Everyone wants to drive like a winner. But business accidents can reveal essential lessons. So go ahead and rubberneck that corporate crash. You might head off your own.
Using 20-20 hindsight, Mui and Carroll identified what caused each collision.
"The biggest surprise was how many of those errors were strategy errors," Mui told IBD. "The conventional wisdom is it's all about execution. But so many of those errors were conceptual errors."
Missteps fell into broad categories, such as relying on ballyhooed acquisition synergies that don't materialize, seizing a market too quickly, staying the course too long, moving into adjacent but not truly similar markets and leaning on soon-to-be-outmoded technologies.
The same blunders occurred again and again.
"But there was no real attempt to learn from them," forcing some firms to make repeated trips to bankruptcy court, Mui said.
• Heed warning signs. Mui says that before each firm's fall, a common set of red flags popped up:
Is leadership overestimating its brand's hold on customers?
Creating catchy semantics to justify a strategy?
Banking on increased purchasing or pricing power that comes with big acquisitions?
If any of those ring a bell, CEOs should "check themselves before they move forward," Mui said.
• Mind dashboard dials. Members of the nonprofit Turnaround Management Association specialize in helping failing companies change direction. Chairman Arthur Perkins says a hazard they see all too often is leaders breezing through business data without dissecting the numbers.
"There's a lack of focus on measuring key metrics and a failure to do the related analysis," he told IBD.
• Squelch back-seat drivers. Perkins, who also co-heads Deloitte Financial Advisory Services' west region, says the current climate has given rise to dangerous whisper campaigns.
"We've seen a number of companies that have had rumors that they were troubled," he said. "If you don't counter it quickly, it becomes a self-fulfilling prophecy."
Much can be learned from snafus large and small, but that attitude has to come from the top.
"One thing leaders can do is admit their own mistakes," he said. "You say, 'It's OK, I'm OK, and these things happen.'"
• Pick a positive crew. Heath noticed his employees reacted to slip-ups in two ways.
Some shut down; others paused to learn the lesson. He cultivated the latter.
"That kind of person has so much potential because they're taking it all in," he said.
• Celebrate fender benders. Even firms that improve experience the occasional backfire. Heath advises treating well-intentioned mistakes as progress.
"You need to create an atmosphere where people are willing to take risks," he said. "I've even given a cash reward for a great mistake."
Source: Investor's Business Daily