By Kevin Meyer
Over the past several months I've held an informal and optional "Leadership Video Breakfast" where every other Friday morning my staff and anyone else who's interested get together to watch one of the Stanford Business Briefings videos. Most of them have been very well done, thought-provoking, and surprisingly from a real-world perspective instead of the ivory tower. Maybe it's because ivy doesn't grow well on on the west coast – perhaps another data point for Bill's hypothesis on east coast nonsense.
Last Friday's video was "Billion Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures" featuring Chunka Mui. He describes the research that went into his bestselling book with the same title, using the example of Apple's iPod and Motorola's Iridium satellite phone to illustrate his conclusions.
Both products went through a lengthy strategy process, had very defined market needs, were backed by top tier companies with very disciplined processes and incredibly smart people. So why was the iPod an incredible success and the Iridium an incredibly expensive failure?
Before I give the answer, here are some clues from the description of the video:
While we are inspired by business success stories, we are educated by
business failures. Chunka Mui and Paul Carroll researched 750 of the
most significant business failures of the past quarter-century and
found the Number 1 cause of failure was not sloppy execution, poor
leadership or bad luck. It was, instead, misguided strategy. Mui gives
examples of the seven most common strategic failure patterns: illusions
of synergy, misjudged adjacencies, faulty financial engineering and
others. He explains that each pattern has predictable red flags.
beings are hard-wired for bad decision making in complex situations,
notes Mui. We hone in on answers before examining all the facts, and
then seek evidence to confirm our answers. We are adversely influenced
by emotion, loyalties, and group think. However, decision making can be
improved when we encourage conflict and question our assumptions. A
devil’s advocate review should be built in early to the strategy
process, and again at the key design stages and when near completion
for a last chance to review the full strategy.
Yes, group think – we seek evidence to confirm our answers. We get so enamored and exuberant about our brilliant new strategy or product that we don't ask the hard questions. Almost more importantly, we don't continue to ask the hard questions during the execution phase. Hmmm… the wondrous strategy of chasing cheap labor offshore without considering all costs? I could also draw a parallel to the myopia of the extreme political left and right, but I won't go there today.
Motorola became so entrenched and focused on the Iridium program that they didn't appropriately consider the impact of new technologies that allowed efficient roaming by traditional cell phones, the impact of the fact that satellite phones had very poor reception inside buildings and in urban areas, and the impact of cell phone prices dropping to near free.
The Iridium project was executed on schedule, near budget, and met the design specification. The $5 billion satellite system was almost immediately written off for less than the cost to decommission the satellites.
Jim Collins likes to talk about "getting on the same bus" and some leadership gurus have then taken that concept one step further to say that everyone needs to be in the right seat on the same bus. Really? Perhaps that means that a bus-load of very smart people, all aligned with blinders on, will be driven right off a cliff. Even in the lean world we often say that people who don't buy in to the magic of lean need to be removed quickly before they irreversibly contaminate the rest of the organization.
Perhaps their concerns should be confronted, discussed, and analyzed. Perhaps a lean tool is being implemented simply because it's a cool new tool and doesn't have a defined need or problem to be solved. Perhaps the operating environment has changed.
Embrace the naysayers, the people that ask the tough questions and present alternative views. Mui mentions in his presentation that some of the best organizations have a defined "devil's advocate" position or even group that do nothing except ask hard questions. Some managers state that they only want to hear a complaint or problem if the person also comes to them with a solution. Perhaps another concept that can skew or delay the process toward failure. The value may be in the questions, even if they don't have an immediate solution.
Ask the hard questions of the strategy and during the execution of that strategy. Test the original assumptions. Don't be afraid to change or even kill a strategy or product. PDCA anyone?