strategy failure reasons
The mantra of American business is growth. Business leaders employ multiple strategies like buying out the competition and innovating products. However, things go wrong all the time, resulting in huge write-offs, bankruptcy and closed business lines, not to mention public humiliation. Chunka Mui and Paul Carroll, authors of "Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years" say seven strategic mistakes are behind many business failures.
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Carroll and Mui point to Motorola's $5 billion investment in satellite-based phones. On the market, the phones cost $3,000 apiece and came with hefty monthly charges, all of which customers ultimately rejected. The business line closed in a year, filing for Chapter 11 bankruptcy. The problem was ignoring early warnings about the shortcomings of the technology and the practicalities of selling it in the open market. Fedex did the same thing in the 1980s when fax technology was expensive and relatively rare. The company's executives possibly never imagined that using an intermediary to fax documents would be a silly service to pay for, as the price of the technology came down and quality improved.
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Another common strategic mistake is misjudging adjacencies. When misjudging adjacencies, the strategy is to sell new products to existing customers or gain new customers for existing products, often through new channels. However, businesses may fail to recognize how well their core competencies and products translate to the new arena. As an example, a school bus operator, Laidlaw, got into the ambulance business, figuring its expertise in transportation and logistics would bode well, but ambulance is part of a vast, complex medical complex that the company wasn't prepared for. In a Forbes magazine blog post, Mui said
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Carroll and Mui point to Motorola's $5 billion investment in satellite-based phones. On the market, the phones cost $3,000 apiece and came with hefty monthly charges, all of which customers ultimately rejected. The business line closed in a year, filing for Chapter 11 bankruptcy. The problem was ignoring early warnings about the shortcomings of the technology and the practicalities of selling it in the open market. Fedex did the same thing in the 1980s when fax technology was expensive and relatively rare. The company's executives possibly never imagined that using an intermediary to fax documents would be a silly service to pay for, as the price of the technology came down and quality improved.
Next One Over
Another common strategic mistake is misjudging adjacencies. When misjudging adjacencies, the strategy is to sell new products to existing customers or gain new customers for existing products, often through new channels. However, businesses may fail to recognize how well their core competencies and products translate to the new arena. As an example, a school bus operator, Laidlaw, got into the ambulance business, figuring its expertise in transportation and logistics would bode well, but ambulance is part of a vast, complex medical complex that the company wasn't prepared for. In a Forbes magazine blog post, Mui said