Historians often say that those who fail to heed the lessons of history are doomed to repeat its follies. This axiom is just as relevant for senior managers seeking to understand the 'root' causes of corporate failure so they don't get repeated.
Can you win if you don't understand why you fail?
When Companies or initiatives fail, detailed analysis (when it does takes place) usually centers around obvious causes like: poor individual decision making [sic], a lack of critical resources insufficient time to act or devastating competitive moves. These are often convenient excuses since they easily lend themselves to simplistic conclusions, diffused accountability (rife in matrix organizations) and finger-pointing.
As failure is not actively pursued by well-meaning and intelligent individuals, it is often difficult to really understand why initiatives fail. Only in rare cases is sheer bad luck and executive folly the primary reasons. In reality, failure usually has many causes often the confluence of some simple and some complex factors.
Military Misfortunes meet Corporate Folly
One approach to explaining failure is to borrow lessons from military history. Military organizations share much in common with the modern corporation including a focus on tangible objectives, an emphasis on planning and strategy, a reliance on teamwork as well as individual performance and delivery models that contain high levels of complexity.
Two military historians, Eliot Cohen and John Gooch in their analysis of military failure, Military Misfortunes, offer a variety lessons that can be used by senior management and directors in almost every industry. These failures share a variety of institutional, psychological and environmental underpinnings.
A failure to learn
Cohen and Gooch analyzed the failure of the US Navy to combat the German U-boat menace in 1941, despite knowing much about enemy intentions, tactics and having intimate knowledge of British accomplishments. British successes was based on two fundamental and hard-won learnings that has obvious business implications: 1) success is not predicated only on men, material and strategy but also; 2) that the right type of organizational structure (with governance and information rights) is critical to aggregate intelligence (i.e. market data), analyze it (i.e. key learnings) and disseminate it (i.e. tactics, alignment) immediately to those who need it. It took the US Navy till 1943 to learn these organizational lessons but not before they floundered on the other variable like ship production, sonar technology and unit training. Within Companies, common causes of the failure to learn include managerial and cultural hubris, a lack of relevant market research, a focus on the wrong metrics and the strategic straightjacket that past successes deliver. Moreover, it is often market leaders or firms in mature industries that ignore disruptive technologies or trends until it is too late to compete in the short term.
A failure to anticipate
A classic military example of this failure was the surprise attack against Israel during the 1973 Yom Kippur War. By correctly reading the signals, the Israelis knew war was coming. However, they refused to preempt the threat by attacking first nor did mobilize the bulk of their defenses. In the business world, this common type of failure occurs when important competitive moves or market developments that can and should be preempted are ignored despite the availability of market intelligence and the attention of a variety of intelligent individuals and teams.
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There are multiple reasons for this type of failure. One cause is the psychological need among individuals and groups for personal immunity (which is seldom rationalized) when faced with a threat; the emergency or risk is simply disbelieved or ignored Another common cause is a slavish attention to conventional wisdom or a paradigm that has strong institutional backing (through logic, data or executive endorsement). This paradigm often solely reflects the corporate view of the world and not possible alternative realities. Firms with a culture and performance measurement system that emphasizes alignment, centralized decision making and teamwork are vulnerable to this type of failure.
A failure to adapt
Strategic plans rarely survive market deployment intact. Often new and unexpected events (i.e. disruptions) conspire to challenge assumptions and change the market landscape. Military Misfortunes describes the failure of the British and Australian military leadership at the 1915 Battle of Gallipoli to quickly grasp and adapt to the poor combat performance of their forces against a tougher than expected Turkish defense. Adaptive failure is one of the most worst types of failure since it often wrongly leads to the belief that without bad luck or a lack of effort disaster would have been averted. In the business world, these failures are often characterized by vague and poorly understood goals, strategic assumptions and plans that are not challenged or linked with core capabilities and; a disconnect between strategy formulation and those that execute the tactics, both on a departmental and geographic basis. As was previously demonstrated, the likelihood of this failure increases with the level of success previously enjoyed by the Company.
What can be done
The previous military disasters demonstrate the importance of the organizational dimension to corporate competitiveness. In some cases, tactical agility and 'heroic' leadership can compensate for the above failures. However, in most cases, systematic organizational optimization is needed to avert problems. Some guidelines include:
- Formalize a yearly strategic planning exercise that takes a bottom up, data-driven market view and then cascade strategies throughout the organization
- Link market and customer research to key metrics and ensure it is distributed with minimal "spin" throughout the organization
- Ensure performance measurement and compensation schemes promote behaviors that link to aligned corporate and departmental goals
- Delegate key decisions to the right geographies, people and departments able to make them.
- Continue to benchmark the firm against leaders (within and external to the industry) as well as garner lesson from the laggards.
- Ensure senior management spend significant amounts of time in front of customers, channels and thought leaders
Copyright 2007 Quanta Consulting Inc.
For additional strategic planning insights and a discussion of our relevant client experience, please contact us-
Mitchell Osak
Managing Director
Quanta Consulting Inc.
99 Bideford Ave
Toronto, ON
M3H 1K5
mosak@quantaconsulting.com
www.quantaconsulting.com
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