It’s good to learn from your mistakes, but sometimes it’s even better to learn from the mistakes of others. Business strategy expert Michael McQueen looks at five key lessons advisors can learn from the businesses that didn’t make it.
1. Don’t trust the numbers
Traditional indicators of business health can be as dangerous as they are useful, says McQueen. As “lagging indicators” they can give the impression that a business is in fine health, while recent decisions have begun to push it down the path of failure.
Kodak, says McQueen, “was still a darling of Wall Street long after it had begun to lose the digital war”.
“It is possible to be on the brink of obsolescence and have absolutely no idea at all. Further still, by the time the numbers indicate that there is something wrong, it may be too late to do anything about it.”
2. Shift happens
“Whether it is changes in technology, competitive dynamics, legislation or demography, fundamental shifts have caused scores of previously successful businesses to falter in recent years,” says McQueen.
For advice and planning professionals, factors such as the growing digital lending market and diversification are shifts that they need to understand and adapt to to keep up with an ever-changing market.
3. The moment you think you’ve made it, you’ve passed it
“A key factor in almost every case of corporate demise is a dynamic I call the Intoxication of Success,” says McQueen.
“Put simply, this phenomenon describes the way in which enduring success leads to a toxic blend of complacency, conceit and closed-mindedness within organizations that blinds leaders to potential opportunities and threats.”
4. Great minds don’t necessarily think alike
If your colleagues are disagreeing with you, you’re doing something right, says McQueen.
“A dangerous dynamic unfolds when a homogenous culture grows within an organization to the point where new points of view are silenced or shunned,” says McQueen.
In the case of failed car company Daewoo, six in 10 of the company’s senior management graduated from the same university, and almost a third graduated from the same high school.
“In the same way that in-breeding results in weaker genetic strains, cultures lacking diversity weaken an organization over time.”
5. Innovation has a dark side
“Although innovation may be the buzzword of our time,” says McQueen. “Very few acknowledge the fact that sometimes over-innovating is as dangerous as inertia.”
Trying to do too many things at once can lead to a loss of focus, says McQueen.
As Steve Jobs once said: “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all… Innovation is saying no to 1,000 things.”
