The Seven Signs of Business Doom

Last Updated Sep 10, 2008 11:45 AM EDT

Failure is fascinating, when it happens to others. That should make a big seller of "Billion Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years," by Paul B. Carroll and Chunka Mui.

The book is due out on September 15th, and I'll hope to have a review of it then. For now, let's look at their "7 Ways to Fail Big," from the September issue of Harvard Business Review. The full article isn't available online, but here's Mui narrating a presentation on it for HBR.

Here are the seven ways to fail big:

  1. The Synergy Mirage. Two companies with complementary products may not be stronger together. That didn't work for Quaker and Snapple, in part because Snapple's distributors didn't want to sell Quaker's Gatorade brand.
  2. Faulty Financial Engineering. Pushing the financial envelope can lead to near-fatal paper cuts. Conseco wound up in bankruptcy after its purchase of Green Tree Financial, which grew rapidly with risky loans to trailer home owners.
  3. Stubbornly Staying the Course. Doubling down on a strategy can lead to doom -- ask pager maker Mobile Media or Pillowtex, which built up its U.S. manufacturing as the industry was offshoring.
  4. Psuedo-Adjacencies. A business that looks similar may not be. Laidlaw, the big school bus operator, thought ambulances were a good fit. But the business turned out to be entirely different.
  5. Bets on the Wrong Technology. Sometimes the world yawns at your better mousetrap (use a video phone lately?). Cases in point: Motorola's Iridium satellite phone, and FedEx's Zapmail service.
  6. Rushing to Consolidate. To the buyer goes the glory -- and the risk. Look at Ames Department Stores, which was a rural discounter before Wal-Mart, and then tried to use acquisitions to follow Wal-Mart as it went nationwide.
  7. Roll-Ups of Almost Any Kind. Any company that thinks it can get big by snapping up lots of smaller players in the same market will probably not succeed. Roll-Ups are the red flag of failure, as far as Carroll and Mui are concerned (though even their research suggests that perhaps 1/3rd of such efforts have created shareholder value).
Here's hoping you didn't read these and weep. Did they miss any?
  • Michael Fitzgerald

    Michael Fitzgerald writes about innovation and other big ideas in business for publications like the New York Times, The Economist, Fast Company, Inc. and CIO. He’s worked as a writer or editor at Red Herring, ZDNet, TechTV and Computerworld, and has received numerous awards as a writer and editor. Most recently, his piece on the hacker collective the l0pht won the 2008 award for best trade piece from the American Society of Journalists and Authors. He was also a 2007 Templeton-Cambridge Journalism Fellow in Science and Religion.