Failure with a Silver Lining

Last Updated Jun 3, 2008 12:25 PM EDT

Some business failures aren't caused by management errors but simply because 'stuff happens'.

Take Sony's Betamax and Netscape -- great innovations which, for different reasons outside their control, were doomed to fail.

To this list add Silverjet, the business-class only airline, which went into administration, the last luxury airline to fail after Eos and Maxjet.

The company had been operating services from the UK to New York and Dubai for less than 18 months and was undermined by the double-whammy of massive oil-price rises and the credit crunch.

Perhaps Silverjet's business model was less than perfect. But when was the last time a new business started life with a flawless money-making machine. It took Tesco over five years to perfect its Express format.

Charles Darwin wrote, "It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change."

Similarly, the continued success of businesses is dependent on their ability to adapt to new realities -- something that Silverjet's nascent organisation was not equipped to do.

In his book, 'The Strategy Paradox', Michael Raynor argues that focused business strategies, such as that pursued by Silverjet, may create huge value but also risk complete failure.

Raynor suggests that more moderate strategies offer greater chance of long-term survival -- "but at the cost of being able to generate significant returns." His solution is for management to develop and pursue a portfolio of strategic options.

This may be possible for large organisations, but it seems unrealistic for small businesses to have the time, capability or the resources to pursue more than one strategy.

Besides, any entrepreneur worth their salt is driven by their desire to create the huge returns delivered by successful market innovations.

If the business had launched at a different point in the economic cycle we may be celebrating its success rather than mourning its demise.

Reports suggest at least three investors are interested in buying the company out of administration. At some point a variation of the business model developed by Silverjet will make it.

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  • Stuart Cross

    Stuart Cross is a founder of Morgan Cross Consulting, which helps companies find new ways to drive substantial, profitable growth. His clients include Alliance Boots, Avon and PricewaterhouseCoopers.