The business of failure

Your business will fail at some point. This is a fact. Now before you get all righteous and argue that your top notch business model, superior management and quality assurance practices are a guarantee of your business’s success , let me illustrate my bold assertion with examples. Apple, General Motors, IBM, Microsoft. Successful businesses you say. No. Businesses that have failed. And because this blog likes to harken to sport metaphors, allow me to add to this a second list of sports clubs. Barcelona, Real Madrid, AC Milan, Chelsea, Arsenal and Manchester United and Bayern Munich. Top European soccer clubs you say. No. Again teams that too have failed. Closer home, I could mention the Indianapolis Colts, the New England Patriots, the Giants and my perennial whipping boys the Washington Redskins as teams that too have failed although I hear you agreeing albeit mutedly with that last one. I will call these type-B Failures.


Now here is a second set of businesses. Bethlehem Steel, America Online, Circuit City and Lehman Brothers. Who you ask. My point exactly. Also failed businesses. To balance it out we can add sports teams too like Leeds United as well as the Redskins (again) and Seattle Supersonics to the list. Failed teams. I will call these Type-A Failures.
 
So, back to my original point. All businesses will fail. My business will fail. Your business will fail. Businesses are run by humans and humans by nature are not infallible. We are prone to mistakes, bad decisions, emotional reactions, aversion to change. A whole lot of predisposition to failure in other words. So the fact is we will make mistakes in business. And ergo our business will fail. However there is a distinct difference between type-A failures and type B-failures as illustrated by the examples above. And the difference is this; type- A failures are fatal. Type-B failures are not. A few years ago Apple was on its death bed. Now it’s a half a trillion enterprise by market share and is successfully churning out superior products at a rate that other companies can only wish for. GM filed for bankruptcy barely 3 years ago and is already turning a healthy profit. And whilst a 2nd place finish for Manchester United and Barcelona read like failures. None can be so bold as to write them out next season.

The key therefore is to structure your business so that the failures that afflict it are type-B failures and not type-A failures. This is where strategy comes into play because strategy drives organizational structure and is the very DNA upon which the business is founded and run. A review of the type-B list failures reveals one common thread. Call it product, branding, marketing, identity, whatever. All those companies stand for something other than the blind pursuit of profits. Whilst profits were and are certainly the end result, they are not the reason for being. Apple is product. IBM is product. Microsoft is product. GM is product. What was Circuit City? You get my drift? Whenever a company does not stake a place in the consumer’s brain, then its chances of suffering a type-A failure and simply disappearing are that much greater. Good strategy should never be a profit only pursuit. It should strive to stake a position in the mind of the consumer, either by the nature of the product, the level of service or the quality of the process. A business that is structured purely for profit cannot do this and is really one miss-step into the abyss. Because your business will fail. The CEO

Thank You

A short note to say thanks to all you who have spared a moment in your busy lives (if it's anything like mine you should consider joining me in the upcoming petition for a 48 hour day) to read my musings on all things strategy. I intend to post a blog atleast once a month and sometimes bi-weekly from now on. Thank you The CEO