How Brilliant Ideas Destroy Companies

The story of 3M's Post-it notes is a classic: a brilliant idea that nobody took seriously and never would have got to market if it wasn't for the tenacity of one guy. That story and others like it remind us to follow our passion and be tenacious when we truly believe in something.

Well, for every story like that, there are ten stories about how so-called brilliant ideas can and do cause the demise of otherwise successful companies. The problem is that a "brilliant idea" is a highly subjective concept; brilliance is in the eye of the beholder. And "brilliant ideas," pet projects, or whatever you want to call them, add up.

They add up to two major issues that companies can scarcely afford in this era of highly-competitive global markets:

  1. Loss of management and organizational focus
  2. Increased opportunity cost - the cost of not doing something else with limited resources
And the biggest culprits are the projects that are actually funded, have customers attached to them, have the CEO's personal backing, or are championed by a founder or influential R&D guy. That's because those projects garner the most management attention and precious resources.

What it really comes down to is this: It's actually more important for management teams to figure out what not to do than it is for them to figure out what to do. You see, too many leaders think the whole "corporate strategy" process ends when they've come up with the company's vision, mission, core competency, value proposition, whatever.

In reality, that's when the real work begins. That's when things get even harder. From then on, every project and every opportunity must be weighed or measured against that corporate strategy. And if it doesn't fit, it shouldn't happen. Here are two examples from the real world:

  • Startup companies experience this sort of problem all the time. The scenario is entirely common: venture capital is hard to come by, so the company does whatever it takes to generate income and completely loses its focus. One company I joined in the 90s was all over the map, but once we sold off about half its operations, canned a bunch of projects, and figured out what to focus on, everything fell into place. It's now a highly profitable, $300 million public company. But other startups aren't so fortunate.
  • It's even worse with turnarounds. Ever wonder why Dell's turnaround is taking so long? Well, the cause of Dell's problem is entirely clear: intense competition across its core product lines that's stifling growth and pressuring profit margins. What isn't so clear is where to go from here. There's certainly no shortage of opportunities. The company's tried a costly retail push, printers, MP3 players, TVs, buying Alienware (gaming), acquiring Perot Systems (services), selling on Twitter, a focus on small business, and now it's mulling over a move into smartphones. It's all over the map and starting to look a little too much like Dell's old rival Gateway, which didn't turn out so well.
So, how do management teams navigate the never-ending parade of opportunities? Well, it really comes down to discipline: staying focused on what you're good at and ensuring that there's a relatively consistent and disciplined strategic process for determining what not to do. And above all, remember this:

Just because --

- it's the CEO's pet project,
- a customer wants it,
- xyz competitor is doing it,
- the founder loves it,
- the government is funding it, or
- it's a brilliant idea,
doesn't mean there's sufficient reason to do it. Period.