strategy mistakes, when flawless execution can not help the situation.

7 categories of business mistakes

  1. Synergy – M&A.  M&A have only 1 in 3 chances to increase value.  All or us probably drill it through the years of the business school…  but it is still one of humanity’s favorite errors.
  1. Financial engineering (legitimate, not fraud).  This point was new to me!  The example: 30 year mortgage for a manufacturing homes that do not last more then about half of this term.  As a result, the initial success was overshadowed by default of owners who owe more than their manufacturing home worth, what can be expected by design.
  1. Rollups  – buying hundreds of local businesses – often to attempt to realize “economies of scale,” which may not be possible
  1. “Staying the course” – Kodak
  1. Adjacency – moving into a closely related industry.  Avon added health care product to be available to its sales force (what was very successful), but entering unknown health care business was not the best move.
  1. Riding technology – concentration on a wrong technology (Iridium, Zapmail, etc.)
  1. Consolidation – buying competing companies.  Possible issues is over-paying and buying competing companies at the point when it is more beneficial to sell (paging companies consolidation just before pages disappeared as a product)

The solution recommended by the authors is to establish a method that will assure that “a devil’s advocate” position is formed and considered at the stage of strategy formulation.

persianAncient Persians’s approach to discussing the issues:  deliberate twice; once drunk and then sober.  If the result is the same, the decision must be good 😉

 

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